Supreme Court Ruling Makes Money Laundering More Difficult to Prove

WASHINGTON – The Supreme Court on Monday ruled against the government in two money laundering cases, making it more difficult for prosecutors to use an important weapon in the war on drugs and organized crime.

In a unanimous decision, Justice Clarence Thomas said that a money laundering case cannot be proven merely by showing that funds were concealed while being transported.

In a separate 5-4 decision, the court said that money laundering refers to profits of an illegal operation, not gross receipts. The court's interpretation is a narrow one opposed by law enforcement agencies.

Justice Antonin Scalia said the narrow definition will not unduly burden authorities, who must show only that a single instance of unlawful activity was profitable.

Providing the crucial tie-breaking vote, Justice John Paul Stevens refused to go as far as Scalia, saying Congress favored a broader interpretation of the law in cases involving the operation of organized crime syndicates.

In the cases of Efrain Santos and Benedicto Diaz, a federal judge and the 7th U.S. Circuit Court of Appeals in Chicago said that paying off gambling winners and compensating employees who collect the bets don't qualify as money laundering. Those are expenses, and prosecutors must show that profits were used to promote the illegal activity, the appeals court ruled in a decision affirmed by the Supreme Court.

In dissent, Justice Samuel Alito said that the court's ruling would frustrate congressional intent and "maim" a law that was enacted as an important defense against organized criminal enterprises.

The other case did not go as far in favor of defendants as defense lawyers had hoped.

In his unanimous ruling, Thomas said that the government is not required to prove that a defendant attempted to create the appearance that laundered money was legitimate.

But the court said that prosecutors must show that the purpose of transporting funds in a money laundering case was to conceal its ownership, source or control.

Thomas and the court ruled in favor of Humberto Cuellar, who was headed for Mexico with over $80,000 stashed in a secret compartment of a car when he was arrested in Schleicher County, Texas.

The 5th U.S. Circuit Court of Appeals in New Orleans had upheld Cuellar's money laundering conviction.

Money laundering carries a maximum penalty of 20 years in prison and prosecutors often use it in drug and gambling cases.

Congress enacted the anti-money laundering law in 1986 after the President's Commission on Organized Crime highlighted the growing problem of "washing" criminal proceeds through overseas bank accounts and legitimate businesses.

The cases are U.S. v. Santos, 06-1005, and Cuellar v. U.S., 06-1456.