AMENDMENT 634

Amendment: Chapter Two, Part S is amended by striking §2S1.1 as follows:

"§2S1.1. Laundering of Monetary Instruments

(a) Base Offense Level:

(1) 23, if convicted under 18 U.S.C. § 1956(a)(1)(A), (a)(2)(A), or (a)(3)(A);

(2) 20, otherwise.

(b) Specific Offense Characteristics

(1) If the defendant knew or believed that the funds were the proceeds of an unlawful activity involving the manufacture, importation, or distribution of narcotics or other controlled substances, increase by 3 levels.

(2) If the value of the funds exceeded $100,000, increase the offense level as follows:

(c) Special Instruction for Fines - Organizations

(1) In lieu of the applicable amount from the table in subsection (d) of §8C2.4 (Base Fine), use:

(A) the greater of $250,000 or 100 percent of the value of the funds if subsections (a)(1) and (b)(1) are used to determine the offense level; or

(B) the greater of $200,000 or 70 percent of the value of the funds if subsections (a)(2) and (b)(1) are used to determine the offense level; or

(C) the greater of $200,000 or 70 percent of the value of the funds if subsection (a)(1) but not (b)(1) is used to determine the offense level; or

(D) the greater of $150,000 or 50 percent of the value of the funds if subsection (a)(2) but not (b)(1) is used to determine the offense level.

Commentary

Statutory Provision: 18 U.S.C. § 1956.

Background: The statute covered by this guideline is a part of the Anti-Drug Abuse Act of 1986, and prohibits financial transactions involving funds that are the proceeds of ‘specified unlawful activity,’ if such transactions are intended to facilitate that activity, or conceal the nature of the proceeds or avoid a transaction reporting requirement. The maximum term of imprisonment authorized is twenty years.

In keeping with the clear intent of the legislation, this guideline provides for substantial punishment. The punishment is higher than that specified in §2S1.2 and §2S1.3 because of the higher statutory maximum, and the added elements as to source of funds, knowledge, and intent.

A higher base offense level is specified if the defendant is convicted under 18 U.S.C. § 1956(a)(1)(A), (a)(2)(A), or (a)(3)(A) because those subsections apply to defendants who encouraged or facilitated the commission of further crimes. Effective November 18, 1988, 18 U.S.C. § 1956(a)(1)(A) contains two subdivisions. The base offense level of 23 applies to § 1956(a)(1)(A)(i) and (ii).

The amount of money involved is included as a factor because it is an indicator of the magnitude of the criminal enterprise, and the extent to which the defendant aided the enterprise. Narcotics trafficking is included as a factor because of the clearly expressed Congressional intent to adequately punish persons involved in that activity.".

A replacement guideline with accompanying commentary is inserted as §2S1.1 (Laundering of Monetary Instruments; Engaging in Monetary Transactions in Property Derived from Unlawful Activity).

Chapter Two, Part S is amended by striking §2S1.2 as follows:

"§2S1.2. Engaging in Monetary Transactions in Property Derived from Specified Unlawful Activity

(a) Base Offense Level: 17

(b) Specific Offense Characteristics

(1) If the defendant knew that the funds were the proceeds of:

(A) an unlawful activity involving the manufacture, importation, or distribution of narcotics or other controlled substances, increase by 5 levels; or

(B) any other specified unlawful activity (see 18 U.S.C. § 1956(c)(7)), increase by 2 levels.

(2) If the value of the funds exceeded $100,000, increase the offense level as specified in §2S1.1(b)(2).

(c) Special Instruction for Fines - Organizations

(1) In lieu of the applicable amount from the table in subsection (d) of §8C2.4 (Base Fine), use:

(A) the greater of $175,000 or 60 percent of the value of the funds if subsection (b)(1)(A) is used to determine the offense level; or

(B) the greater of $150,000 or 50 percent of the value of the funds if subsection (b)(1)(B) is used to determine the offense level.

Commentary

Statutory Provisions: 18 U.S.C. § 1957. For additional statutory provision(s), see Appendix A (Statutory Index).

Application Note:

1. ‘Specified unlawful activity’ is defined in 18 U.S.C. § 1956(c)(7) to include racketeering offenses (18 U.S.C. § 1961(1)), drug offenses, and most other serious federal crimes but does not include other money-laundering offenses.

Background: The statute covered by this guideline is a part of the Anti-Drug Abuse Act of 1986, and prohibits monetary transactions that exceed $10,000 and involve the proceeds of ‘specified unlawful activity’ (as defined in 18 U.S.C. § 1956), if the defendant knows that the funds are criminally derived property. (Knowledge that the property is from a specified unlawful activity is not an element of the offense.) The maximum term of imprisonment specified is ten years.

The statute is similar to 18 U.S.C. § 1956, but does not require that the recipient exchange or ‘launder’ the funds, that he have knowledge that the funds were proceeds of a specified unlawful activity, nor that he have any intent to further or conceal such an activity. In keeping with the intent of the legislation, this guideline provides for substantial punishment. The offense levels are higher than in §2S1.3 because of the higher statutory maximum and the added element of knowing that the funds were criminally derived property.

The 2-level increase in subsection (b)(1)(B) applies if the defendant knew that the funds were not merely criminally derived, but were in fact the proceeds of a specified unlawful activity. Such a distinction is not made in §2S1.1, because the level of intent required in that section effectively precludes an inference that the defendant was unaware of the nature of the activity.".

The Commentary to §2S1.3 captioned "Statutory Provisions" is amended by inserting "18 U.S.C. § 1960;" before "26 U.S.C. § 7203"; and by inserting ", 5326" after "5324".

Appendix A (Statutory Index) is amended in the line referenced to 18 U.S.C. § 1957 and the line referenced to 21 U.S.C. § 854 by striking "2S1.2" and inserting "2S1.1";

by inserting after the line referenced to 18 U.S.C. § 1959 the following new line:

"18 U.S.C. § 1960               2S1.3";

and by inserting after the line referenced to 31 U.S.C. § 5324 the following new line:

"31 U.S.C. § 5326               2S1.3, 2T2.2".

The Commentary to §1B1.3 captioned "Application Notes" is amended in Note 6 in the first paragraph by striking the second sentence as follows:

"For example, in §2S1.1 (Laundering of Monetary Instruments), subsection (a)(1) applies if the defendant ‘is convicted under 18 U.S.C. § 1956(a)(1)(A), (a)(2)(A), or (a)(3)(A).’",

and inserting the following:

"For example, in §2S1.1 (Laundering of Monetary Instruments; Engaging in Monetary Transactions in Property Derived from Unlawful Activity), subsection (b)(2)(B) applies if the defendant ‘is convicted under 18 U.S.C. § 1956’.".

The Commentary to §1B1.3 captioned "Application Notes" is amended in Note 6 in the second paragraph by striking "An express" and inserting "Unless otherwise specified, an express"; and by striking the last sentence as follows:

"For example, §2S1.1(a)(1) (which is applicable only if the defendant is convicted under 18 U.S.C. § 1956(a)(1)(A), (a)(2)(A), or (a)(3)(A)) would be applied in determining the offense level under §2X3.1 (Accessory After the Fact) where the defendant was convicted of accessory after the fact to a violation of 18 U.S.C. § 1956(a)(1)(A), (a)(2)(A), or (a)(3)(A).",

and inserting the following:

"For example, §2S1.1(b)(2)(B) (which is applicable only if the defendant is convicted under 18 U.S.C. § 1956) would be applied in determining the offense level under §2X3.1 (Accessory After the Fact) in a case in which the defendant was convicted of accessory after the fact to a violation of 18 U.S.C. § 1956 but would not be applied in a case in which the defendant is convicted of a conspiracy under 18 U.S.C. § 1956(h) and the sole object of that conspiracy was to commit an offense set forth in 18 U.S.C. § 1957. See Application Note 3(C) of §2S1.1.".

Section 3D1.2(d) is amended in the second paragraph by striking "2S1.2,".

Section 8C2.1(a) is amended by striking "2S1.2,".

The Commentary to §8C2.4 captioned "Application Notes" is amended in Note 5 by striking "; 2S1.1 (Laundering of Monetary Instruments); and 2S1.2 (Engaging in Monetary Transactions in Property Derived from Specified Unlawful Activity)"; and by inserting "and" before "2R1.1".

The Commentary to §8C2.4 captioned "Background" is amended in the seventh sentence by striking "and money laundering".

Reason for Amendment: This amendment consolidates the money laundering guidelines, §§2S1.1 (Laundering of Monetary Instruments) and 2S1.2 (Engaging in Monetary Transactions in Property Derived from Specified Unlawful Activity), into one guideline that applies to convictions under 18 U.S.C. § 1956 or § 1957, or 21 U.S.C. § 854. The amendment responds in several ways to concerns that the penalty structure existing prior to this amendment for such offenses did not reflect adequately the culpability of the defendant or the seriousness of the money laundering conduct because the offense level for money laundering was determined without sufficient consideration of the defendant’s involvement in, or the relative seriousness of, the underlying offense. This amendment is designed to promote proportionality by providing increased penalties for defendants who launder funds derived from more serious underlying criminal conduct, such as drug trafficking, crimes of violence, and fraud offenses that generate relatively high loss amounts, and decreased penalties for defendants who launder funds derived from less serious underlying criminal conduct, such as basic fraud offenses that generate relatively low loss amounts.

First, this amendment ties offense levels for money laundering more closely to the underlying conduct that was the source of the criminally derived funds by separating money laundering offenders into two categories for purposes of determining the base offense level. For direct money launderers (offenders who commit or would be accountable under §1B1.3(a)(1)(A) (Relevant Conduct) for the underlying offense which generated the criminal proceeds), subsection (a)(1) sets the base offense level at the offense level in Chapter Two (Offense Conduct) for the underlying offense (i.e., the base offense level, specific offense characteristics, cross references, and special instructions for the underlying offense). For third party money launderers (offenders who launder the proceeds generated from underlying offenses that the defendant did not commit or would not be accountable for under §1B1.3(a)(1)(A)), subsection (a)(2) sets the base offense level at level 8, plus an increase based on the value of the laundered funds from the table in subsection (b)(1) of §2B1.1 (Theft, Fraud, Property Destruction).

Second, in addition to the base offense level calculation, this amendment provides an enhancement designed to reflect the differing seriousness of the underlying conduct that was the source of the criminally derived funds. Subsection (b)(1) provides a six-level enhancement for third party money launderers who knew or believed that any of the laundered funds were the proceeds of, or were intended to promote, certain types of more serious underlying criminal conduct; specifically, drug trafficking, crimes of violence, offenses involving firearms, explosives, national security, terrorism, and the sexual exploitation of a minor. The Commission determined that defendants who knowingly launder the proceeds of these more serious underlying offenses are substantially more culpable than third party launderers of criminally derived proceeds of less serious underlying offenses.

Third, this amendment provides three alternative enhancements, with the greatest applicable enhancement to be applied. These enhancements are designed to (1) ensure that all direct money launderers receive additional punishment for committing both the money laundering offense and the underlying offense, and (2) reflect the differing seriousness of money laundering conduct depending on the nature and sophistication of the offense. Specifically, subsection (b)(2)(A) provides a one-level increase if the defendant was convicted under 18 U.S.C. § 1957, and subsection (b)(2)(B) provides a two-level increase if the defendant was convicted under 18 U.S.C. § 1956. The one-level difference between these two enhancements reflects the fact that 18 U.S.C. § 1956 has a statutory maximum penalty (20 years’ imprisonment) that is twice as long as the statutory maximum penalty for violations of 18 U.S.C. § 1957 (10 years’ imprisonment). In addition, subsection (b)(3) provides an additional two-level increase if subsection (b)(2)(B) applies and the offense involved sophisticated laundering such as the use of fictitious entities, shell corporations, two or more levels of transactions, or offshore financial accounts. The Commission determined that, similar to fraud and tax offenses that involve sophisticated means, see subsection (b)(8) of §2B1.1 (Theft, Property Destruction, and Fraud), subsection (b)(2) of §2T1.1 (Tax Evasion; Willful Failure to File Return, Supply Information, or Pay Tax; Fraudulent or False Returns, Statements, or Other Documents), violations of 18 U.S.C. § 1956 that involve sophisticated laundering warrant additional punishment because such offenses are more difficult and time consuming for law enforcement to detect than less sophisticated laundering. As a result of the enhancements provided by subsections (b)(2)(A), (b)(2)(B), and (b)(3), all direct money launderers will receive an offense level that is one to four levels greater than the Chapter Two offense level for the underlying offense, depending on the statute of conviction and sophistication of the money laundering offense conduct.

With respect to third party money launderers, subsection (b)(2)(C) provides a four-level enhancement if the defendant is "in the business" of laundering funds. The Commission determined that, similar to a professional "fence", see §2B1.1(b)(4)(B), defendants who routinely engage in laundering funds on behalf of others, and who gain financially from engaging in such transactions, warrant substantial additional punishment because they encourage the commission of additional criminal conduct.

Fourth, this amendment contains an application note expressly providing instructions regarding the grouping of money laundering counts with a count of conviction for the underlying offense. In a case in which the defendant is to be sentenced on a count of conviction for money laundering and a count of conviction for the underlying offense that generated the laundered funds, this application note instructs that such counts shall be grouped pursuant to subsection (c) of §3D1.2 (Groups of Closely-Related Counts), thereby resolving a circuit conflict on this issue. Compare United States v. Cusumano, 943 F.2d 305 (3d Cir. 1991), cert. denied, 502 U.S. 1036 (1992) (affirming decision to group under §3D1.2(b) money laundering count with other offenses that "were all part of one scheme to obtain money" from an employee benefit fund); United States v. Leonard, 61 F.3d 1181 (5th Cir. 1995) (affirming decision to group fraud and money laundering offenses under §3D1.2(d) because defendant’s money laundering activity and fraudulent telemarketing scheme constituted the same common plan and had the same victims); and United States v. Wilson, 98 F.3d 281 (7th Cir. 1996) (district court erred in not grouping money laundering and mail fraud convictions under §3D1.2(d)), with United States v. Kneeland, 148 F.3d 6 (1st Cir. 1998) (affirming district court decision not to group fraud and money laundering counts under §3D1.2(d) because the offense level for fraud, unlike money laundering, is determined "largely on the basis of total amount of harm or loss"); United States v. Napoli, 179 F.3d 1 (2d Cir. 1999), cert. denied, 528 U.S. 1162 (2000) (affirming decision not to group wire fraud and money laundering counts under §3D1.2(b) or (d) because the offenses have different victims and the offense level for money laundering, unlike fraud, is not based primarily on the amount of money involved); United States v. Hildebrand, 152 F.3d 756 (8th Cir.), cert. denied, 525 U.S. 1033 (1998) (finding that money laundering and fraud counts should not be grouped because the fraud and money laundering guidelines do not measure the same types of harm); United States v. Hanley, 190 F.3d 1017 (9th Cir. 1999) (affirming decision not to group money laundering and wire fraud counts under §3D1.2(d) because the guidelines for such offenses measure harm differently); and United States v. Johnson, 971 F.2d 562 (10th Cir. 1992) (district court erred in grouping money laundering and fraud counts under §3D1.2(d) because the measurement of harm for fraud is not the same as that for money laundering).

Finally, this amendment provides that convictions under 18 U.S.C. § 1960 are referenced to §2S1.3 (Structuring Transactions to Evade Reporting Requirements). Operation of money transmitting businesses without an appropriate license is proscribed by 18 U.S.C. § 1960, as are failures to comply with certain reporting requirements issued under 31 U.S.C. § 5330. The Commission determined that offenses involving these regulatory requirements serve many of the same purposes as Currency Transaction Reports, Currency and Monetary Instrument Reports, Reports of Foreign Bank and Financial Accounts, and Reports of Cash Payments over $10,000 Received in a Trade or Business, violations regarding which currently are referenced to §2S1.3, and that, therefore, violations of 18 U.S.C. § 1960 also should be referenced to §2S1.3.

Effective Date: The effective date of this amendment is November 1, 2001.