On July 28, 2010, the Sixth Circuit imposed a tougher standard for prosecutors who want to pursue convictions for money laundering in white collar crime cases under 18 U.S.C. 1956(a)(1)(B)(1) (pdf). In United States v. Faulkenberry, Case Nos. 08-4233/4404 (6th Cir. 2010) (pdf), the Court vacated money-laundering and conspiracy to commit money-laundering convictions against former executives of National Century Financial Enterprises (“NCFE”).
In doing so, the Court held that prosecutors must prove that the purpose of the transaction at issue was to conceal the source or nature of the funds. It is no longer enough to prove that the transaction was structured in such a way that it resulted in concealment of the source or nature of the money or that concealment of the source of the money facilitated some other purpose of the transaction. This holding was the product of clarification provided by the United States Supreme Court in Cuellar v. United States, 128 S.Ct. 1994 (2008) (pdf), which imposed this standard on the transportation portion of the money laundering statute.
Because the standard in Cuellar was announced between the trial and appeal in the Faulkenberry case, the government had not tried its case with the tougher standard in mind and, in the Court’s opinion, was not able to make the evidence at trial fit the new standard.
It will be interesting to see whether this decision really makes a difference in money-laundering indictments and convictions. As noted in Daniel Fisher’s blog posting for Forbes, money-laundering counts are included in nearly 90% of all federal fraud indictments and carry heftier sentences than fraud charges.
At the same time the Court was announcing this tougher standard, though, it also went out of its way to note several ways the government can meet this standard in the future by using the structure and documentation for a transaction (evidence that would have satisfied the old standard) to support an inference of a purpose to conceal to satisfy the new standard.
The unanimous decision was authored by Judge Kethledge and joined by Judge Sutton and Judge White.