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Financial Services Law Insights and Observations

11th Circuit holds forfeiture is required for money laundering even without financial harm

Courts Eleventh Circuit Anti-Money Laundering Financial Crimes

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On August 12, the U.S. Court of Appeals for the Eleventh Circuit reversed a district court’s denial of a government forfeiture order, concluding that a forfeiture order is still mandatory when a defendant is convicted of a money laundering scheme even when no financial harm is caused to a bank. According to the opinion, between 2000 and 2009 an international businessman engaged in “mirror-image” financial transactions, which includes using phony invoices to launder money between his corporations. The bank involved incurred no financial loss from the transactions, due to the “mirror-image nature of the scheme,” and all financial draws were repaid with interest. The opinion notes that “had the Bank known of the falsehoods that prompted these financial transactions, it would not have approved [them].” In 2017, the defendant pled guilty to conspiracy to commit money laundering and the government requested forfeiture of over $20.8 million. The district court sentenced the defendant to 27-months imprisonment and denied the government’s forfeiture motion, noting that the purpose of forfeiture would not be served since the defendant returned all the money plus interest. 

On appeal, the 11th Circuit disagreed, holding that the language of the U.S. money laundering statute (18 U.S.C. § 982(a)(1)), as stated by the Supreme Court, “provides that a district court ‘shall order’ forfeiture, [Congress] ‘could not have chosen stronger words to express its intent that forfeiture be mandatory.’ The appellate court noted that there is no “double counting” merely because the money was returned to the bank, and this is not a case of “double recovery” because the defendant “made no payment to the government body seeking forfeiture.” Moreover, the court agreed with the government that “substitute forfeiture” is permitted, rejecting the defendant’s claim that the bank was the owner of the funds; therefore, not a “third party” to whom the money was transferred within the meaning of e 21 U.S.C. § 853(p). Lastly, the appellate court rejected the district court’s conclusion that the $20.8 million forfeiture order was “excessively punitive,” holding that the court “failed to properly define the harm” when performing the excessiveness analysis. The appellate court noted that on remand, the district court “must consider the adverse impact on society that money laundering generally has as well as the specific conduct that [the defendant] engaged in” when determining the forfeiture amount.

 

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