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United States v. Santos - 553 U.S. 507, 128 S. Ct. 2020 (2008)

Rule:

The federal money-laundering statute prohibits a number of activities involving criminal "proceeds." 18 U.S.C.S. § 1956(a)(1)(A)(i) criminalizes transactions to promote criminal activity. This provision uses the term "proceeds" in describing two elements of the offense: the Government must prove that a charged transaction in fact involved the proceeds of specified unlawful activity (the proceeds element), and it also must prove that a defendant knew that the property involved in the charged transaction represented the proceeds of some form of unlawful activity (the knowledge element).

Facts:

In an illegal lottery run by respondent Santos, runners took commissions from the bets they gathered, and some of the rest of the money was paid as salary to respondent Diaz and other collectors and to the winning gamblers. Based on these payments to runners, collectors, and winners, Santos was convicted of, inter alia, violating the federal money-laundering statute, 18 U.S.C. § 1956, which prohibited the use of the "proceeds" of criminal activities for various purposes, including engaging in, and conspiring to engage in, transactions intended to promote the carrying on of unlawful activity, § 1956(a)(1)(A)(i) and § 1956(h). Based on his receipt of a salary, Diaz pleaded guilty to conspiracy to launder money. The Seventh Circuit affirmed the convictions. On collateral review, the District Court ruled that, under intervening Circuit precedent interpreting the word "proceeds" in the federal money-laundering statute, § 1956(a)(1)(A)(i) applied only to transactions involving criminal profits, not criminal receipts. Finding no evidence that the transactions on which respondents' money-laundering convictions were based involved lottery profits, the court vacated those convictions. The Seventh Circuit affirmed. Petitioner United States appealed.

Issue:

Should the word “proceeds” in the federal money-laundering statute apply only to transactions involving criminal profits?

Answer:

Yes.

Conclusion:

The Court held that the rule of lenity required it be interpreted in favor of defendants as "profits." According to the Court, if "proceeds" meant "receipts," nearly every illegal-lottery violation would also be money-laundering, as paying a winner involved receipts intended to promote the lottery. Interpreting it as "profits" eliminated the merger problem. While it meant the Government had to prove more, it ensured the severe money-laundering penalties would be imposed only for the removal of profits from criminal activity, which permitted the leveraging of one criminal activity into the next. The prosecution had to show only that a single instance of specified unlawful activity was profitable and gave rise to the money involved in a charged transaction. The Court concluded that "proceeds" meant "profits" absent contrary legislative history.

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