Money Laundering in New York
The act of money laundering is a serious and intentional crime. If you suspect that you are involved in a money laundering scheme or have receiving funds from illicit activity, retaining counsel needs to be done sooner rather than later. These charges serious illicit repercussions and lead to other charges commonly.
What is Money Laundering?
By a general definition, money laundering is the disguising of funds gained through illegal activity. For the purpose of this article, the word funds applies to the money, resources, property, and any other sort of compensation that holds value or is used for payment. The law is very inclusive of the various types of transactions and source of payments.
Money Laundering does not include the production or manufacture of counterfeit coins or bills. This is a separate charge in relation to counterfeit, fraud, and other charges. There are various ways that money laundering can be accomplished, and New York has this detailed in section 470 of the New York Penal Code.
It involves many entities and individuals in transactions that further criminal activity.
Legal Definition: Section 470 NY Penal Code
In New York, money laundering is specifically detailed about who uses the money, what it is used for, and where it came from. It classifies a financial institution as an entity that is responsible for loans, sales, purchases, exchange of currency, credit lines, and even in jewels. It does not limit who is involved in the agency listing examples such as bankers, brokers, pawn operators, lenders, banks, and credit unions.
A complete list of all of these elements can be found in Section 470.6. This list is very inclusive and encompasses all types of institutions. The law also defines transactions that are performed by individual from loans to sales to credit and much more. The law is VERY detailed in listing examples and inclusions. Attempting to circumvent the law in relation to what type of business, who conducted the transaction or the money involved is a very treacherous and will most likely result in failure. The law covers every type of institution, transaction, and use of the funds.
What are the elements that must be proven?
If any of these individuals/entities are involved in any type of these businesses with these transactions, it sets them up for possible charges of money laundering. In order to prosecute, there are elements that must be proven. These are the three elements are:
Element #1: Knowledge that the money originated from criminal activity
Conducts transactions that continue involve committing a felony, and having transactions that are designed to conceal and avoid documentation of the funds that are used
- In simple: Using the money for illegal transactions and trying to hide the funds would qualify for this element. Obtaining money from an illegal source is not recommended and can lead down this slippery slope into money laundering.
Element #2: Knowledge that the purpose is to disguise the use of the funds
This occurs when the money is changed hands to hide the owner, purpose, and location of the actual funds. In moving the funds, it makes money harder to “trace” to prove the activity, owner, and what the funds are being used for.
- An example case: A drug trafficking ring was charged with money laundering in 2001. They engaged in placing sums of 10,000-25000 dollars into three separate bank accounts in TN.
By spreading these funds, it committed multiple accounts of bank fraud, money laundering and they were obviously charged with the drug trafficking and made money less likely to seem suspicious as it was coming from different accounts.
Investment of these funds into various accounts showed where the money attempting to be concealed
Element #3: Knowledge that the money will cause for the continuation of criminal activity
When the funds are used to further the crimes, such as paying a drug trafficker that completes the operation of this element.
- An example case: A man in MD plead guilty to a Ponzi scheme and other crimes related to his activity. He and 2 associates in Texas were responsible for fraud cases involving $550 million dollars. He would call and pose as a debt collector.
However, instead of turning the money over, it was used to pay new investors into the scheme. In doing this, he slowly accumulated this massive amount of funds until he was eventually caught.
By taking the money (considered wire fraud) and placing it in various accounts and using it to pay new investors, he used the funds to keep his operation going. They were sent to his associates and moved throughout the accounts to fund his operation. Every dollar he earned he spent back into the company to gain more investors and funds.
What Places an Individual at Risk?
Money laundering occurs when an individual uses funds that are derived from a criminal enterprise and is used to continue their operation. When considering if you are at risk, it is important to know where your money comes from and what it is being used for. When involved in a criminal enterprise, it is unlikely that you will be involved without knowledge of some level of the enterprise.
In order to be prosecuted for money laundering, it is important to know that the knowledge of the crime and details are required to press these charges. If you know or suspect that your money is not derived from legitimate purposes, it is important to contact an attorney or local law enforcement. An early indication of these crimes and reporting allow for you to be a reporter and not a perpetrator inadvertently.
Receiving funds from questionable sources, vague transactions, and other criminal activity should raise a red flag for money laundering and criminal enterprises and activity. Though you may be participating, whether intentional or not, it is critical to separate yourself as soon as possible to avoid the harsher punishment that comes as the operation grows.
Degrees of Money Laundering
Money Laundering in the Fourth Degree
- Article 470.05 of NY Penal Code
- All three elements of knowledge, deceit and criminal activity must be met
- Amount of funds exceeds $10,000
- This is considered a Class E Felony
Possible punishments can include fines up to double the amount and 4 years imprisonment
Money Laundering in the Third Degree
- Article 470.10 of NY Penal Code
- The same three elements must be met
- The law also includes the sale of controlled substances as a higher offense
- Amount of funds exceeds $50,000
- This is considered a Class D Felony
Possible punishments can include fines up to $100,000 or double of the amount and 7 years imprisonment
Money Laundering in the Second Degree
- Article 470.15 of NY Penal Code
- Three elements of knowledge deceit and criminal activity
- In addition to these, it includes the sales of controlled substances
- Amount of funds exceeds $100,000
Possible punishments can include fines up to double the amount, $200,000, and 15 years in prison
Money Laundering in the First Degree
- Article 470.20 of NY Penal Code
- The three elements listed
- Inclusion of the sales of controlled substances
- Amount of funds exceeds $1,000,000
Possible punishments can include fines up $2,000,000 and 25 years in prison
Additional Penalties and Sentence Enhancements
In addition to the charges that are filed, the convictions themselves come with penalties as well. A judge has the right to determine the sentence based on your case. An attorney can argue on your behalf, which could allow you to receive less punishment or even make a deal with the prosecution.
The deal would be contingent on the circumstances of your crime and as set forth by the opposing legal representation. As a felon, there are many essential rights as a citizen that you lose. For example:
- You may not be allowed to vote in elections, purchase a firearm or weapon, or even perform certain jobs. These charges would show on a background check and can make it difficult to find employment. Some of these rights can be awarded back to the individual, but it is not an easy process.
- If you are a repeat offender, meaning that you have previous charges from similar or other cases, then you can receive harsher penalties. These can include parole violations, additional prison time, and even fines as well. The judge makes the decision of the sentence based on conviction, circumstances of the crime, and your previous criminal background.
Finally, this conviction can inhibit you from being able to move, especially out of state. You will be unable to enlist in the military services as your background has been tainted. You will be considered a felon, which carries a stigma itself and brings all the punishments that come with the title.
Often with cases of money laundering, there are other charges included. Money laundering involves criminal enterprises, and the activities that were performed will be prosecuted as well. These enterprises can be complex businesses with varying degrees of criminal activity.
Many cases of money laundering also include cases of fraud such as wire fraud, bank fraud, and pyramid schemes as discussed. The funds are diverted from their cause and use to fund these agencies and further their plans. Penalties for fraud are varied depending on the amount of money. Possible sentences can include fines and prison time. Civil suits can arise as well from the individuals or the businesses involved.
In addition, there can be charges for RICO law violations, operating or participating in a criminal enterprise, and tax evasion. All of these charges carry heavy penalties alone; when combined, they create a storm of offenses that can add up quickly. Each carries its own set of fines and prison time. It is crucial to understand that these are complex crimes that can cascade quickly into many charges with hefty fines.
Depending on the specific circumstances of your crime, there can be defenses formulate to prove innocence or lack of involvement. The following are examples of possible defenses from cases and are not meant to replace legal counsel.
Lack of Knowledge
A possible defense could include a lack of knowledge of the source of the money. This can also extend to the use of the funds. If you are unaware of where the money came from, meaning that you did not know or there was no way to know where the funds came from.
The prosecution has to prove that you know or should have known where the funds came from. This defense also includes the aspect of not knowing the funds were being used to further a criminal enterprise.
You have to intentionally and knowingly commit money laundering as it is required by the statute of the law. If the prosecution cannot prove that you meant to further the business of the criminal activity/enterprise, then they will not be able to convict successfully.
Does not meet the Monetary Criteria
Obviously, the monetary amounts must be met in order to convict to any of these degrees. Should you fall below the amount, the degree could be dropped or cause this particular charge to be unsuccessful. The monetary amount is what dictates the degree to which you are charged.
Lack of Intention to Conceal or Disguise Funds
In order to prosecute for money laundering, the funds have to have been attempted to be concealed, hidden, or disguised. This could be done via purchases, switching of banks, lines of credit, or any means of monetary transaction. If the funds were not diverted and concealed or attempted to be disguised, then the prosecution would have a difficult time trying to obtain a conviction for money laundering
Why Consult a Lawyer?
Charges of money laundering are serious offenses that have life-altering repercussions. A conviction, even of the least offense, is considered a felony. The title alone carries its own set of punishments and a brand upon your record.
These cases involve complex scheme, illegal activity, and are often large operations. If you suspect that you are involved with an organization, call for help.
An attorney can help to separate you from the ‘business’ and clear your name from the wrongdoings. These charges can be accompanied by many others that the agency is conducting, carry large fines, and can even result in jail time. With these consequences on the table, it is critical to consult with a professional that can help you to navigate these difficult waters.
Milagros Katz was sentenced for charges of:
- Money Laundering
- Enterprise Corruption
Katz was prosecuted for using money from advertising and other businesses to promote illegal activity, funding of the criminal enterprise, and promotion of prostitution. She and her associates were found guilty after the investigation showed tax statements and bank documents linking them to the funds and activities.
She was fined $100,000 as restitution for her crimes but did not receive jail time as she entered a plea bargain. Her associate was sentenced as well and faced 1-3 years in prison in addition to the fines.
Lawrence Penn II was sentenced for charges of:
- Money Laundering
He set up a fake company in which he would divert funds that he used for himself. Penn managed a private-equity business in which he had access to the funds. His investment firm used the funds inappropriately, and he managed to steal over $9 million dollars when he claimed to his clients that he used the money for additional services from the company.
He was sentenced to 2-6 years in prison, $8.3 million dollars in restitution payments, and surrender all his assets and related finances. His partner faces sentencing for the same crimes as well.
Theodore Werner was charged with:
- Money Laundering in the second and third degree
- Scheme to Defraud in the first degree
- Grand Larceny in the second and third degree
Werner used software to conceal his location and identity, claiming he was in Asia. He scammed international citizens from New Zealand, Australian, and other countries. He led the victims to believe that they were investing in valuable stock and private security options.
The investigation is still ongoing, and the agencies are still collecting data. He has not been sentenced at this time.
Davit Kudugulyaon was charged with:
- Money Laundering
He allegedly used credit card skimmers and stolen data in order to steal $2 million dollars from citizens in Texas, Georgia, and South Carolina while based in New York. He pleads guilty to money laundering in the third degree.
He has been sentenced to 1-3 years in jail and $75,000 in restitution to the victims. Eight other individuals have been charged in this case as well and are awaiting trial.
No Mi Kwon, also known under the alias Sarah, was charged with:
- Enterprise Corruption
- Money Laundering
She was involved in a prostitution ring involving money laundering and linked with other criminal activity. There were a total of twenty individuals that were charged as well with various crimes, including falsifying business records, possession of controlled substances, promoting prostitution, and money laundering.
She agreed to a plea bargain and pled guilty to enterprise corruption and money laundering. She has not been sentenced yet but faces 3-9 years in the state penitentiary and over $250,000 in fines and restitution. She has been released on bail at this time and is awaiting sentencing.
18 US CODE Section 1956. Laundering of monetary instruments. (n.d.) Retrieved from https://www.law.cornell.edu/uscode/text/18/1956
2101 Money Laundering. (n.d.) Retrieved from https://www.justice.gov/jm/criminal-resource-manual-2101-money-laundering-overview
Janney, Elizabeth. 5/17/19. Towson Man Pleads Guilty in $550 Million Ponzi Scheme. Retrieved from https://patch.com/maryland/towson/towson-man-pleads-guilty-550m-ponzi-scheme
New York money laundering law. (n.d.) Retrieved from https://statelaws.findlaw.com/new-york-law/new-york-money-laundering-laws.html
New York Penal Law 470.20: Money Laundering in the first degree. 5/1/17. Retrieved from https://www.nyccriminalattorneys.com/new-york-penal-law-470-20-money-laundering-first-degree/
SAR Filing Results in Arrest in Drug Trafficking and Money laundering. (n.d.) Retrieved from https://www.fincen.gov/resources/law-enforcement/case-examples/sar-filing-results-arrests-drug-trafficking-and-money
Section 470: Money Laundering in support of terrorism in the fourth degree. (n.d.) Retrieved from https://statelaws.findlaw.com/new-york-law/new-york-money-laundering-laws.html