Florida's anti-money laundering statutes.

The legislature has equipped law enforcement with several interrelated criminal and civil sanctions to combat this facet of organized crime.

Although much has been said and written about the "war on drugs," the ongoing battles on the money laundering[1] front have not received the same degree of attention. Nevertheless, the Florida Legislature has armed law enforcement officers with myriad statutes that impose criminal and civil penalties on individuals who launder criminal proceeds in our state. These misunderstood and underused law enforcement weapons could be the seam of any coordinated and successful state money laundering prosecution. These statutes are best understood when analyzed within the context of a typical state-level money laundering case.

Typical State-Level Money Laundering Investigation

Police detectives follow a man and woman while they make deliveries of large amounts of U.S. currency to several area businesses. Later, each business owner confirms receiving the U.S. currency as payment for debts arising from sales of merchandise shipped to Colombia or Venezuela. None of the proprietors file any type of currency transaction report despite receiving cash in excess of $10,000.

The detectives also see the unemployed couple visiting different banks where either the man or the woman makes cash deposits into several bank accounts. The bank accounts are under different names and do not belong to the couple. Some of the accounts are controlled by an individual in Colombia while others belong to businesses engaged in exporting products to South America.[2] Neither one of them is in privity of contract with the account holders or business entities. The couple makes the cash deposits in round-figure increments of $2,000, $3,000, or $9,000 to avoid government currency transaction reporting requirements.[3] On one occasion, after making a deposit with a lobby teller, the man uses the drive-through of the same branch to make another cash deposit into a different account.

The detectives later discover an out-of-state company that shipped merchandise to Colombia and accepted cash deposits into its checking account via a Miami branch of the bank where the company has an account. The company accepted the cash deposit even though it had never conducted business in the State of Florida and was not in privity of contract with the either the man or the woman.

Subsequent police searches reveal large amounts of U.S. currency in the couple's car and home. The money is wrapped with rubber bands, separated into stacks, and sorted by denominations.[4] A drug-trained dog alerts to the greenbacks.[5] The couple goes on to explain that an individual they arranged to meet in a shopping center parking lot delivered the money to them. The couple believes the funds are drug proceeds and denies ownership of the money.

Florida's Anti-Money Laundering Initiative

The parties involved in the aforementioned scheme face a blanket of interconnecting statutes skillfully crafted by lawmakers to combat organized money laundering. For brevity, this article will analyze the couple's actions. From a criminal standpoint, the couple has violated provisions of the Money Transmitter Code,[6] the Florida Control of Money Laundering in Financial Institutions Act,[7] the Florida anti-money laundering statute,[8] the Florida RICO (Racketeer Influenced and Corrupt Organization) Act,[9] and/or the conspiracy statute.[10] On the civil side, they face administrative penalties for violations of the Money Transmitter Code and the Florida Control of Money Laundering in Financial Institutions Act. The couple has also exposed the currency and their automobile to civil forfeiture pursuant to the Florida Contraband Forfeiture Act.[11] If the home is not homestead property,[12] they may have to forfeit that, as well.

Money Transmitter Code

The felony violations of the Money Transmitter Code are powerful anti-money laundering deterrents. The chief portion of the code, the Florida Control of Money Laundering in Money Transmitters Act,[13] was clearly enacted to deter "smurfing."[14] Under the code, a money transmitter is any person located in or doing business in Florida who acts as a funds transmitter.[15] A funds transmitter is a person who engages in the receipt of currency or payment instruments for the purpose of transmission by courier.[16] Thus, the couple in this scenario were acting as funds transmitters (money transmitters). Accordingly, the code governs the couple and they have committed several felonies.

Chief among the consummated crimes is the provision that makes it a third degree felony for a person other than a registered money transmitter to engage in the business of a money transmitter.[17] Likewise, it is a third degree felony for a person to act as a vendor of a money transmitter when such money transmitter is subject to registration under the code but has not registered.[18] By express action, the Florida Legislature has directly tied federal money laundering violations to the code. For example, it is a violation of the code[19] to engage in an act that violates the federal money laundering statute[20] or the structuring provision of the Bank Secrecy Act.[21]

Additionally, if the couple willfully violated any provision of the Money Transmitter Code, or Ch. 896, committed in furtherance of the commission of any other violation of any Florida state law;[22] as part of a pattern of illegal activity involving financial transactions exceeding $300 but less than $20,000 in any 12-month period;[23] as part of a pattern of illegal activity involving financial transactions exceeding $20,000 but less than $100,000 in any 12-month period;[24] or, as part of a pattern of illegal activity involving financial transactions exceeding $100,000 in any 12-month period,[25] they could face more serious escalating felony charges. This statute illustrates how the legislature has joined related statutes to create an overall anti-money laundering scheme by incorporating Ch. 896.[26] Fines for violating any of the Money Transmitter Code crimes can range from up to $250,000 to twice the value of the financial transaction, whichever is greater.[27] On a second or subsequent conviction for or plea of guilty or nolo contendere to a violation, the fine may be up to $500,000 or quintuple the value of the financial transaction, whichever is greater.[28]

Florida Control of Money Laundering in Financial Institutions Act

The Florida Control of Money Laundering in Financial Institutions Act,[29] has incorporated the federal statutory and regulatory definition of financial institution to include any person engaged in the business of transmitting funds.[30] Under current regulations, financial institutions must file a currency transaction report, IRS Form 4789, on any cash transaction of more than $10,000.[31] Thus, the man and the woman can be held criminally liable for failing to comply with the reporting requirements imposed under this section.[32] Additionally, a person is subjected to various increasing levels of felony liability when willfully violating any provision of the Florida Control of Money Laundering in Financial Institutions Act (failing to file a currency exchange report),[33] F.S. Ch. 896, or any similar state or federal law if the violation is committed in furtherance of the commission of any violation of Florida law;[34] committed as part of a pattern of illegal activity involving financial transactions exceeding $300 but less than $20,000 in any 12-month period;[35] committed as a part of a pattern of illegal activity involving financial transactions exceeding $20,000 but less than $100,000 in any 12-month period;[36] or, committed as part of a pattern of illegal activity involving financial transactions exceeding $100,000 in any 12-month period.[37] The fines here are identical to the fines imposed under the Money Transmitter Code.[38] The statutory language is nearly identical.[39] This nearly identical language again illustrates the Florida Legislature's intent to tailor a comprehensive multifaceted and interrelated anti-money laundering initiative.

This section is sewn to F.S. Ch. 896 in other ways. For example, this act requires every financial institution to keep a record of each financial transaction occurring in this state known to involve currency or other monetary instrument of a value in excess of $10,000 to involve the proceeds of specified unlawful activity, or designed to evade the reporting requirements of this section, F.S. Ch. 896, or any similar state or federal law while maintaining appropriate procedures to ensure compliance with this section, F.S. Ch. 896, and any other similar state or federal law.[40] Additionally, any financial institution may keep a record of any financial transaction occurring in this state, regardless of the value, if it suspects the transaction to involve the proceeds of specified unlawful activity.[41] The Florida Legislature's mandate advocating coordination of the state's anti-money laundering statutes is clear by the adoption of the RICO predicate acts to define specified unlawful activity[42] and the inclusion of F.S. Ch. 896 violations.[43]

Florida Money Laundering Statute

The anti-money laundering provisions of F. S. Ch. 896 virtually mirror the elements of its federal counterpart.[44] Like the federal statute, the Florida offenses contain a transaction prong and a transportation prong. Each prong creates three separate second degree felony violations.

One prong imposes criminal liability for transactional money laundering if "knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity," a person conducts or attempts to conduct such a "financial transaction" which in fact involves the proceeds of "specified unlawful activity" either: with the intent to promote the carrying on of specified unlawful activity;[45] or, knowing that the transaction is designed in whole or in part to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity;[46] or, knowing that the transaction is designed in whole or in part to avoid a transaction reporting requirement under state law.[47]

Under the transportation branch, three additional second degree felonies are committed if any person transports or attempts to transport a monetary instrument or funds: with the intent to promote the carrying on of specified unlawful activity;[48] or, knowing that the monetary instrument or funds involved in the transportation represent the proceeds of some form of unlawful activity and knowing that such transportation is designed in whole or in part to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity;[49] or, knowing that the monetary instrument or funds involved in the transportation represent the proceeds of some form of unlawful activity and knowing that such transportation is designed in whole or in part to avoid a transaction reporting requirement under state law.[50]

Statutory definitions play a pivotal role in analyzing potential F.S. Ch. 896 criminal liability. "Knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity" means that the person knew the property involved in the transaction represented proceeds from softie form, though not necessarily which form, of activity that constitutes a felony under state or federal law, regardless of whether such activity is specified unlawful activity.[51] In defining what offenses constitute "specified unlawful activity,"[52] the legislature has equated those offenses with the Florida and federal RICO predicate acts.[53] Thus, "specified unlawful activity" can include, but is not limited to: 1) any violation of F.S. [sections]655.50 (10)(b)1 (1997), the Florida Control of Money Laundering in Financial Institutions Act, committed as part of a pattern of illegal activity involving financial transactions exceeding $100,000 in any 12-month period; 2) any violation of F.S. Ch. 893 (1997), the Florida Controlled Substances Act; 3) any violation of F.S. Ch. 895 (1997), the Florida RICO Act; or 4) any violation of F.S. [sections]896.102 (1997) (not reporting the receipt of more than $10,000 in U.S. currency received in trade or business).[54] Because the Florida RICO predicate acts include the predicate acts under the federal RICO statute, specified unlawful activity also includes, among others, any violation of 18 U.S.C. [sections]1952 (1998), relating to racketeering; any violation of 18 U.S.C. [sections]1956 (1998), the federal Money Laundering Act; and/or any violation of the federal Currency and Foreign Transactions Reporting Act a/k/a The Bank Secrecy Act, to wit: 31 U.S.C. [sections]5311 (1998) et al.[55] Like the applicable provisions of the Florida Control of Money Laundering in Financial Institutions Act, the legislature has again incorporated relevant federal statutes and regulations to define a financial institution as any person engaged in the business of transmitting funds.[56] Lastly, the statute defines a "financial transaction" as a transfer or delivery of currency by whatever means effected which in any way or degree affects commerce.[57]

Thus, the couple exposed themselves to criminal liability when they transported and delivered the illegal drug proceeds (cash) to the various businesses as well as the banks where they subsequently made the structured deposits. This is true because the woman believed the money was drug proceeds. Consequently, if correctly applied, the Florida statutory definition of a financial institution clearly reflects that the man and the woman, individually or collectively, are a financial institution.

Florida RICO Act

The federal and state RICO statutes are among the most powerful law enforcement tools in existence today to combat organized crime. Under the Florida version, racketeering activity means "to commit, to attempt to commit, to conspire to commit, or to solicit, coerce, or intimidate another person to commit any violation of" F.S. [sections] 655.50 (1997) relating to reports of currency transactions, when such violation is punishable as a felony; F.S. Ch. 893, relating to drug abuse prevention and control; or F.S. Ch. 896, relating to offenses related to financial transactions; or any conduct defined as "racketeering activity" under 18 U.S.C. [sections] 1961(1) (1998).[58] Accordingly, the couple could be charged pursuant to this act because it is unlawful for any person who has with criminal intent received any proceeds derived, directly or indirectly, from a pattern of racketeering activity to use or invest, whether directly or indirectly, any part of such proceeds, or the proceeds derived from the establishment or operation of any enterprise;[59] through a pattern of racketeering activity to acquire or maintain, directly or indirectly, any interest in or control of any enterprise;[60] employed by, or associated with, any enterprise to conduct or participate, directly or indirectly, in such enterprise through a pattern of racketeering activity;[61] or, to conspire or endeavor to violate any of the above provisions.[62]

Florida Contraband Forfeiture Act

The Florida Contraband Forfeiture Act defines a contraband article as any vessel, aircraft, item, object, tool, substance, device, weapon, machine, vehicle of any kind, money, securities, record, research, negotiable instrument, or currency, which was used or was attempted to be used as an instrumentality in the commission of, or in aiding or abetting in the commission of any felony.[63] Any contraband article is subject to forfeiture pursuant to the Florida Contraband Forfeiture Act because it is unlawful to transport, carry, or convey any contraband article in, upon, or by means of any vessel, motor vehicle, or aircraft; to conceal or possess any contraband article; to use any vessel, motor vehicle, aircraft, other personal property, or real property to facilitate the transportation, carriage, conveyance, concealment, receipt, possession, purchase, sale, barter, exchange, or giving away of any contraband article; to conceal, or possess, or use any contraband article as an instrumentality in the commission of or in aiding or abetting in the commission of any felony or violation of the Florida Contraband Forfeiture Act; or to acquire personal property by the use of proceeds obtained in violation of the Florida Contraband Forfeiture Act.[64] Therefore, the currency and the vehicle used by the couple is contraband and will be forfeited to the appropriate law enforcement agency specifically as it relates to the commission of the Money Transmitter Code violation.[65]

Administrative Sanctions

Administratively, the couple faces several additional sanctions. Under the Money Transmitter Code[66] and the Florida Control of Money Laundering in Financial Institutions Act,[67] any person who willfully violates any provision of F.S. [subsections] 560.123, 655.50 or Ch. 896 (1997) is also liable for a civil penalty of not more than the greater of the value of the financial transaction involved or $25,000, not to exceed $100,000.[68] The couple could also face supplemental civil RICO sanctions.[69]

Conclusion

Drug trafficking and its byproduct, money laundering, have become significant problems in Florida.[70] In response, the legislature has equipped law enforcement with several interrelated criminal and civil sanctions to combat this facet of organized crime. As money laundering techniques become more sophisticated, most notably through the Black Market Peso Exchange, law enforcement will continue to face new challenges in repelling this criminal offensive. As a result of this intervention of state and federal statutory and regulatory scheme, Florida law enforcement officials now have some of the necessary tools. Clearly, the complexity of and obfuscation created by sophisticated money laundering schemes can only be unraveled by aggressive and tempered prosecutions coupled with judicial application of these sanctions.

The legislature's intent at amassing a strategic state based anti-money laundering initiative is clear from the tailored nature of the statutes quilted together by federal statutory stitching. However, the eventual deterrent value of these statutes will be maximized only if the criminal penalties, under the sentencing guidelines, are increased. One such option could be to increase the penalties under F.S. Ch. 896 contingent on the amount of funds involved in the transaction or transportation similar to the escalating penalties in the Money Transmitter Code and the Florida Control of Money Laundering in Financial Institutions Act. The one constant is that money laundering will continue to occur and thrive in this state unless it is addressed and attacked at the local level.

[1] Money laundering is the process by which one conceals the existence, illegal source, or illegal application of income, and disguises that income to make it appear legitimate. Through money laundering, the criminal transforms the monetary proceeds derived from criminal activity into funds with a deceptively legal source. A diverse and often complex process, it involves three independent steps that often occur simultaneously: placement, layering, and integration. Placement is physically placing bulk cash proceeds. Layering entails separating the proceeds of criminal activity from their origins through layers of complex financial transactions. Integration is providing an apparently legitimate explanation for the illicit proceeds. Money laundering remains a corollary of the illegal drug trade.

[2] According to the U.S. Department of Justice, National Drug Intelligence Center and the U.S. Department of the Treasury, Financial Crimes Network, Colombia's Black Market Peso Exchange (BMPE) may be the most significant money laundering system in the Americas and the greatest challenge to law enforcement's anti-money laundering programs. The system involves the use of a BMPE to return substantial amounts of dollars from illegal U.S. drug sales to Colombia as imported goods. Drug traffickers sell U.S. currency at a discount to money brokers, who assume the responsibility for placing the funds into the financial systems. The BMPE fuels Colombia's contraband market, accounting for an estimated $3 billion to $6 billion annually. The system involves the use of individuals in both Colombia and the U.S. to open checking accounts in the United States. Checks drawn on these accounts will then either be sold on the black market or used to pay debts. The same or other individuals will also deliver cash to businesses as payment for merchandise shipped to Colombia on consignment or make cash deposits into accounts. In this manner, the Colombian buyer's debt is paid to the U.S. company, the drug dealer's U.S. currency has been laundered, and the broker has received a commission from both parties. The unlicensed money transmitter (money courier) receives a fee for transporting and/or depositing the U.S. drug dollars.

[3] This is known as structuring or structuring a transaction. A person structures a transaction if that person, acting alone, or in conjunction with, or on behalf of, other persons, conducts or attempts to conduct one or more transactions in currency, in any amount, at one or more financial institutions, on one or more days, in any manner, for the purpose of evading the reporting requirements. "In any manner" includes, but is not limited to, the breaking down of a single sum of currency exceeding $10,000 into smaller sums, including sums at or below $10,000. 31 C.F.R. [sections]103.11(gg) (1998).

[4] This is known as a "quick count bundle." Persons engaged in drug trafficking and money laundering package drug dollars in this fashion to minimize the time spent together during transactions by enabling those counting the money to quickly fan the bundle revealing each bill and providing an accurate count in very little time.

[5] A positive dog alert indicates that the currency or item has recently or just before packaging been in close or actual proximity to a significant amount of narcotics and/or illegal drugs and is not the result of any alleged innocent environmental contamination of circulated U.S. currency by microscopic traces of cocaine.

[6] FLA. STAT. ch. 560 (1997).

[7] FLA. STAT. [sections] 655.50 (1997).

[8] FLA. STAT. ch. 896 (1997).

[9] FLA. STAT. ch. 895 (1997).

[10] FLA. STAT. [sections] 777.04(3) (1997).

[11] FLA. STAT. [sections] 932.701 et seq. (1997).

[12] Homestead property is protected against forfeiture except in the circumstances enumerated in FLA. CONST. art. X, [sections]4. Butterworth v. Caggiano, 605 So. 2d 56 (Fla. 1992); Tramel v. Stewart, 697 So. 2d 821 (Fla. 1997).

[13] FLA. STAT. [sections] 560.123 (1997).

[14] "Smurfing," a phrase used by law enforcement, describes the process of employing low level employees of an unlicensed money transmitter to structure large pools of illicit drug money into amounts below the Bank Secrecy Act reporting threshold of $10,000 by either depositing these moneys into bank accounts, or purchasing bank checks or money orders, thus evading the requisite currency reporting requirements. "Smurfs" are usually unlicensed money transmitters. See FLA. STAT. ch. 560 (1997).

[15] FLA. STAT. [sections] 560.103(10) (1997).

[16] FLA. STAT. [sections] 560.103(9) (1997).

[17] FLA. STAT. [sections] 560.125(1) (1997); In Re Forfeiture Of One Hundred Seventy-One Thousand Nine Hundred Dollars ($171,900) In United States Currency, 711 So. 2d 1269, 1273 (Fla. 3d D.C.A. 1998).

[18] FLA. STAT. [sections] 560.125(2) (1997).

[19] FLA. STAT. [sections] 560.111(1)(d) (1997).

[20] 18 U.S.C. [sections] 1956 (1998).

[21] 31 U.S.C. [sections] 5324 (1998).

[22] FLA. STAT. [sections] 560.123(8)(b)1 (1997). Compare FLA. STAT. [sections] 655.50(10)(b)1 (1997).

[23] FLA. STAT. [sections] 560.123(8)(b)1 (1997). Compare FLA. STAT. [sections] 655.50(10)(b)2 (1997).

[24] FLA. STAT. [sections] 560.123(8)(b)2 (1997). Compare FLA. STAT. [sections] 655.50(10)(b)3 (1997).

[25] FLA. STAT. [sections] 560.123(8)(b)3 (1997). Compare FLA. STAT. [sections] 655.50(10)(b)4 (1997).

[26] FLA. STAT. ch. 896 (1997).

[27] FLA. STAT. [sections] 560.123(8)(C) (1997). Compare FLA. STAT. [sections] 655.50(10)(C) (1997).

[28] Id.

[29] FLA. STAT. [sections] 655.50 (1997).

[30] A financial institution includes, but is not limited to, any person engaged in the business of transmitting funds. FLA. STAT. [sections] 655.50(3)(b) (1997); 31 U.S.C. [sections] 5312(a)(2)(Y) (1998); 31 C.F.R. [sections] 103.11(n)(5) (1998). Compare FLA. STAT. [sections] 896.101(f) (1997).

[31] 31 C.F.R. [sections] 103.22 (1998).

[32] FLA. STAT. [subsections] 655.50(4)(5) (1997).

[33] Pursuant to 31 U.S.C. [sections] 5313(a) (1998) and FLA. STAT. [sections] 655.50 (1997), financial institutions must file a currency transaction report with the Treasury Department for every cash transaction over $10,000. Thus, the couple is required to file a currency transaction report.

[34] FLA. STAT. [sections] 655.50(10)(b)1 (1997). Compare FLA. STAT. [sections] 560.123(8)(b)1 (1997).

[35] FLA. STAT. [sections] 655.50(10)(b)2 (1997). Compare FLA. STAT. [sections] 560.123(8)(b)1 (1997).

[36] FLA. STAT. [sections] 655.50(10)(b)3 (1997). Compare FLA. STAT. [sections] 560.123(8)(b)2 (1997).

[37] FLA. STAT. [sections] 655.50(10)(b)4 (1997). Compare FLA. STAT. [sections] 560.123(8)(b)3 (1997).

[38] FLA. STAT. [sections] 655.50(10)(C) (1997). Compare FLA. STAT. [sections] 560.123(8)(C) (1997).

[39] See id.

[40] FLA. STAT. [sections] 655.50(4)(a) (1997).

[41] FLA. STAT. [sections] 655.50(4)(C) (1997).

[42] FLA. STAT. [sections] 655.50(g); FLA. STAT. [sections] 896.101(1)(g) (1997); FLA. STAT. 895.02 (1997).

[43] Id.

[44] 18 U.S.C. [sections] 1956 (1998).

[45] FLA. STAT. [sections] 896.101(2)(a)1 (1997).

[46] FLA. STAT. [sections] 896.101(2)(a)2.a (1997).

[47] FLA. STAT. [sections] 896.101(2)(a)2.b (1997).

[48] FLA. STAT. [sections] 896.101(2)(b)1 (1997).

[49] FLA. STAT. [sections] 896.101(2)(b)2.a (1997).

[50] FLA. STAT. [sections] 896.101(2)(b)2.b (1997).

[51] FLA. STAT. [sections] 896.101(1)(a) (1997).

[52] FLA. STAT. [sections] 896.101(1)(g) (1997). See also FLA. STAT. [sections] 895.02 (1997); FLA. STAT. [sections] 655.50(3)(g) (1997).

[53] FLA. STAT. [sections] 895.02 (1997). See also FLA. STAT. [sections] 655.50(3)(g) (1997).

[54] Id.

[55] Id.

[56] FLA. STAT. [sections] 896.101(f) (1997); 31 U.S.C. [sections] 5312(a)(2)(Y) (1998); 31 C.F.R. [sections] 103.11(n)(5) (1998). Compare FLA. STAT. [sections] 655.50(3)(b) (1997).

[57] FLA. STAT. [sections] 896.101(1)(d) (1997).

[58] FLA. STAT. [sections] 895.02 (1997). See also FLA. STAT. [sections] 896.101(1)(g) (1997); FLA. STAT. [sections] 655.50(3)(g) (1997).

[59] FLA. STAT. [sections] 895.03(1) (1997).

[60] FLA. STAT. [sections] 895.03(2) (1997).

[61] FLA. STAT. [sections] 895.03(3) (1997).

[62] FLA. STAT. [sections] 895.03(4)(1997).

[63] FLA. STAT. [sections] 932.701(2)(a) (1997).

[64] FLA. STAT. [sections] 932.701 et seq. (1997).

[65] Forfeiture of $171,900.00, 711 So. 2d at 1273.

[66] FLA. STAT. ch. 560 (1997).

[67] FLA. STAT. [sections] 655.50 (1997).

[68] FLA. STAT. [sections] 560.123(8)(d) (1997). Compare FLA. STAT. [sections] 655.50(10)(d) (1997).

[69] FLA. STAT. [sections] 895.05 (1997).

[70] Forfeiture of $171,900.00, 711 So. 2d at 1275 (Miami is a center for both drug smuggling and money laundering).

Israel Reyes is an assistant state attorney in the Miami-Dade State Attorney's Office Racketeering / Organized Crime Unit. Before becoming an attorney, he served for 16 years as a police officer/detective with Miami-Dade Police Department. He received a B.S. from Florida International University (high honors), and a J.D. from Nova Southeastern University School of Law.

This column is submitted on behalf of the Criminal Law Section, George E. Tragos, chair, and Randy E. Merrill, editor