In essence, money laundering involves making illegally obtained money appear legitimate. The Federal Government defines the offense as conducting transactions with specific intent, knowing that the proceeds are from a specified criminal activity.
Specified criminal activities include, but are not limited to:
- Controlled substances offenses
- Fraud, or
The individual does not have to know which type of crime the proceeds derived from, only that they were not obtained legitimately.
Money launderers often engage in the conduct to:
- Continue a criminal enterprise,
- Engage in tax evasion or tax fraud,
- Hide the source of ill-gotten gains, or
- Avoid State or Federal reporting requirements
Traditionally, money laundering has been carried out by placing the illegally obtained funds into a financial system (through deposits and investments, for example), moving the proceeds around through different accounts (a process knowns as layering), and then integrating the now seemingly legitimate money back into the system.
With the proliferation of technology, especially with things such as the dark web and cryptocurrency, money laundering offenses have changed. Law enforcement agencies are working to catch up with the sophisticated methods used to conceal proceeds from illicit activities.
Money Laundering, Cryptocurrency, and the Dark Web
Cryptocurrency was developed nearly a decade and a half ago to give people more control over their money. Essentially, it does this by eliminating the need for a centralized network to oversee financial transactions. With fiat currency (or traditional money), distribution, transfers, and other transactions are controlled by a federal government and typically processed through a bank or other financial institution.
With the lack of controls and oversight involving cryptocurrency, it is easier for launderers to make larger and more frequent transactions. Thus, the first step in the money laundering process – placement – bypasses the need for a bank or bank account to introduce the funds into the system. All the launderer needs is the wallet address of the individual or entity where the funds are to be placed. Similarly, moving illicit proceeds around to different accounts is also less likely to be as closely scrutinized as it would had it been deposited into a traditional financial institution.
That said, detection of money laundering facilitated by cryptocurrency, while difficult, is not impossible. Virtual currencies use blockchain technology to record transactions. Basically, when someone transfers cryptocurrency, the details of the transaction are stored on a ledger. Although the technology essentially conceals a person's identity, it does not prevent transactions from being traced. If law enforcement officials follow the ledger records, they could eventually determine with whom the transfer was initiated.
Enter the dark web. The dark web provides a place for people to exchange information fairly anonymously. Although legitimate transactions do occur on the dark web, it also serves as a forum for illegal activity. For example, individuals can unlawfully sell and purchase controlled substances or firearms.
Recently, various "mixing" services have cropped up on the dark web. These systems facilitate the anonymity of transactions conducted using cryptocurrency. They do so by combining one user's transfers with another's. Thus, it becomes difficult to trace the origins of transactions.
As such, mixing systems have increasingly become the instrument of choice for money laundering. Launderers are able to layer and integrate proceeds without the fear (or with a lesser fear) of being caught.
Prosecution of Money Laundering Offenders
Technology has given money launderers the means to more easily move around proceeds, but that does not mean they cannot get caught. For example, an Ohio man was charged in February of 2020 for a money laundering conspiracy. He was alleged to have operated a "mixing" service on the dark web that allowed people to conceal the source of their money. In August of 2021, he pleaded guilty to the charges.
As methods for money laundering become more sophisticated, so too do the techniques used by law enforcement officials. State and Federal agencies are constantly revamping how they investigate these crimes and establish departments specifically designed to detect offenses and identify offenders. Recently, Deputy Attorney General Lisa O. Monaco announced a National Cryptocurrency Enforcement Team (NCET). The team will investigate complex crimes involving cryptocurrency, including money laundering.
Money laundering is a serious offense. A conviction can result in up to 20 years of imprisonment and/or up to $500,000 in fines or twice the value of the assets involved (whichever is greater).
If you or a loved one has been accused of a federal crime, such as money laundering, it is essential that you speak with a lawyer about your case as soon as possible. At Keegan, Tindal & Jaeger, we have over 50 years of combined experience and the skills necessary to defend you.
To schedule a consultation with a member of our Iowa City team, please call us at (319) 499-5524 or contact us online today. Your initial case consultation is free.