Stefan Cassella of Asset Forfeiture Law, LLC looks at the case of a US-based luxury watch businessman who regularly traded with watch dealers from Mexico and accepted bags of up to $200,000 cash without asking questions. The cash was generated from heroin and cocaine sales.
Circumstantial evidence – including evidence of the defendant’s wilful blindness — may be sufficient to show that a third-party money launderer knew that the purpose of a transaction was to conceal or disguise drug proceeds.
United States v. Stern, ___ F. Supp.3d ___, 2017 WL 4676660 (S.D.N.Y. Oct. 17, 2017). S.D.N.Y.
* Defendant, a wholesale watch dealer in Brooklyn, NY, made his living importing luxury watches from Switzerland and selling them to watch dealers in Mexico.
As payment, Defendant accepted bags of cash containing between $100,000 and $200,000 in proceeds from the sale of heroin and cocaine from total strangers who acted as couriers for drug dealers.
In each case, the courier would arrive at Defendant’s place of business from another part of New York and drop off the cash without Defendant’s asking who the money was from or what it was for.
A jury found Defendant guilty of a money laundering conspiracy in violation of 18 U.S.C. § 1956(h), and substantive counts of concealment money laundering in violation of 18 U.S.C. § 1956(a)(1)(B)(i), but he moved post-trial for a judgment of acquittal.
Defendant first challenged the conspiracy conviction, arguing that he may have engaged in a number of separate conspiracies with various parties in Mexico, but not in a single, over-arching conspiracy as found by the jury.
The court held, however, that Defendant was the “hub” of a classic hub-and-spoke conspiracy, and that the other parties formed a connected “rim.”
In particular, the court found that Defendant provided a common service of converting drug money to watches for at least two Mexican importers, that the importers shared a common goal, and that they each knew that there were other participants involved in the process.
Second, Defendant challenged the venue for the substantive money laundering convictions.
The illegal transactions, he said, occurred in the Eastern District of New York when he received the drug money at his place of business in Brooklyn, not in the Southern District where he was prosecuted.
The court held, however, that venue was proper in the Southern District. Section 1956(c)(2) provides that a person “conducts” a financial transaction when he initiates or concludes, or participates in initiating or concluding, a transaction.
Moreover, the venue provision for money laundering, Section 1956(i)(3), provides that the transfer of funds from one place to another constitutes “a single, continuing transaction,” and that “any person who conducts any portion of the transaction may be charged in any district in which the transaction takes place.”
Here, the couriers transported the money from various places in the Southern District to Defendant’s place of business in the Eastern District.
For example, one courier transported a load of cash from the Bronx to Brooklyn, and another transported the cash by automobile from Maryland via New Jersey and the Verrazano-Narrows Bridge, which spans a body of water touching the Southern and Eastern Districts.
Accordingly, because Defendant “conducted” the transactions within the meaning of Section 1956(c)(2) when he received the money, and because the transactions were continuing offenses that occurred in more than one district, he was guilty of conducting transactions that occurred at least in part in the Southern District and could be lawfully prosecuted there.
Finally, Defendant argued that the evidence was insufficient to prove that he knew that the purpose of the transactions was to conceal or disguise the nature, source, location, ownership or control of the money, as Section 1956(a)(1)(B)(i) requires.
The court held, however, that the Government satisfied this element of the offense with circumstantial evidence.
Among other things, the Government showed that Defendant accepted large quantities of cash, delivered by unknown couriers in plastic bags, without inquiring as to the source.
He also was recorded telling others that he would meet “scary people,” “sometimes late at night,” “in some place on the street;” that he feared for his safety and was concerned about his possible arrest; and that he deliberately kept the transactions from his boss and family members.
In these circumstances, the court concluded, “[t]here was ample evidence from which the jury could have concluded that the defendant deliberately closed his eyes to what otherwise would have been obvious and acted with a conscious purpose to avoid learning the truth . . ..”
That is, Defendant’s knowledge of the purpose of the transactions was established by his willful blindness. So, the motion for a new trial was denied. SDC Contact: AUSA Andrew Adams
This case involves the Black Market Peso Exchange, which is a common form of trade-based money laundering.
In the typical BMPE case, an American exporter ships goods to Mexico or South America and is paid not by the importer who receives the goods, but by an unrelated third party using bundles of drug-generated cash, often in paper or plastic bags.
The Mexican or South American importer then pays for the goods either by transferring some portion of them directly to the local drug dealer, or by selling them and paying the drug dealer in local currency.
Here, the defendant in Brooklyn received bags of cash from couriers representing Mexican drug dealers to pay for watches that he shipped to jewelry importers in Mexico.
The Mexican merchants then delivered a number of the watches to the original suppliers of the heroin and cocaine that had been sold in the US to generate the money delivered to the defendant.
The venue question is interesting because, on its face, there appears to be some force to the defendant’s argument that he conducted the transactions in question when he received the money in Brooklyn, and thus should have been indicted in the Eastern District of New York.
See United States v. Cabrales, 524 U.S. 1 (1998) (holding that a money laundering offense must be prosecuted in the district where the financial transaction took place).
But unfortunately for the defendant, the money laundering statute was amended in the wake of Cabrales to provide that a financial transaction occurs in more than one district if it involves the transfer of money through multiple districts before it is delivered.
Because the statute also broadly defines “conducting a transaction” to include receiving the money, the defendant who merely received the money in Brooklyn could be found guilty in each instance of conducting a continuing transaction that touched on multiple other districts before it reached him. – SDC
Stefan Cassella, Asset Forfeiture Law, LLC
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