Money Laundering Charges: 18 U.S.C. §§ 1956, 1957, and Penalties

Federal money laundering charges carry penalties of up to 20 years in prison per count, fines reaching $500,000 or twice the value of the transaction, and mandatory forfeiture of any property involved in or traceable to the offense. Three statutes do most of the work: 18 U.S.C. § 1956 for laundering itself, 18 U.S.C. § 1957 for spending more than $10,000 in criminally derived property, and 31 U.S.C. § 5324 for structuring cash transactions to dodge bank reporting rules. Conspiracy to commit any of these carries the same maximum as the completed offense.

Laundering Monetary Instruments: 18 U.S.C. § 1956

Section 1956 is the primary federal money laundering statute and carries the heaviest penalties. It criminalizes financial transactions involving the proceeds of illegal activity when the person conducting the transaction knows the money came from a crime and acts with one of several prohibited purposes: promoting further criminal activity, concealing the nature or source of the funds, or evading a transaction reporting requirement under state or federal law.¹

The defendant does not have to be the person who committed the underlying crime. A real estate agent who knowingly helps a drug trafficker purchase properties with cash proceeds can be charged even though the agent had nothing to do with the drug operation. What matters is knowledge that the funds represent the proceeds of some form of felony and that the transaction serves a prohibited purpose.

The list of “specified unlawful activity” that can trigger a § 1956 charge is enormous: drug trafficking, fraud, racketeering, bribery, counterfeiting, smuggling, kidnapping, robbery, human trafficking, and dozens of other federal crimes. It also reaches certain offenses committed against foreign nations, including foreign drug crimes, bank fraud, and public corruption.¹

A separate subsection targets the international movement of funds. Anyone who transports, transmits, or transfers money or monetary instruments between the United States and a foreign country with intent to promote criminal activity or conceal the source of illegal proceeds faces the same 20-year maximum.¹

The statute also authorizes sting prosecutions. If a law enforcement officer represents that certain property is the proceeds of illegal activity and the defendant then conducts a transaction with that property intending to conceal its source or promote crime, the defendant can be convicted even though no actual criminal proceeds were involved. This is how federal agents catch professional launderers who offer services to what they believe are criminal organizations.¹

Spending Criminally Derived Property: 18 U.S.C. § 1957

Section 1957 is a simpler charge and a prosecutor’s workhorse. Anyone who knowingly engages in a financial transaction involving more than $10,000 in criminally derived property can be convicted without the government proving any intent to conceal or promote further crime.²

If someone uses $15,000 in drug proceeds to buy a car, the government has to prove only two things: the buyer knew the money came from criminal activity, and the transaction exceeded $10,000. The $10,000 threshold is strict. A transaction of $9,500 in dirty money will not support a § 1957 charge, though it could still fall under § 1956 if concealment or promotional intent existed.

Structuring Cash Transactions: 31 U.S.C. § 5324

Structuring is where people without criminal intent often get into serious trouble. Under 31 U.S.C. § 5324, it is a federal crime to break up transactions for the purpose of evading the Bank Secrecy Act’s reporting requirements. The classic example: instead of depositing $12,000 at once, which would trigger a Currency Transaction Report to FinCEN, a person makes three deposits of $4,000 across different days or branches. That pattern of deliberately staying under the $10,000 threshold is a felony.³

The part that catches people off guard: structuring is illegal even when the money is completely legitimate. A small business owner who deposits cash earnings in amounts just under $10,000 to avoid “government paperwork” has committed a federal crime, despite having earned every dollar legally. The IRS has stated explicitly that structuring is illegal regardless of whether the funds come from legal or illegal activity.⁴

Federal Penalties at a Glance

Prison exposure and fines scale with the statute charged and, for structuring, with aggravating factors.

18 U.S.C. § 1956 (laundering monetary instruments): Up to 20 years in prison per count, plus a fine of up to $500,000 or twice the value of the property involved, whichever is greater.¹
18 U.S.C. § 1957 (transactions in criminally derived property): Up to 10 years in prison per count, with a possible fine of up to twice the amount of the criminally derived property involved.²
31 U.S.C. § 5324 (basic structuring): Up to 5 years in federal prison and a fine of up to $250,000.³
31 U.S.C. § 5324 (aggravated structuring): Up to 10 years if the structuring occurs while violating another federal law or involves more than $100,000 over a 12-month period. These penalties apply on top of any charges for the underlying crime that produced the money.³
Conspiracy: Anyone who conspires to commit an offense under § 1956 or § 1957 faces the same maximum penalties as the completed crime.¹
Civil penalty: Anyone who conducts or attempts a transaction described in § 1956 or § 1957 is also liable for a civil penalty of the greater of the value of the property involved or $10,000, separate from any criminal prosecution.¹

Each individual transaction can constitute a separate count, so a laundering case built around dozens of deposits or transfers can stack decades of theoretical exposure before any sentencing guideline calculation.

Mandatory Criminal Forfeiture

For many defendants, forfeiture is the most financially devastating part of a conviction. When a court sentences someone under § 1956, § 1957, or the related unlicensed money transmitting statute at § 1960, it must order the defendant to forfeit any property involved in the offense and any property traceable to that property.⁵ The house bought with drug money, the car purchased with fraud proceeds, and every bank account that touched the laundered funds can be permanently seized by the government. Forfeiture strips away the assets the defendant was trying to protect in the first place, and because it is mandatory, judges have no discretion to spare it at sentencing.

How Prosecutors Prove Knowledge

Every federal money laundering charge requires the government to show the defendant knew the money was connected to criminal activity. A signed confession is not required. Knowledge can be proven through circumstantial evidence: unusual transaction patterns, implausible explanations for large cash holdings, or communications revealing awareness of the money’s origins.

Federal courts also recognize a doctrine called “willful blindness” or “deliberate ignorance.” If a person deliberately avoids learning the source of funds when the circumstances practically scream that something illegal is going on, a jury can treat that avoidance as the equivalent of actual knowledge. Mere negligence or failure to investigate is not enough. Courts require evidence that the defendant was aware of a high probability that the funds were criminal proceeds and took deliberate steps to avoid confirming that fact. Every federal circuit has adopted some version of this principle, though courts caution that it should apply only when the facts clearly point toward intentional avoidance.

In a § 1956(a)(3) sting case the knowledge requirement works a little differently. A law enforcement officer can represent that funds are the proceeds of crime, and the defendant’s words and conduct after hearing that representation serve as proof of the defendant’s belief.¹

Civil Penalties for Banks and Financial Businesses

Financial institutions face their own consequences for failing to maintain adequate anti-money laundering controls. The penalties under 31 U.S.C. § 5321 are separate from any criminal charges against individuals and can be assessed on a per-violation basis.

Negligent violations: Up to $500 per violation, with an additional penalty of up to $50,000 for a pattern of negligent violations.
Willful violations: Up to $100,000 per violation or the amount of the transaction involved up to $25,000, whichever is greater.

For deficient anti-money laundering programs, every day the deficiency continues and every branch where it exists can be treated as a separate violation, so aggregate penalties climb into the millions quickly.⁶

Statute of Limitations

The general federal statute of limitations for money laundering is five years. The limitations period extends to seven years when the underlying crime that generated the laundered funds is a foreign offense listed in § 1956(c)(7)(B).¹ Because each individual transaction can constitute a separate count, the clock starts independently for each one. Complex laundering investigations often take years to unravel, and charges frequently arrive long after the transactions occurred.

1
Office of the Law Revision Counsel. 18 USC 1956 – Laundering of Monetary Instruments
2
Office of the Law Revision Counsel. 18 USC 1957 – Engaging in Monetary Transactions in Property Derived From Specified Unlawful Activity
3
Office of the Law Revision Counsel. 31 USC 5324 – Structuring Transactions to Evade Reporting Requirement Prohibited
4
Internal Revenue Service. IRM 4.26.13 Structuring
5
Office of the Law Revision Counsel. 18 USC 982 – Criminal Forfeiture
6
Office of the Law Revision Counsel. 31 USC 5321 – Civil Penalties