Finally: Some Common Sense on Money Laundering

For more than 20 years, I've opposed the criminalization of "money laundering" on philosophical grounds.

Money laundering laws are dangerous because laundering is not a crime like murder, robbery, or rape, where the evil act is clear. 

Instead, money laundering is a crime of motive rather than activity.  Two different people can engage in the exact same set of activities, and one can be guilty of money laundering while the other is not. 

Money laundering is commonly defined as taking ill-gotten gains and moving them through a sequence of transactions so they ultimately look like legitimate profits from legal business.  Yet, this is exactly what all of do everyday in our own bank accounts with our hopefully legitimate gains. 

That's bad enough.  But since the enactment of the first money laundering law in 1986, the U.S. government has expanded its use to the point where prosecutors can add money-laundering charges to virtually any prosecution involving money.  Because the penalties for money laundering are much more severe than for other crimes, criminal defendants must plead guilty or face much higher sentences. 

Now, the Supreme Court has injected a small element of sanity into the money laundering law.  In two decisions it handed down last week, the court concluded:

• The mere fact that you "conceal" money doesn't violate the money laundering statute.  The government must also prove that the concealment was designed to hide the source, ownership, or control of the money.
• *The "proceeds" of a money laundering crime should be interpreted to mean profits and not gross receipts. 

Taken together, these decisions significantly restrict the reach and scope of the money-laundering statute.  One practical effect is that you can no longer be prosecuted for money laundering merely for hiding cash at home, in a safety deposit box, or in your vehicle.  But more significantly, the decisions mean that the government won't be able to convert garden-variety financial crimes into money laundering prosecutions.

Congress, of course, can amend the law to specifically make it a money laundering offense to "hide money."  It could also redefine "proceeds" as "gross receipts." 

But for the moment, these decisions are good news for anyone concerned about financial privacy.  Not to mention the overarching authority of a government that demands that we reveal every detail of our financial affairs, or face draconian criminal sanctions.

Copyright © 2008 by Mark Nestmann