Part II of the Analysis of the Combatting Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017
As we recently blogged, Senators Chuck Grassley (R-Iowa) and Diane Feinstein (D-California) introduced on May 25, 2017 a bill, S. 1241, entitled the Combatting Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017. As we previously noted, the Panama Papers scandal presumably motivated much of S. 1241, which also may be seeking to respond to international criticism that the U.S. has become a haven for tax cheats and money launderers.
This post focuses on Section 11 of the bill, which seeks to amend 18 U.S.C. § 1956(a)(2), the “international” prong of the “transactional” money laundering statute. This amendment, if passed, would have a significant impact on any individual or company seeking to evade U.S. taxes through a cross-border transfer of funds. This is important because pursuing the use of undisclosed foreign accounts, and related efforts to evade taxes through the use of offshore instruments, has been the centerpiece of U.S. tax fraud enforcement for almost a decade.
The most commonly enforced section of the “transactional” money laundering statute, Section 1956(a)(1), requires the proceeds involved in the transaction at issue to in fact represent the proceeds of “specified unlawful activity” (“SUA”), a defined statutory term which broadly includes many types of criminal conduct. One of the few offenses not included is tax fraud: Congress has defined “SUA” so as to not include tax crimes under Title 26, the Internal Revenue Code. Indeed, and as we note below, DOJ currently has a general policy against trying to base money laundering charges on the proceeds of tax fraud.
In contrast, Section 1956(a)(2), the “international” prong, does not necessarily require the funds at issue to in fact represent “specified unlawful activity” proceeds. In fact, the proposed amendment in Section 11 of S. 1241 appears to transform any cross-border transfer of funds done with the intent to commit U.S. tax evasion or the filing of a false U.S. tax return into an actual money laundering violation, including transfers involving entirely clean funds. Continue Reading Proposed Bill Seeks to Transform International Tax Evasion into Money Laundering