Updated September 2026 | The Bulldog Law | Federal and California White Collar Defense
Money laundering is conducting a financial transaction with the proceeds of a crime, knowing they came from a crime, in order to hide their source, promote further crime, or evade reporting. The main federal statute, 18 U.S.C. 1956, carries up to 20 years per count and a fine of $500,000 or twice the amount laundered. A second statute, 18 U.S.C. 1957, reaches any transaction over $10,000 in criminal proceeds with no concealment intent required, and carries 10 years. California's Penal Code 186.10 is a wobbler, up to three years, for transactions exceeding $5,000 in a week or $25,000 in a month, with additional years above $50,000. In every version, the prosecution must prove two things beyond the transaction itself: that the money came from a specified unlawful activity, and that the defendant knew it. Those two elements decide nearly every case.
The Bulldog Law's federal defense attorneys handle money laundering as a charge that almost never stands alone. It arrives attached to a drug conspiracy, a fraud scheme, or a RICO indictment, and it is frequently the count that reaches the people at the edges: the spouse whose name was on the account, the friend who bought the car, the employee who ran the books, the cousin who received a wire. For those clients the question is not whether money moved but whether they knew what it was, and that is a question the government answers with inference and the defense answers with facts. What follows is what the statutes require, how the sentence is calculated, how the three-stage model works for and against a defendant, and where laundering cases fall apart. Call (888) 928-1609 or message our team if an account has been frozen or an agent has called.
The federal statutes
18 U.S.C. 1956: laundering with intent
Section 1956 has three main prongs. Subsection (a)(1) punishes conducting or attempting a financial transaction involving the proceeds of specified unlawful activity, knowing the property represents proceeds of some unlawful activity, with intent to promote the carrying on of that activity, with intent to evade taxes, or knowing the transaction is designed to conceal the nature, location, source, ownership, or control of the proceeds, or to avoid a reporting requirement. Subsection (a)(2) reaches international transportation of funds with the same intents. Subsection (a)(3) is the sting provision, covering transactions with property an undercover agent represents to be criminal proceeds. And subsection (h) makes conspiracy to launder a separate offense with the same penalty, and no overt act required.
Specified unlawful activity is a defined list, and it is long: nearly every federal felony, most state felonies that are also RICO predicates, drug offenses, fraud, bribery, theft, and hundreds of others. The government must prove the money came from one of them, though it does not have to prove which specific act or convict anyone of it. Knowledge is the defendant's knowledge that the property came from some crime; the defendant need not know which one. Both elements are usually proven circumstantially, from the amounts, the cash, the secrecy, the defendant's relationship to the people who committed the crime, and, above all, what the defendant said.
18 U.S.C. 1957: the $10,000 rule
Section 1957 punishes knowingly engaging in a monetary transaction in criminally derived property worth more than $10,000, through a financial institution. No concealment intent, no promotion intent; the transaction itself is the offense, and the $10,000 threshold is the only limit. It exists to reach the person who simply spends criminal proceeds, buying a car, paying a mortgage, wiring a deposit, and it carries up to 10 years. The two sections are charged together routinely, 1957 as the fallback where intent to conceal is thin.
Penalties and sentencing
The statutory maxima are 20 years under 1956 and 10 under 1957, with fines of $500,000 or twice the value involved under 1956 and $250,000 under 1957, and mandatory forfeiture of the property involved. Actual sentences come from the guidelines, where the offense level begins with the underlying crime's level if the defendant committed it, or with a base level tied to the amount laundered if the defendant was only the launderer, plus enhancements for conviction under 1956 rather than 1957, for being in the business of laundering, and for sophisticated means. The value laundered drives everything. According to the U.S. Sentencing Commission's most recent data, the average federal money laundering sentence is around six years and roughly ninety percent of defendants are sentenced to prison; those figures include the drug and fraud organizers whose laundering counts ride on far larger conduct, and our federal sentencing attorneys routinely bring the peripheral defendant's range far below them.
California: Penal Code 186.10
Penal Code 186.10 makes it a crime to conduct a transaction, or a series of them, through a financial institution, involving monetary instruments worth more than $5,000 within a seven-day period or more than $25,000 within a thirty-day period, with the specific intent to promote criminal activity or knowing that the instruments represent proceeds of criminal activity. It is a wobbler: a misdemeanor with up to one year in county jail, or a felony with 16 months, two, or three years, plus an additional one to four years when the value exceeds $50,000, scaling up at $150,000, $1,000,000, and $2,500,000. Health and Safety Code 11370.9 is a separate statute for laundering drug proceeds over $25,000, a felony with up to four years.
State laundering charges are less common than federal ones for the same reason state RICO cases are rare: the U.S. Attorney's offices have the resources, the forfeiture tools, and the sentencing leverage, and a laundering case of any size in California is referred. State charges appear mostly as add-ons in drug and fraud prosecutions that stay local, and they are often the first count to go in negotiation because the dollar thresholds and the financial-institution element are easy to contest.
The three stages, and why they matter to the defense
Prosecutors, banks, and regulators describe laundering in three stages. Placement: introducing criminal proceeds into the financial system, through cash deposits, casino chips, money orders, prepaid cards, or a cash-intensive business that reports the money as revenue. Layering: moving the money through transactions that separate it from its source, transfers among accounts and shell companies, purchases and resales, international wires, cryptocurrency exchanges and mixers. Integration: bringing the money back as apparently legitimate assets, real estate, a business, investments, a car titled to a relative.
The model is a teaching tool, and it is also a defense tool. A laundering scheme of any size involves people at each stage who never see the other stages: the bookkeeper who deposits what the owner hands her, the buyer who purchases a car for a friend, the person whose account received a wire from someone they believed was a legitimate business. The government charges them all with laundering the same proceeds. The defense, stage by stage, is what this client actually knew about where the money came from and where it was going, and the answer is frequently nothing beyond their own transaction. Our attorneys map every client to the stage they touched and build the knowledge defense from there.
How laundering cases actually arise
Drug proceeds. The largest category: cash from distribution moved through bank deposits, cash businesses, money service businesses, and, increasingly, cryptocurrency, charged alongside the drug conspiracy and often the structuring that placed the cash.
Fraud proceeds. Wire fraud, embezzlement, investment schemes, and health care fraud generate laundering counts whenever the proceeds were moved to a second account, spent on assets, or wired out. In fraud cases the laundering count frequently doubles the exposure of a defendant who is already facing the fraud.
Mules and account holders. The fastest-growing group of defendants: people recruited online to receive and forward funds for a percentage, students who let a stranger use their account, romance-scam victims who forwarded money believing it was for a partner, and cryptocurrency traders who converted funds for clients they never met. The government charges them under 1956 and 1957 on the theory that they knew or deliberately avoided knowing; the defense is that they did not.
Stings. Under 1956(a)(3), an undercover agent represents that funds are criminal proceeds and asks the target to move them. The target's agreement, and any statement about concealment, is the case. These prosecutions turn on entrapment, on what the agent actually said, and on whether the target's conduct was designed to conceal or was simply a transaction.
Conspiracy. Section 1956(h) lets the government charge anyone who agreed to participate in a laundering scheme, without any completed transaction and without an overt act, on the same evidentiary basis as any conspiracy: association, presence, and statements. The rules our attorneys describe on our aiding and abetting page apply, and the agreement is the defense.
Defenses
No knowledge. The government must prove the defendant knew the property came from some unlawful activity. Knowledge is proven by circumstance, and circumstance cuts both ways: a defendant who was paid a normal fee, who kept records, who used their own name and bank, and who asked questions is a defendant who did not know. Willful blindness, deliberately avoiding knowledge, satisfies the element, and the line between innocence and willful blindness is where most mule and account-holder cases are fought.
No specified unlawful activity. If the government cannot prove the money came from a listed crime, there is nothing to launder. This defense wins where the underlying fraud or drug case is weak, where the proceeds were commingled with legitimate funds so that the transaction cannot be traced to the crime, or where the alleged predicate is not actually on the list.
No design to conceal. Under 1956(a)(1)(B), the transaction must have been designed, in whole or in part, to conceal the nature, source, ownership, or control of the proceeds. The Supreme Court held in Cuellar v. United States that moving money in a hidden compartment, without more, does not prove a design to conceal its source; the concealment must be the purpose of the transaction, not an incidental feature. Spending criminal proceeds openly is not laundering under that prong, and a transaction in the defendant's own name, to a known payee, for a real purchase, is hard to characterize as concealment.
The merger problem. Under United States v. Santos, proceeds in some contexts means profits, not gross receipts, so that paying the ordinary expenses of the underlying crime is not laundering its proceeds; Congress narrowed that holding in 2009 but did not eliminate the argument in every context.
Suppression. Laundering cases are built from bank records obtained by subpoena and from devices and premises searched by warrant, and a warrant that fails, or a search that exceeded it, takes the records with it. The usual weaknesses of a document case apply.
Silence. Every laundering investigation includes a request to explain the transactions, and the explanation supplies the knowledge element the records cannot. The right to remain silent is the first defense, and the interview is the moment most defendants give it away.
Collateral consequences
Forfeiture is mandatory and reaches the property involved in the transaction, which in laundering cases means the accounts, the real estate, and the assets bought with the funds, and it can be frozen pretrial. For non-citizens, money laundering with a value over $10,000 is an aggravated felony under federal immigration law, with removal and no discretionary relief; our immigration attorneys are consulted before any plea, and the value stated in the plea agreement is negotiated with the threshold in mind. Professional licenses, bank relationships, and the ability to work in any financial role are lost with a conviction. Where a case cannot be won outright, the realistic goals are a plea to 1957 rather than 1956, a stipulated value below the immigration line, a range reduced by role, and forfeiture limited to what was actually involved. Our fraud defense attorneys and our federal practice handle those negotiations together, alongside the check fraud and structuring charges that so often accompany them.
Frequently asked questions
How long do you stay in jail for money laundering?
The federal maximum is 20 years per count under 18 U.S.C. 1956 and 10 years under 18 U.S.C. 1957, but actual sentences are set by the guidelines and driven by the amount laundered and the underlying crime. The U.S. Sentencing Commission's most recent data puts the average federal money laundering sentence at roughly six years, with about nine in ten defendants receiving prison. California's state statute, Penal Code 186.10, is a wobbler carrying up to three years, plus one to four additional years when the amount exceeds $50,000.
What are the three stages of money laundering?
Placement, layering, and integration. Placement is getting the criminal proceeds into the financial system: cash deposits, casino chips, money orders. Layering is moving the money through transactions designed to obscure its origin: transfers between accounts, shell companies, cryptocurrency, purchases and resales. Integration is bringing the money back out as apparently legitimate wealth: real estate, a business, investments. Prosecutors use the three-stage model to explain a scheme to a jury, and defense attorneys use it to show that a client touched only one stage without knowing what came before or after.
How much money counts as money laundering?
There is no minimum under the main federal statute, 18 U.S.C. 1956; laundering $500 of drug money is a crime. Section 1957 applies only to transactions over $10,000 in criminal proceeds. California's Penal Code 186.10 requires transactions totaling more than $5,000 in a seven-day period or more than $25,000 in a thirty-day period through a financial institution. The dollar amount matters far more at sentencing than at charging: the federal guidelines scale the offense level to the value laundered.
Can money laundering charges be dropped?
Yes, and they often are when the government cannot prove the two things the statute requires: that the money came from a specified unlawful activity, and that the defendant knew it did. A person who received funds, moved funds, or was paid in funds without knowledge of their source has not laundered anything. Charges are also dropped when the underlying crime cannot be proven, when the transaction was not designed to conceal, and when the evidence came from an unlawful search. Money laundering counts are frequently dismissed in plea negotiations because they were charged as leverage.
What is the difference between money laundering and structuring?
Money laundering requires dirty money: proceeds of a specified unlawful activity, moved to conceal them or promote the crime. Structuring requires only evasion of a bank's reporting duty; the money can be completely legal. A drug dealer who breaks deposits into sub-$10,000 pieces commits both. A restaurant owner who does the same with lawful receipts commits only structuring. Prosecutors charge structuring in laundering cases because it is easier to prove and needs no proof of the money's source.
Related reading from our attorneys
- Structuring cash deposits and smurfing
- Racketeering and RICO charges
- Embezzlement and misappropriation in California
Account frozen or agents asking about a wire? The question is what you knew
The Bulldog Law's federal defense attorneys represent clients in money laundering, structuring, and forfeiture cases in the federal courts across California and under Penal Code 186.10 in state court, with the immigration analysis in-house. Visit our criminal defense page, call (888) 928-1609, or reach us online.