The traditional definition of “money laundering” is exactly what it sounds like—making “dirty” money clean.
This is done by taking money obtained from criminal or other illegal activity, and channeling it into bank accounts or other legitimate uses, so that no one will be able to trace its source.1
California criminal law on money laundering has two major parts:
- Penal Code 186.10 PC, which covers money that’s related to any kind of crime;2 and
- Health & Safety Code 11370.9 HS, which deals only with money earned from drug crimes.3
Examples
Here are some examples of individuals who might be charged under one of California’s money laundering statutes:
- A woman knows that her husband, a doctor, has been earning significant amounts of money from health care fraud. She deposits large checks that she knows are the proceeds of that fraud into their shared personal bank account.
- A successful drug dealer takes the thousands of dollars he earns in cash from selling narcotics and uses it to stock the cash registers of a chain of food trucks he owns. His idea is that this will make his “dirty” money clean.
Penalties
Both forms of money laundering—under PC 186.10 and HS 11370.9—are “wobblers” in California law.4
This means that prosecutors may choose to either form of money laundering as either a misdemeanor or a felony, depending on the defendant’s criminal history and the facts of the case.5
Potential misdemeanor penalties include up to one (1) year in county jail, and/or a fine of up to one thousand dollars ($1,000).6
But felony money laundering carries a jail sentence of at least sixteen (16) months to four (4) years, and/or a fine of up to two hundred fifty thousand dollars ($250,000) or twice the amount of money laundered (whichever is greater).7
Legal defenses
Money laundering can be a difficult crime to prove. If you are charged with this offense, you may be able to beat the charges with the help of one of the following legal defenses:
- You lacked either criminal intent or the knowledge that you were laundering the proceeds of criminal activity;
- The amount of money you dealt with did not mean the minimum threshold for a money laundering conviction; and/or
- You were the victim of police misconduct.
In this article, our California criminal defense attorneys8 explain the following:
- 1. The History and Philosophy of California Money Laundering Laws
- 2. Legal Definition of Money Laundering in California
- 3. Penalties for California Money Laundering
- 4. Legal Defenses to Money Laundering Charges
- 5. Federal Money Laundering Laws
If, after reading this article, you would like more information, we invite you to contact us at Shouse Law Group.
1. The History and Philosophy of California Money Laundering Laws
You might wonder what the point of money laundering laws is. Isn’t it enough to just prosecute people for committing the crime that the money came from? Why does it have to be a separate crime to deposit the money earned from the crime in a bank?
The answer comes from the history of California’s money laundering law. The California legislature passed the law in 1986, in order to crack down on money obtained from the transport and sale of illegal drugs.9
Drug trafficking was often done by large-scale organized crime rings. The actual transportation and sale was handled by rank-and-file “workers” in the crime rings—while the “bosses” got to keep the profits.
Making it a crime to handle the money provided a way for prosecutors to get at the people who were higher up in the organization.
But California money laundering law now leads to the arrest of many people who are very far from being organized crime bosses. Because of the way the laws are written, you could be charged if you are financially involved with a family member or friend who earns money from illegal activity—even if you don’t participate in that illegal activity yourself.10
2. Legal Definition of Money Laundering in California
2.1. Penal Code 186.10 general money laundering
The legal definition of money laundering under California Penal Code 186.10, the more general California money laundering statute, is:
- Conducting, or attempting to conduct, a transaction through a bank (this can include depositing or withdrawing money, or writing a check);
- Where the transaction or series of transactions involve a total value of more than five thousand dollars ($5,000) in a seven (7)-day period, or more than twenty-five thousand dollars ($25,000) in a thirty (30)-day period;
- With either:
a. Specific intent to promote criminal activity; or
b. Knowledge that the money involved in the transaction came from criminal activity.11
Example: Marv makes thousands of dollars in cash through the crime of pimping.
On Monday, he deposits $3,000 in cash into his bank account. On Friday, he deposits another $3,000 to the same account.
The two transactions took place within 4 days of each other and total $6,000. So Marv may be guilty of money laundering.
According to Oakland criminal defense attorney Reve Bautista12:
“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.”
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 manufacturing of drugs. 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 activity.
3. Penalties for California Money Laundering
Both forms of money laundering—under PC 186.10 and HS 11370.9—are “wobblers” in California law.16
This means that prosecutors may choose to charge either form of money laundering as either a misdemeanor or a felony, depending on the defendant’s criminal history and the facts of the case.17
If either form of money laundering is charged as a misdemeanor, the potential penalties include:
- Up to one (1) year in county jail; and/or
- A fine of up to one thousand dollars ($1,000).18
The basic penalties for Penal Code 186.10 money laundering as a felony are:
- A sentence of sixteen (16) months, two (2) years, or three (3) years, served in county jail under California’s realignment program; and/or
- A fine of up to two hundred fifty thousand dollars ($250,000) or twice the amount of money laundered (whichever is greater).19
The maximum fine increases if this is not your first conviction for money laundering.20
Also, the maximum prison sentence for money laundering increases if the amount of money laundered is more than fifty thousand dollars ($50,000).21
In contrast, the felony penalties for Health & Safety Code 11370.9 controlled substances money laundering include:
- Two (2), three (3), or four (4) years in state prison; and/or
- A fine of up to two hundred fifty thousand dollars ($250,000) or twice the amount laundered (whichever is greater).22
4. Legal Defenses to Money Laundering Charges
If you are charged with the California money laundering, a good California criminal defense attorney can help you assert legal defenses that could get you a verdict of “innocent.” Some of these are:
Lack of intent/lack of knowledge
To be convicted of money laundering under Penal Code 186.10 PC, you need to either have specifically intended to promote or support criminal activity, OR have known that you were handling money that came from criminal activity.23
Similarly, to be convicted under Health & Safety Code 11370.9 HS, you need to have intended to hide the source or owner of drug proceeds.24
If the prosecutor can’t prove that you intended or knew these things, then you can’t be found guilty.
Not enough money from illegal activities
As we discussed above, you can’t be convicted of California money laundering unless the transactions involved money above certain minimum amounts.
And that’s not all: the prosecutor needs to be able to show not just that the laundering transactions were above these amounts, but that a certain amount of the money that was laundered actually came from illegal sources.25
Example: Alvin runs both an illegal escort (prostitution) business and a legal music studio business. He deposits the profits from both in the same bank account.
Alvin is arrested for money laundering based on an $8,000 rent check he writes from that account.
The prosecutor will need to show that, on the day Alvin wrote that check, at least $5,000 of the money in the account came from the prostitution business (and not the music studio). Otherwise, Alvin cannot be convicted.26
Police misconduct
Police often use complicated undercover operations to make money laundering arrests. These operations sometimes lead to instances of police misconduct, like searches made without a valid California search warrant or without probable cause.
If this occurs, your attorney may be able to file a successful motion to suppress evidence that was obtained through an illegal search.
5. Federal Money Laundering Laws
Money laundering is a federal crime as well as a California state crime. Federal law makes it a crime to engage in one of two types of money laundering.
The first is knowingly conducting a financial transaction with the proceeds from illegal activity, with the intent EITHER to promote the illegal activity OR to conceal the illegal source of the money.27
If you are convicted of this crime, you could be sentenced to up to twenty (20) years in federal prison, or fined up to five hundred thousand dollars ($500,000) or twice the amount laundered (whichever is greater), or both imprisoned and fined.28
The other type of federal money laundering is knowingly engaging in (or attempting to engage in) a transaction of more than ten thousand dollars ($10,000) using money that comes from criminal activity.29
This only somewhat less serious crime is punishable with a fine, up to ten (10) years in federal prison, or both.30
Call us for help…
For questions about California’s money laundering laws, or to discuss your case confidentially with one of our California criminal defense attorneys, do not hesitate to contact us at Shouse Law Group.
To learn about the federal crime of money laundering in Nevada, you may go to our page on the federal crime of money laundering in Nevada.
We have local criminal law offices in and around Los Angeles, San Diego, Orange County, Riverside, San Bernardino, Ventura, San Jose, Oakland, Sacramento, the San Francisco Bay area, and several nearby cities.
Legal References:
- Black’s Law Dictionary (9th ed. 2009), money-laundering. (“The act of transferring illegally obtained money through legitimate people or accounts so that its original source cannot be traced.”)
- Penal Code 186.10 PC – Money laundering; elements; violations; punishment; pleadings. (“(a) Any person who conducts or attempts to conduct a transaction or more than one transaction within a seven-day period involving a monetary instrument or instruments of a total value exceeding five thousand dollars ($5,000), or a total value exceeding twenty-five thousand dollars ($25,000) within a 30-day period, through one or more financial institutions (1) with the specific intent to promote, manage, establish, carry on, or facilitate the promotion, management, establishment, or carrying on of any criminal activity, or (2) knowing that the monetary instrument represents the proceeds of, or is derived directly or indirectly from the proceeds of, criminal activity, is guilty of the crime of money laundering.”)
- Health & Safety Code 11370.9 HS – Proceeds over $25,000 derived from controlled substance offenses; penalties [money laundering in connection with drug crimes]. (“(a) It is unlawful for any person knowingly to receive or acquire proceeds, or engage in a transaction involving proceeds, known to be derived from any violation of this division or Division 10.1 with the intent to conceal or disguise or aid in concealing or disguising the nature, location, ownership, control, or source of the proceeds or to avoid a transaction reporting requirement under state or federal law. (b) It is unlawful for any person knowingly to give, sell, transfer, trade, invest, conceal, transport, or maintain an interest in, or otherwise make available, anything of value which that person knows is intended to be used for the purpose of committing, or furthering the commission of, any violation of this division or Division 10.1 with the intent to conceal or disguise or aid in concealing or disguising the nature, location, ownership, control, or source of the proceeds or to avoid a transaction reporting requirement under state or federal law. (c) It is unlawful for any person knowingly to direct, plan, organize, initiate, finance, manage, supervise, or facilitate the transportation or transfer of proceeds known to be derived from any violation of this division or Division 10.1 with the intent to conceal or disguise or aid in concealing or disguising the nature, location, ownership, control, or source of the proceeds or to avoid a transaction reporting requirement under state or federal law. (d) It is unlawful for any person knowingly to conduct a transaction involving proceeds derived from a violation of this division or Division 10.1 when the transaction is designed in whole or in part to conceal or disguise the nature, location, source, ownership, or control of the proceeds known to be derived from a violation of this division or Division 10.1 with the intent to conceal or disguise or aid in concealing or disguising the nature, location, ownership, control, or source of the proceeds or to avoid a transaction reporting requirement under state or federal law. . . . (h) For the purposes of this section, the following terms have the following meanings: (1) ‘Proceeds’ means property acquired or derived directly or indirectly from, produced through, or realized through any violation of this division or Division 10.1.”)
- Penal Code 186.10 PC – Money laundering; elements; violations; punishment; pleadings. (“(a) . . . A violation of this section shall be punished by imprisonment in a county jail for not more than one year or pursuant to subdivision (h) of Section 1170, by a fine of not more than two hundred fifty thousand dollars ($250,000) or twice the value of the property transacted, whichever is greater, or by both that imprisonment and fine. However, for a second or subsequent conviction for a violation of this section, the maximum fine that may be imposed is five hundred thousand dollars ($500,000) or five times the value of the property transacted, whichever is greater.”)
Health & Safety Code 11370.9 HS – Proceeds over $25,000 derived from controlled substance offenses; penalties [money laundering in connection with drug crimes]. (“(e) A violation of this section shall be punished by imprisonment in a county jail for not more than one year or in the state prison for a period of two, three, or four years, by a fine of not more than two hundred fifty thousand dollars ($250,000) or twice the value of the proceeds or property involved in the violation, whichever is greater, or by both that imprisonment and fine. Notwithstanding any other provision of law, each violation of this section shall constitute a separate, punishable offense without limitation.”) - Same.
- Same.
See also Penal Code 672 PC. (“Upon a conviction for any crime punishable by imprisonment in any jail or prison, in relation to which no fine is herein prescribed, the court may impose a fine on the offender not exceeding one thousand dollars ($1,000) in cases of misdemeanors [including misdemeanor money laundering] or ten thousand dollars ($10,000) in cases of felonies, in addition to the imprisonment prescribed.”) - Penal Code 186.10 PC – Money laundering; elements; violations; punishment; pleadings, endnote 4, above.
Health & Safety Code 11370.9 HS – Proceeds over $25,000 derived from controlled substance offenses; penalties [money laundering in connection with drug crimes], endnote 4, above.
See also Penal Code 1170(h) PC – Determinate sentencing. (“(h)(1) Except as provided in paragraph (3), a felony punishable pursuant to this subdivision where the term is not specified in the underlying offense shall be punishable by a term of imprisonment in a county jail for 16 months, or two or three years.”) - Our California criminal defense attorneys have local Los Angeles law offices in Beverly Hills, Burbank, Glendale, Lancaster, Long Beach, Los Angeles, Pasadena, Pomona, Torrance, Van Nuys, West Covina, and Whittier. We have additional law offices conveniently located throughout the state in Orange County, San Diego, Riverside, San Bernardino, Ventura, San Jose, Oakland, the San Francisco Bay area, and several nearby cities.
- See People v. Mays (2007) 148 Cal.App.4th 13, 22.
- See, e.g., Penal Code 186.10 PC – Money laundering; elements; violations; punishment; pleadings, endnote 2, above.
- Judicial Council of California Criminal Jury Instructions (“CALCRIM”) 2997 – Money Laundering (Pen. Code, § 186.10). (“The defendant is charged [in Count ] with money laundering [in violation of Penal Code section 186.10]. To prove that the defendant is guilty of this crime, the People must prove that: 1. The defendant (conducted/ [or] attempted to conduct) one or more financial transactions involving at least one monetary instrument through at least one financial institution; 1. <Give 2A when only one transaction is alleged.> [2A. The financial transaction involved [a] monetary instrument[s] with a total value of more than $5,000;] [2A. <Give 2B and/or 2C as appropriate when multiple transactions are alleged.> [2B. The defendant (conducted/ [or] attempted to conduct) the financial transactions within a seven-day period and the monetary instrument[s] involved had a total value of more than $5,000;] [OR] [2C. The defendant (conducted/ [or] attempted to conduct) the financial transactions within a 30-day period and the monetary instrument[s] involved had a total value of more than $25,000;] [AND] [2C. <Give 3A, 3B, or both, as appropriate.> [3A. When the defendant did so, (he/she) intended to (promote/ [or] manage/ [or] establish/ [or] carry on/ [or] facilitate) criminal activity;] [OR] [3B. The defendant knew that the monetary instrument[s] represented the proceeds of criminal activity or (was/were) derived directly or indirectly from the proceeds of criminal activity(;/.)] [AND] [3B. <Give element 4 as appropriate if the defendant is an attorney.> [4. The attorney defendant accepted a fee for representing a client in a criminal investigation or proceeding and accepted the monetary instrument with the intent to disguise or aid in disguising the source of the funds or the nature of the criminal activity.]”).
- 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. As a result, she is well-known at every courthouse in the San Francisco Bay Area. Now, she devotes her energy to helping protect the rights of criminal defendants in cases ranging from DUI to white collar offenses such as money laundering.
- Health & Safety Code 11370.9 HS – Proceeds over $25,000 derived from controlled substance offenses; penalties [money laundering in connection with drug crimes], endnote 3, above
- Same.
- Health & Safety Code 11370.9 HS – Proceeds over $25,000 derived from controlled substance offenses; penalties [money laundering in connection with drug crimes]. (“(f) This section shall apply only to a transaction, or series of related transactions within a 30-day period, involving over twenty-five thousand dollars ($25,000) or to proceeds of a value exceeding twenty-five thousand dollars ($25,000).”)
- Penal Code 186.10 PC – Money laundering; elements; violations; punishment; pleadings, endnote 4, above.
Health & Safety Code 11370.9 HS – Proceeds over $25,000 derived from controlled substance offenses; penalties [money laundering in connection with drug crimes], endnote 4, above. - Same.
- Same.
See also Penal Code 672 PC, endnote 6, above. - Penal Code 186.10 PC – Money laundering; elements; violations; punishment; pleadings, endnote 4, above.
See also Penal Code 1170(h) PC – Determinate sentencing, endnote 7, above. - Same.
- Penal Code 186.10(c) PC – Money laundering; elements; violations; punishment; pleadings. (“(c)(1) Any person who is punished under subdivision (a) by imprisonment pursuant to subdivision (h) of Section 1170 shall also be subject to an additional term of imprisonment pursuant to subdivision (h) of Section 1170 as follows: (A) If the value of the transaction or transactions exceeds fifty thousand dollars ($50,000) but is less than one hundred fifty thousand dollars ($150,000), the court, in addition to and consecutive to the felony punishment otherwise imposed pursuant to this section, shall impose an additional term of imprisonment of one year. (B) If the value of the transaction or transactions exceeds one hundred fifty thousand dollars ($150,000) but is less than one million dollars ($1,000,000), the court, in addition to and consecutive to the felony punishment otherwise imposed pursuant to this section, shall impose an additional term of imprisonment of two years. (C) If the value of the transaction or transactions exceeds one million dollars ($1,000,000), but is less than two million five hundred thousand dollars ($2,500,000), the court, in addition to and consecutive to the felony punishment otherwise imposed, shall impose an additional term of imprisonment of three years. (D) If the value of the transaction or transactions pursuant to this section exceeds two million five hundred thousand dollars ($2,500,000), the court, in addition to and consecutive to the felony punishment otherwise prescribed by this section, shall impose an additional term of imprisonment of four years.”)
- Health & Safety Code 11370.9 HS – Proceeds over $25,000 derived from controlled substance offenses; penalties [money laundering in connection with drug crimes], endnote 4, above.
- CALJIC 12.99 – Money Laundering. (“In order to prove this crime, each of the following elements must be proved: . . . [2.] [The person did so with the specific intent to promote, manage, establish, carry on, or facilitate the promotion, management, establishment or carrying on of any criminal activity [.]] [; or] [; and] [2.] [3.] [The person knew that the monetary instrument represents at least [$5,000.00] [$25,000.00] [of the proceeds] [, or] [is derived directly or indirectly from the proceeds] of criminal activity[.]] [; and] . . . .”)
- Health & Safety Code 11370.9 HS – Proceeds over $25,000 derived from controlled substance offenses; penalties [money laundering in connection with drug crimes], endnote 3, above.
- People v. Mays, endnote 9, above, at 32.
- Loosely based on the facts of the same.
- 18 United States Code (“U.S.C.”) 1956 – Laundering of monetary instruments [i.e., money laundering]. (“(a)(1) Whoever, knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity, conducts or attempts to conduct such a financial transaction which in fact involves the proceeds of specified unlawful activity– (A)(i) with the intent to promote the carrying on of specified unlawful activity; or (ii) with intent to engage in conduct constituting a violation of section 7201 or 7206 of the Internal Revenue Code of 1986; or (B) knowing that the transaction is designed in whole or in part– (i) to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity; or (ii) to avoid a transaction reporting requirement under State or Federal law, shall be sentenced to a fine of not more than $500,000 or twice the value of the property involved in the transaction, whichever is greater, or imprisonment for not more than twenty years, or both. For purposes of this paragraph, a financial transaction shall be considered to be one involving the proceeds of specified unlawful activity if it is part of a set of parallel or dependent transactions, any one of which involves the proceeds of specified unlawful activity, and all of which are part of a single plan or arrangement.”)
- Same.
- 18 U.S.C. § 1957 – Engaging in monetary transactions in property derived from specified unlawful activity [i.e., money laundering]. (“(a) Whoever, in any of the circumstances set forth in subsection (d), knowingly engages or attempts to engage in a monetary transaction in criminally derived property of a value greater than $10,000 and is derived from specified unlawful activity, shall be punished as provided in subsection (b).”)
- Same. (“(b)(1) Except as provided in paragraph (2), the punishment for an offense under this section is a fine under title 18, United States Code, or imprisonment for not more than ten years or both. (2) The court may impose an alternate fine to that imposable under paragraph (1) of not more than twice the amount of the criminally derived property involved in the transaction.”)