Federal money laundering charges are among the most serious financial allegations prosecuted by the United States government. At its core, money laundering is the process of taking proceeds from unlawful activity ("dirty money") and disguising their origin through financial transactions to make them appear legitimate ("clean money").

These charges are rarely brought in isolation. Federal prosecutors routinely attach money laundering counts to underlying offenses—such as wire fraud, mail fraud, drug trafficking, healthcare fraud, and RICO racketeering—to increase potential prison sentences, levy massive fines, and trigger sweeping asset forfeiture.

Quick Reference Summary: Federal Money Laundering at a Glance

Understanding the Federal Statutes: 18 U.S.C. §§ 1956 vs. 1957

Federal law splits money laundering enforcement into two core statutes, each targeting different levels of involvement and intent:

18 U.S.C. § 1956 – Laundering of Monetary Instruments

This is the broader and more severe statute. It applies when a defendant conducts or attempts to conduct a financial transaction knowing the funds represent proceeds of unlawful activity, with the specific intent to:

• Promote the carrying on of a specified unlawful activity;

• Conceal or disguise the nature, location, source, ownership, or control of the proceeds;

• Evade federal taxes or avoid transaction reporting requirements (such as Currency Transaction Reports); or

• Transport or transfer funds across international borders to promote crime or conceal proceeds.

18 U.S.C. § 1957 – Transactions in Criminally Derived Property

Section 1957 applies to engaging or attempting to engage in a monetary transaction using criminally derived property valued at greater than $10,000 through a financial institution.

Unlike Section 1956, Section 1957 does not require the government to prove an intent to conceal or promote the crime. Prosecutors only need to establish that you knew the funds were derived from criminal activity and spent or transferred more than $10,000 of those funds.

Real-World Example

Scenario: An executive at a logistics firm discovers that a partner generated $250,000 using fraudulent billing schemes (wire fraud). To help clear the books, the executive splits the money into $9,500 cash deposits across multiple bank accounts over two weeks to avoid triggering automatic bank alerts, then transfers the funds to an offshore shell company.

Legal Outcome:

• 18 U.S.C. § 1956 Violation: The executive committed money laundering under Section 1956 by conducting financial transactions designed specifically to conceal the origin of the funds and avoid federal reporting requirements (structuring).

• 18 U.S.C. § 1957 Violation: Each individual transfer exceeding $10,000 out of those accounts constitutes a distinct violation of Section 1957 for engaging in monetary transactions exceeding $10,000 with criminally derived property.

Strategic Defense Tactics Against Money Laundering Charges

Defending against federal money laundering charges requires attacking the prosecution's evidence regarding knowledge, intent, and tracing:

• Lack of Knowledge: You cannot be convicted under Section 1956 or 1957 if you were genuinely unaware that the funds involved were derived from an illegal activity.

• Lack of Specific Intent: Under 18 U.S.C. § 1956, conducting a standard financial transaction is not illegal unless the government proves you acted with specific intent to conceal, promote, or evade taxes. Open, transparent business transactions often defeat the claim of an intent to conceal.

• Proceeds Not Derived from a "Specified Unlawful Activity" (SUA): Money laundering statutes apply only to proceeds originating from specific crimes defined by statute. If the underlying predicate crime is unproven or falls outside the statutory list of SUAs, the laundering counts fail.

• Tracing Failure / Commingled Funds: Prosecutors must trace the money back to the illicit act. If legitimate business revenue and alleged illicit funds are commingled in a complex account structure, establishing that a specific transaction used "dirty money" can be difficult to prove beyond a reasonable doubt.

• Constitutional Violations (4th & 6th Amendments): Challenging financial records, bank seizures, or wiretaps obtained without valid warrants or in violation of constitutional search procedures via suppression motions.

Frequently Asked Questions

What is the difference between 18 U.S.C. § 1956 and 18 U.S.C. § 1957?

Section 1956 requires prosecutors to prove a specific intent to conceal funds, promote crime, or evade taxes, and carries up to 20 years in prison. Section 1957 requires no intent to conceal—simply spending or transferring more than $10,000 of known illicit funds through a bank is a crime carrying up to 10 years in prison.

Can I be charged with money laundering if I was not involved in the underlying crime?

Yes. You do not need to have committed the predicate crime (e.g., drug trafficking or fraud) to be charged with money laundering. If you knowingly handle, transfer, or conceal proceeds generated by someone else's illegal activity, you can be independently prosecuted.

How does the Corporate Transparency Act (CTA) impact money laundering investigations?

The Corporate Transparency Act requires many reporting companies to disclose Beneficial Ownership Information (BOI) to FinCEN. Federal agencies use this database to dismantle shell companies, trace anonymous transfers, and build money laundering cases against business owners.

What should I do if federal agents (IRS-CI or FBI) visit my home or office?

Assert your constitutional rights immediately. Refrain from answering questions without legal representation present, invoke your Fifth Amendment privilege against self-incrimination, and request to speak with a federal defense attorney before making any statements.

Can the federal government freeze my bank accounts before a conviction?

Yes. Under federal asset forfeiture laws, the government can obtain pre-trial restraining orders or seize accounts if they establish probable cause that the funds are tied to money laundering or derived from a specified unlawful activity.

Can money laundering charges be resolved through pretrial negotiations or diversion?

While federal money laundering charges carry severe prison time, experienced defense counsel can challenge the government's tracing models, demonstrate lack of intent, or negotiate reduced charges to minimize exposure or seek alternative sentencing arrangements.

Related Federal Financial & Regulatory Statutes

• Wire Fraud (18 U.S.C. § 1343): Criminalizes schemes to defraud or obtain money through electronic communications, frequently charged as the predicate offense for money laundering.

• Mail Fraud (18 U.S.C. § 1341): Penalizes using the U.S. Postal Service or private interstate carriers to execute fraudulent schemes.

• Racketeer Influenced and Corrupt Organizations Act (18 U.S.C. § 1962 - RICO): Targets organized criminal enterprises, where money laundering often serves as a key predicate act.

• The Bank Secrecy Act (31 U.S.C. § 5324): Makes it a crime to "structure" financial transactions (e.g., depositing under $10,000) specifically to avoid triggering Currency Transaction Reports (CTRs).

• Corporate Transparency Act / FinCEN BOI Rules (31 U.S.C. § 5336): Mandates beneficial ownership reporting to combat anonymous shell corporations and illegal money laundering channels.

Speak to an Experienced Federal Defense Attorney

Federal money laundering investigations involve sub-agencies such as IRS Criminal Investigation (IRS-CI), the FBI, and FinCEN, working alongside federal prosecutors. Because these cases hinge on forensic accounting, digital tracing, and technical intent requirements, early legal intervention is vital.

If you are facing a federal subpoena, an inquiry from federal law enforcement, or active money laundering charges under 18 U.S.C. § 1956 or § 1957, securing experienced federal defense counsel can protect your rights, challenge government forfeitures, and build an effective defense strategy.

Contact Eisner Gorin LLP to schedule a confidential consultation with a federal criminal defense attorney.

Related Content 

• Smurfing and Structuring
• Federal First Offenders Act (FFOA)
• High-Profile RICO Indictments
• Federal White Collar Defenses
• Trade-Based Money Laundering