Banking and Finance Law Daily Forfeiture was mandatory, even where money laundering caused no harm to bank
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Wednesday, August 12, 2020

Forfeiture was mandatory, even where money laundering caused no harm to bank

By Nicole D. Prysby, J.D.

Where a defendant is convicted of money laundering, forfeiture is mandatory even where the scheme caused no harm to the bank because the money was repaid with interest.

Where a defendant is convicted of a money laundering scheme that caused no harm to an innocently involved bank, an order of forfeiture is still mandatory, held the Eleventh Circuit Court of Appeals. The defendant pleaded guilty to a money laundering scheme in which he drew on a business line of credit, which he immediately repaid with interest. The district court declined to order forfeiture, and the Eleventh Circuit reversed. Forfeiture under the money laundering statute is mandatory, and imposing forfeiture is not impermissible double counting merely because the money was returned to the bank. Nor can the defendant escape forfeiture on the ground that the interest in the laundered funds was actually his business’s interest, not his own. The court also held that the district court erred in finding that the Eighth Amendment limit on forfeiture would be $10,000 per transaction, because the money laundering caused little harm since the funds were returned to the bank with interest. 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 (U.S. v. Waked Hatum, August 11, 2020, Martin, B.).

Between 2000 and Nidal Ahmed Waked Hatum engaged in a series of so-called "mirror-image" financial transactions, where he sent invoices between businesses he owned, used the invoices to justify drawing on the buyer’s line of credit, paid the seller business, and then immediately reimbursed the buyer business with a check from the seller. In reality the invoices were phony and Waked was using them to launder money among his corporations. Because of the mirror-image nature of the scheme, the bank incurred no financial loss from these transactions, and all draws were repaid with interest. Waked pleaded guilty to conspiracy to commit money laundering. The government requested forfeiture of $20.8 million, the total amount Waked illegally transferred, plus the amount received back in mirror payments. The district court acknowledged that forfeiture is mandatory but declined to impose it. The government appealed.

The Eleventh Circuit held that the language of the statute (district courts "shall order" forfeiture) means that forfeiture is mandatory. The court rejected Waked’s argument that the money he laundered cannot be considered property "involved in" the offense because forfeiture money judgments are not authorized by statute. Imposing forfeiture is not impermissible double counting merely because the money was returned to the bank. Waked did not "return" the fraudulently obtained funds to the bank out of the goodness of his heart. His laundering scheme depended on the bank being repaid in full at the conclusion of each mirror-image transaction. There is no double recovery because he made no payment to the government body seeking forfeiture. Even if the laundered money was not held in Waked’s personal account, he still has an "interest" in that money for the purposes of forfeiture. Allowing him to escape forfeiture on the ground that the interest in the laundered funds was actually his business’s interest, not his own, would relieve him of culpability for the offense to which he already pled guilty. The court also rejected Waked’s argument that criminal forfeiture can only be ordered against "tainted property," and that there is no tainted property here because the laundered funds were returned to the bank with interest.

The government also argued that a forfeiture money judgment is available because 21 U.S.C. §853(p) permits substitute forfeiture where, as here, a defendant does not retain laundered funds. The court agreed, and held that the fact that the bank was the original and still-current owner of the laundered money, as opposed to a mere "third party" to whom the money was transferred did not prevent forfeiture. There is no reason why a victim of money laundering could not also have received a transfer of the property.

The district court erred in its holding that a fine of $10,000 per transaction is the constitutional ceiling for an order of forfeiture against Waked. He is within the class of persons whom the money laundering statutes were meant to cover, and the maximum fine for criminal money laundering is "twice the amount of the criminally derived property involved in the transaction" (18 U.S.C. §1957(b)(2)) and "criminally derived property" is "any property constituting, or derived from, proceeds obtained from a criminal offense" 18 U.S.C. §1957(f)(2). The word "proceeds" generally refers to the total revenue—"receipts as well as profits"—of the underlying criminal offense. Since the money Waked fraudulently obtained is proceeds within the meaning of §1957(f)(2), the maximum fine for his money laundering offense is twice the amount of money "involved in" the laundering scheme. The district court erred when it found that the money laundering caused little harm because the funds were returned to the bank with interest. The crime falls on society in general, not merely the bank’s bottom line. On remand, the district court must consider the adverse impact on society that money laundering generally has as well as the specific conduct that Waked engaged in, when determining the forfeiture amount.

Judge Lagoa filed a concurring and dissenting opinion, stating that the district court must enter a forfeiture money judgment against Waked and that such judgment must reflect the total money laundered through his conspiracy. However, it was premature for the court to consider entitlement to substitute asset forfeiture and whether or not the forfeiture amount is excessive under the Eighth Amendment.

The case is No. 18-11951.

Attorneys: Attorneys: Scott A.C. Meisler, U.S. Attorney General's Office, for the United State. Howard M. Srebnick (Black Srebnick Kornspan & Stumpf, PA) for Nidal Ahmed Waked Hatum.

MainStory: TopStory CrimesOffenses

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