Penal Code 186.10 is the California statute that defines the crime of money laundering. People commit this offense when they take money obtained from illegal or criminal activity, and channel it into bank accounts or other legitimate uses, so that no one will be able to trace the source of the funds.
California’s money laundering laws are set forth in two main statutes. These are:
- Penal Code 186.10 PC, which covers money that is related to any kind of crime, and
- California Health and Safety Code 11370.9 HS, which deals only with money earned from drug crimes.
What are some common examples of money laundering?
- a person depositing checks worth a large amount of money, earned via health care fraud, with a California financial institution.
- depositing stolen cash into a legitimate business account based in California.
- placing money, gained via operating an illegal house of prostitution, into a California bank
How do you fight the charges?
Criminal defense lawyers draw upon several legal strategies to help clients challenge money laundering charges. A few include lawyers showing that:
- an accused did not act with a specific intent to promote criminal or illegal activity,
- a defendant deposited only a small amount of money, and/or
- law enforcement agencies violated one of the defendant’s constitutional rights.
How much trouble can you get in for money laundering?
Misdemeanor money laundering is punishable by custody in county jail for up to one year.
A felony money laundering conviction can result in a jail sentence of up to four years.
Plus, defendants can face forfeiture of any assets obtained by means of the money laundering.
Our California criminal defense attorneys will address the following in this article:
- 1. How does California law define “money laundering”?
- 2. Are there legal defenses to PC 186.10 charges?
- 3. Is money laundering a felony in California?
- 4. Are there related offenses?
1. How does California law define “money laundering”?
Under California law, a prosecutor must prove the following to successfully convict a defendant of money laundering:
- the accused conducted, or attempted to conduct, a financial transaction or a series of transactions through a bank,1
- the transaction or series of transactions involved a total value of more than $5,000 in a seven-day period, or more than $25,000 in a 30-day period,2 and
- the defendant acted with a specific intent to promote criminal activity, or with the knowledge that the source of the money or proceeds involved in the transaction came from criminal activity.3
As to the third element above, according to Oakland criminal defense attorney Reve Bautista:
“The legal definition of PC 186.10 money laundering has specific intent or knowledge as one of its key elements. This means that you are not guilty of money laundering if you unknowingly initiated a banking transaction that turned out to be connected with a crime.”4
Example: Doug asks his mother, Mary, for a loan of $10,000. He tells her he wants to use the money to start a business. Mary writes him a check for this amount.
Doug’s “business” turns out to be purchasing materials to start a meth lab, in violation of California’s laws against the manufacturing of controlled substances. Mary does not know this when she gives Doug the money.
Mary is not guilty of money laundering because she did not specifically intend to support Doug’s criminal enterprise.
Money laundering activities typically involve layering, which is trying to camouflage the source of the “proceeds of crime” by making it look like the funds came from a legitimate source.
Some money laundering schemes are relatively crude, involving one person using money orders and making wire transfers to conceal “dirty money” through a legitimate financial system. Other scams involve very intricate organized crime rings putting illicit funds in shell companies, offshore banking accounts, real estate, and in recent years, cryptocurrencies and bitcoin.
2. Are there legal defenses to PC 186.10 charges?
People accused of committing the crime of money laundering can challenge the accusation with a legal defense. Three common defenses include accused people showing that:
- they did not act with criminal intent.
- they deposited only a small amount of money.
- police violated one of their constitutional rights.
Typical evidence includes suspicious activity reports (SARs) from the financial sector and other monetary instrument/cash transaction reporting.
2.1. No criminal intent
Recall that defendants are only guilty under this law if they acted with either:
- a specific intent to promote criminal activity, or
- knowledge that the money involved came from criminal activity.
This means it is always a defense for a defendant to show that he/she did not act with this intent or with this knowledge. Perhaps, for example, an accused deposited money for her husband without knowing that it was the proceeds of a crime. This defense is also called “mistake of fact.”
2.2. Minimum amounts deposited
Recall, too, that a defendant is not guilty under this statute unless he/she engages in certain financial transactions that involve more than $5,000 or $25,000 (over a seven-or 30-day period of time). Showing that a transaction involved only a minimal amount of money, or less than the amount listed in the statute, could shield the defendant from a conviction.
2.3. Violation of a constitutional right
Alleged money launderers can contest a charge under this law by showing that law enforcement violated one of their constitutional rights.
Perhaps, for example, law enforcement personnel:
- conducted an unlawful search or seizure,
- stopped or arrested the defendant without probable cause,
- coerced a confession, or
- failed to read the accused his/her Miranda rights.
If any of the above applies, then a judge can reduce or drop a defendant’s money laundering charges.
3. Is money laundering a felony in California?
A violation of PC 186.10 is a wobbler. Prosecutors can charge wobblers as either misdemeanors or felonies depending on:
- the facts of the case, and
- the defendant’s criminal history.
If charged as a misdemeanor, the crime is punishable by:
- up to one year in county jail (as opposed to a state prison term), and/or
- a maximum fine of up to $1,000.5
If charged as a felony, the crime is punishable by:
- up to four years in jail (rather than a prison sentence) under California’s realignment program, and/or
- a fine of up to $250,000 or twice the amount of money laundered (whichever is greater).6
The maximum fine increases to $500,000 or five times the laundered amount (whichever is larger) if a defendant is found guilty of money laundering on more than one occasion.7
Also, the maximum jail sentence for money laundering can increase by one year if the amount of money laundered is more than $50,000. And the defendant faces an extra four years if the money laundered is more than $2,500,000.8
4. Are there related offenses?
There are three laws related to money laundering. These are:
- laundering drug money – HS 11370.9,
- California’s freeze and seize penalty enhancement – PC 186.11, and
- federal law on money laundering – 18 U.S.C. 1956.
4.1. Laundering drug money – HS 11370.9
Per Health and Safety Code 11370.9, laundering drug money is the crime where people launder the proceeds of an unlawful drug sale or drug trafficking.
“Laundering money” under this statute takes place in the same manner as laundering under PC 186.10.
Further, as with charges under PC 186.10, defendants can contest charges brought under this law by showing that they did not act with criminal intent.
4.2. Freeze and seize penalty enhancement – PC 186.11
Under Penal Code 186.11, the freeze and seize penalty enhancement is the law that says people will face an additional consecutive prison term (of one to five years) if:
- they are convicted of two or more fraud or embezzlement related felonies in a single case, and
- the crimes involve the taking of over $100,000.
Unlike with violations of PC 186.10, violations of this law result in custody in state prison and not county jail.
4.3. Federal money laundering – 18 U.S.C. 1956 & 1955
Money laundering can be both a California state crime and a federal crime.
Under 18 U.S.C. 1956, federal money laundering occurs when people:
- transfer money (that comes from criminal activity) into legitimate channels, and
- do so in an attempt to disguise the illegal source of the funds.
People are only guilty under this law if they:
- know that the money involved in a financial transaction came from proceeds of unlawful activity, or
- conduct a financial transaction involving money from unlawful activity.
If people violate this federal law, they will serve up to 20 years in federal prison. They do not have the option to serve a term of imprisonment in a state-based jail.
This law prohibits all types of money laundering schemes, from tax evasion to terrorist financing.
For additional help…
For additional guidance or to discuss your case with a criminal defense lawyer, we invite you to contact our law offices at the Shouse Law Group. Our attorneys provide both free consultations/case evaluations and legal advice you can trust.
Our lawyers represent clients throughout jurisdictions in California, including Los Angeles, Orange County, and San Diego.
- Department of Justice (justice.gov) – money laundering and asset recovery
- Department of the Treasury – money laundering
- Financial Crimes Enforcement Network – History of Anti-Money Laundering (AML) Laws
- Financial Action Task Force (FATF) (U.S. is a member state) – Private sector news
- United Nations Office on Drugs and Crime
- Money Laundering Control Act
- History of Anti-Money Laundering Laws, FinCEN
- Bank Secrecy Act (BSA)
- European Union – European Commission
- International Monetary Fund – Anti-Money Laundering / Combating the Financing of Terrorism
- U.S. Department of the Treasury – Terrorism and Financial Intelligence
- New York State Department of Financial Services
- Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT), International Monetary Fund
- Patriot Act
- Caribbean Financial Action Task Force (includes news on sanctions)
- Customer Due Diligence — Overview, Federal Financial Institutions Examination Council’s (FFIEC)
- A transaction can include depositing or withdrawing money or writing a check. See CALCRIM No. 2997 – Money Laundering. Judicial Council of California Criminal Jury Instructions (2020 edition).
- See, for example, People v. Bolding (2019) 34 Cal.App.5th 1037.
- As to the elements of California money laundering, see CALCRIM No. 2997. See also People v. Mays (2007) 148 Cal.App.4th 13. As to “proceeds,” see United States v. Santos (2008) 553 U.S. 507.
- Oakland criminal defense attorney Reve Bautista spent over 20 years as a prosecutor with the Contra Costa District Attorney and the San Francisco District Attorney. Now, she devotes her energy to helping protect the rights of criminal defendants in matters ranging from DUI to money laundering cases to other white-collar crimes. As to “knowledge,” see People v. Connors (2008) 168 Cal.App.4th 443. See also People v. Bolding (Cal. App. 4th Dist., 2019), 246 Cal. Rptr. 3d 760, 34 Cal. App. 5th 1037. See also People v. Lee (Cal. App. 1st Dist., 2017), 217 Cal. Rptr. 3d 392, 11 Cal. App. 5th 344.
- California Penal Code 186.10 PC. See also California Penal Code 672 PC.
- California Penal Code 186.10 PC. See also California Penal Code 1170h PC.
- See same.
- California Penal Code 186.10c PC.