Commingled Funds: How to Seize Proceeds of Electronic Crime
| Pages | 312-315 |
| Published date | 01 February 1998 |
| DOI | https://doi.org/10.1108/eb027154 |
| Date | 01 February 1998 |
| Author | Linda J. Candler |
| Subject Matter | Accounting & finance |
Journal of Money Laundering Control — Vol. 1 No. 4
Commingled Funds: How to Seize Proceeds of
Electronic Crime
Linda J. Candler
Under US law, whether the proceeds of electronic
crime can be identified and seized where the funds
have been commingled with legitimate funds
depends on whether the legitimate funds somehow
facilitated the concealment and laundering of crim-
inal proceeds. The US criminal forfeiture statute,
18 US Code, s. 983, and the civil forfeiture statute,
18 US Code, s. 981, provide that all property
involved in the offence is subject to forfeiture.
The legislative history to the civil forfeiture
statute, 18 US Code, s. 981, makes it clear that
'[T]he term "property involved" is intended to
include the money or other property being laun-
dered (the corpus), any commissions or fees paid
to the launderer, and any property used to facilitate
the laundering offense.'1 Thus, where proceeds of
electronic crime are commingled with legitimate
funds,
for example by wire transfer to an existing
account, the entire account may be forfeited if the
legitimate funds are used to conceal or disguise the
tainted funds. However, as discussed below, there
are limitations on seizure where the government
has not established that the entire account is used
to hide or facilitate the illegal proceeds.
FACILITATION THEORY
Several US district courts have held that forfeiture
of the entire balance of accounts containing both
tainted and untainted funds is proper because 'the
commingling of crime proceeds and "clean
money" makes money laundering less difficult and
may even be necessary to successful completion of
the offense'.2
Before 1988, ss. 981-982 provided only for the
forfeiture of 'gross receipts' which meant the com-
mission paid to the launderer. The legislative
history of the 1988 amendment expanding ss.
981-982 to all 'property involved' says the term
includes the actual money laundered, commissions
or fees paid to the launderer, and property used to
facilitate the laundering offence.
In
Tencer,
the defendant was convicted of fraud
and money laundering based on submission of
false claims to health insurers. The proceeds were
deposited in various bank accounts throughout the
country, then a week after a search warrant was
executed at his clinic, the funds were transferred
via bank cheque to a new account in Las Vegas, a
place where he neither lived or worked. He then
arranged to have the entire proceeds, approxima-
tely $1,055,000, delivered to him at a local airport.
Before the funds could be delivered, the account
was seized by law enforcement officials. Tencer
told bank officials in Las Vegas that he needed the
money to buy a business. The court held that the
government had proven that the defendant was
guilty of money laundering, under 18 US Code. s.
1956,
and that the funds were proceeds of money
laundering and subject to forfeiture, based on Ten-
ccr's efforts to consolidate illicit funds in a city
hundreds of miles from his home and where large
cash transactions are commonplace. Tencer also
argued that the account should not have been for-
feited because it contained legitimate funds as well
as proceeds of fraudulent claims. The court agreed
with other courts holding that merely pooling
tainted funds in an account does not, without
more, render that account subject to forfeiture.
However, 'forfeiture of legitimate and illegitimate
funds commingled in accounts [is] proper as long
as the government demonstrate [s] that the defend-
ant had pooled the funds to disguise the nature
and source of
his
scheme'.3
Where laundered funds are transferred from one
account to another, the court will look closely at
whether the government can trace the tainted
funds.
In United States v
Certain
Accounts,
Together
with All
Monies
on
Deposit
Therein,
a
'smurf'4
named
Zapata was arrested after attempting to assault a
US Customs officer with a machine gun. When
arrested, Zapata was in possession of receipts for
approximately $1m in money orders and a hand-
written list of bank accounts into which he
deposited 'a substantial sum' of money orders. The
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