undercover sting, and conspiracy offenses: 18 USC §1956(a)(1)-(3). A criminal fine of up to USD 250 000 (for a natural person) or USD 500 000 (for a legal person), or twice the amount of the criminally derived property involved in the transaction (whichever is greater), or imprisonment for up to 10 years, or both apply for the transactional offense: 18 USC §1957. Higher fines may be applied in cases of egregious conduct. All ML offenses are also punishable by civil fines of up to USD 10 000 or the value of the property involved in the transaction (whichever is greater): § 1956(b). Any officer, director or employee of a FI found guilty of a ML offense should also be the subject of a written notice to the relevant regulatory agency: §1956(g). Natural persons may be sanctioned as principals to the offense or accessories after the fact: 18 USC §§2 & 3.
Criterion 3.10 - Criminal liability and proportionate, dissuasive sanctions for ML apply to legal persons, and are without prejudice to the criminal liability of natural persons: 1 USC § 1. Legal persons are punishable by the same criminal and civil fines described in c. 3.9. Any FI found guilty of a ML offense should be the subject of a written notice to the relevant regulatory agency and may subsequently face the revocation of its licence: USC §1956(g).
Criterion 3.11 - There are ancillary offenses to all of the ML offenses: §1956(h), §1956(a)(1)-(3) and 1957(a)., including conspiracy and attempt. Anyone found aiding and abetting, counselling, commanding, inducing, procuring, or wilfully causing a ML offense can be prosecuted and punished as a principal: 18 USC §2.
Weighting and Conclusion:
Criterion 3.1 shortcomings are minor as the Federal ML offenses cover all but an extremely limited number of circumstances. That gap is also narrowed to some extent by the 36 States which have enacted State-level ML offenses (all of which apply regardless of any connection to “inter-state commerce”). Shortcomings under c.3.2 and c. 3.6 are also considered minor: while tax crimes are not specifically listed as predicate, other predicates in effect criminalise a range of tax fraud and even though 9 designated categories of predicate are not specifically listed as foreign SUAs, a broad range of foreign conduct is captured by other means including domestic SUAs applying extra-territorially.
Recommendation 3 is rated largely compliant.
Recommendation 4 - Confiscation and provisional measures
In its 3rd MER, the U.S. was rated largely compliant with these requirements. The technical deficiencies were: the inability to seize/restraint property of equivalent value which may be subject to confiscation; and proceeds derived from offenses which are not required predicate offenses cannot be frozen/seized/confiscated based on a ML offense.
Criterion 4.1 - The U.S. has three mechanisms enabling confiscation: i) criminal (in personam) confiscation applies to, among other things, any property held by a defendant convicted of an ML offense which was involved in the ML offense or traceable to it68; ii) civil judicial non-conviction-based forfeiture (NCBF) (i.e., civil forfeiture) (in rem) procedures may be used to forfeit any
68 18 USC §982(a)(1) and §981(a)(1)(G) apply to all assets of terrorists, including those convicted of TF.
TECHNICAL COMPLIANCE
property linked to a crime which is held by the defendant or a third party (§981); and iii) administrative forfeiture (in rem) permits a Federal seizing agency to forfeit property held by the defendant or a third party, as long as such seizure is not contested69. Property is also subject to criminal confiscation in all cases where civil forfeiture is available: 28 USC §2461(c). Over 220 separate Federal offenses give rise to confiscation in the context of predicates and non-predicate crimes. For ML offenses and crimes constituting ML predicate offenses, the following types of property (including that which is “clean”, commingled, appreciated in value, income or earned interest) may be confiscated:
a) any property involved in a transaction or attempted transaction in violation of a ML offense (even if the offense was not completed): 18 USC §982(a)(1) (criminal confiscation), 18 USC
§981(a)(1)(A) (NCBF)
b) property other than SUA proceeds, which is also part of the corpus of the ML offense
c) proceeds of predicate offenses, including income/other benefits derived from such proceeds:
18 USC§981(a)(1)(C)-(F) and 18 USC§982(a)(2)-(8) [(a)(1)(A) of the former and (a)(1) of the latter are broader than proceeds but could technically include proceeds]
d) instrumentalities (i.e., any property involved in the ML offense or used to commit the SUA offense): 18 USC §982(a)(1); 18 USC §981(a)(1)(A). It can be deduced from the very broad notion of involved in that instrumentalities used or intended for use in the commission of a ML offense are also subject to confiscation. Separately, many predicate offenses, in the statutes in which they are criminalized, contain provisions permitting the forfeiture of instrumentalities (e.g. for drug offenses, 21 USC §881, 21 USC §853(a)(2); for firearms offense, 18 USC §924(d), 26 USC §5372; for smuggling offenses, 19 USC §1595a).
NCBF is permitted for the proceeds of ML and predicate offenses, and in respect of the instrumentalities of a ML offense and some of the predicate offenses: 18 USC (a)(1)(C).
Instrumentalities (some forfeitable in the U.S. under statutes authorizing forfeiture of facilitating property or property used to commit an offense) are forfeitable pursuant to some of the main forfeiture statutes and the statutes criminalizing certain offenses70. Specifically, 18 USC
§981(a)(1)(G) provides for the forfeiture of “all assets, foreign or domestic (…) of any individual, entity or organization engaged in planning or perpetrating any Federal crime of terrorism.” Federal crime of terrorism is defined in 18 USC §2332b(g)(5) to include the primary TF offenses, namely 18 USC §2339A (providing material support to terrorists), 18 USC §2339B (providing material support to terrorist organizations), and 18 USC §2339C (financing of terrorist acts).71
Equivalent value forfeiture is possible in criminal cases when the tainted property subject to confiscation under a particular statute has become unavailable. In such cases, the substitute assets
69 18 USC §983(a)(1)-(2), 19 USC 1602 & 1607, and other statutes.
70 E.g. 18 USC §982(a)(6)-(8); 8 USC. §1324(b), 18 USC §981(a)(1)(B) (facilitating property for certain foreign crimes, including drug trafficking, crimes of violence, public corruption); 18 USC §§2253 and 2254; 17 USC
§§506(b) and 509; 16 USC §407; 16 USC §1540(e)(4); 16 USC §3637(d); 18 USC §1037(c)(1)(B); 18 USC
§2319A(b); 22 USC §401(a); 21 USC §881(a); 18 USC §1028(b)(5); 18 US. §1029(c)(1)(C); 18 USC §1955(d); 18 USC §986(a)(6); etc.
71 18 USC §981(a)(1)(G), 18 USC §2332(b)(g)(5), 18 USC §2339A, 18 USC §2339B, 18 US. §2339C.
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are forfeitable value-based confiscation order made upon the criminal conviction of the defendant:
Rule 32.2(e) of the Federal Rules of Criminal Procedure and replicated in many separate Federal offenses that give rise to confiscation72. For ML offenses, equivalent value forfeiture is not applied where the defendant acted merely as an intermediary who handled but did not retain the property in the course of the ML offense, unless the defendant conducted three or more separate transactions involving a total of USD 100 000 or more in any 12 month period: 18 USC §982(b)(2).
Criterion 4.2 - The U.S. has measures that enable their competent authorities to:
a) Identify, trace and evaluate property subject to confiscation by using grand jury and administrative subpoenas, search warrants and writs of entry: 18 USC§985, 18 USC §3322.
b) Carry out provisional measures (e.g. seizure or restraint), or other measures to preserve property prior to trial, and prevent any transfer/disposal of property subject to confiscation73. There is no general power to freeze/seize non-tainted assets prior to a conviction or value-based confiscation order, although this is possible on one Federal judicial circuit.
c) Take steps (in both civil and criminal proceedings) to prevent or void actions prejudicing the country’s ability to freeze/seize/recover property subject to confiscation: 18 USC §981(f), 18 USC §982(b)(1), 21 USC §853(c). It is an offense to take any action to destroy/remove property to prevent seizure or to knowingly impair the jurisdiction of a U.S. court over property subject to confiscation: 18 USC §2232 (a) & (b). Violations of restraining orders issued in advance of forfeiture can be deemed contempt of court, the punishment for which can include imprisonment.
d) Take any appropriate investigative measures through the broad investigative powers described in R.29 and R.31.
Criterion 4.3 - The rights of bona fide third parties are protected by law74.
Criterion 4.4 - The U.S. has various mechanisms for managing and, when necessary, disposing of property frozen, seized, and confiscated. All forfeited cash, proceeds from the sale of forfeited property, interest from the investment of the DOJ – AFF balances, and interest from the Seized Asset Deposit Fund (i.e. currency not yet confiscated) are to be deposited with JAFF. Proceeds of all confiscations enforced/administered by a Treasury or DHS LEA occurring are deposited into the TFF. Both funds may be used for asset management expenses, qualified third party interests, equitable asset sharing payments, or investigative expenses.
72 21 USC §853(p); 18 USC §982(b)(2); 18 USC §1963(m), 31 USC §5332(b)(4); 31 USC §5317(c)(1)(B), 18 USC
§2253(b).
73E.g. 18 USC §982(b)(1)-(3), 18 USC §981(b)(4) (restraint of assets pursuant to foreign arrest or charge) 21 USC
§853(e)&(f), 18 USC §983(j), 18 USC §981(b)(2); 18 USC §981(k) (seizure of funds subject to forfeiture in correspondent accounts); 19 USC §§1594-95, 1602-03.
74Federal Rules of Criminal Procedure 32.2(c); 18 USC §982(b)(1); 21 USC §853(c) & (n); 21 USC §853(n)(6)-(7); 18 USC §1963(l)(6)-(7) (RICO); 18 USC §983(d) (innocent owner defense); Rule G of the Federal Rule of Civil Procedure, Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Action.
TECHNICAL COMPLIANCE
Although the confiscation of instrumentalities is not covered for all predicate offenses, this is a minor deficiency as the key predicate offenses (from a risk perspective) do yield this power, including the drug and RICO offenses. There is no general power to freeze/seize non-tainted assets prior to a conviction to preserve them in order to satisfy a value-based confiscation order; however, this is permitted on one Federal judicial circuit.