By Frank D. Whitney
Assistant United States Attorney
for the
Western District of North Carolina
On September 14, a Charlotte real estate broker pleaded guilty in United States District Court to two felony counts of mishandling large amounts of cash in violation of federal currency transaction reporting requirements, and forfeited $180,000 to the United States. The cash was proceeds of cocaine trafficking and illegal gambling.
This conviction illustrates the shift in the "war on drugs" from the streets and into the business and finance community, where in the Money Laundering Control Act of 1986, Congress criminalized the handling of "dirty money" as well as the distribution of drugs. The intent of the Act is to prevent drug traffickers from laundering their ill-gotten gains into legitimate assets so that they are unable to spend their illegal profits; thus, the profit incentive of drug trafficking is diminished or even eliminated.
There are two domestic money laundering sections in the United States Code. Under Section 1956 of Title 18, persons are subject to a twenty-year prison sentence if they know that property (currency, securities, real estate, etc.) is the proceeds of unlawful activity and the property is, in fact, the proceeds of certain "specified unlawful activities" (fraud, Control Substance Act crimes, racketeering, gambling, etc.), and they either (1) promote the conduct of a specified unlawful activity; (2) engage or attempt to engage in tax evasion or tax fraud; (3) conceal the nature, location, source, ownership, or control of the property; or (4) avoid the applicable transaction reporting requirements.
And under Section 1957 of Title 18, persons may face a maximum ten-year prison sentence if they merely spend or attempt to spend in a "monetary transaction" more than $10,000 in currency or other monetary instrument (personal checks, investment securities, etc.) knowing that the property is "criminally derived"; i.e., was obtained from a criminal offense.
In addition to the two money laundering crimes previously described, real estate agents should also be aware that Congress has enacted "currency reporting requirements" requiring that the IRS be notified where $10,000 or more in currency is used in a transaction. It was these crimes to which the Charlotte real estate broker pleaded guilty. Presently, two forms of federal domestic reporting requirements exist: The CTR which is filed by a bank or similar depository institution when $10,000 in cash is deposited in the bank; and Form 8300 which must be filed by a trade or business (including real estate agencies and closing attorneys) when $10,000 or more in cash is transferred or exchanged in a transaction or a series of related transactions. [NOTE: There is also a proposal pending before the IRS which would extend the reporting requirements to include transactions involving cashiers checks and money orders.]
As the Charlotte verdict illustrates, real estate brokers and salespersons must be cautious as to ~ the source of funds used to purchase houses. If they do not, they may.risk not only losing their real estate licenses but also serving time in a federal institution without chance of parole.