Fraud Enforcement And Recovery Act Of 2009

Floor Speech

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Mr. GRASSLEY. I will speak on a provisions of the bill dealing with money laundering. This section of the bill that I am referring to would amend the criminal money laundering statute to make clear that the proceeds of specified unlawful activity include the gross receipts of illegal activity and not just the profits of that illegal activity.

The money laundering statutes make it an offense to conduct financial transactions involving the ``proceeds'' of a crime, sometimes referred to as ``specific unlawful activity'' in the statutes.

These statutes, however, do not define what the term ``proceeds'' amounts to. Instead, the term has been left to definition by our courts.

For 22 years, since the money laundering statute was enacted in 1986, courts have construed ``proceeds'' to mean ``gross receipts'' and not ``net profits'' of illegal activities consistent with the original intent of Congress.

However, last year, the Supreme Court entered into it and, of course, reverses the definition in a case called United States v. Santos.

The Supreme Court suggested that the term ``proceeds'' was ``ambiguous''--that is their word--and as a result, under the rule of lenity, the Court gave the term a much narrower definition.

In this decision, the Court mistakenly limited the term ``proceeds'' to the ``profits'' of a crime, not the more global word ``receipts.''

As a result, the Court's decision has limited the money laundering statutes to only profitable crimes. It gives criminal defendants an argument against their criminal conduct by forcing the Government to prove that they actually made a profit, regardless of the criminal activity.

This decision of the Court is contrary to the intent of Congress in passing the money laundering statutes and weakens one of the Federal Government's primary tools used to recover the proceeds of illegal activity, including mortgages and securities fraud.

For example, these are some of the problems created by the Santos decision.

If a drug dealer committed a financial transaction with the proceeds of illegal drug dealing but the money was only used to purchase drugs, then they could not be prosecuted for money laundering. I know, everybody hears that, and they say common sense dictates otherwise. But the Supreme Court interpretation puts us in that sense that is contrary to common opinion.

Another example: If a fraudulent broker, such as a mortgage broker, intentionally overvalued the fair market of a home for purposes of a mortgage, that broker could only be charged for money laundering related to any fees or potential profit made in the fraudulent transaction, not based on the full value of the house.

Another example: An executive who committed security fraud could not be charged with money laundering if the fraud were unsuccessful in making a profit even though there was a fully completed financial transaction.

Those are just three of many examples I could give about how Santos very narrowly construes the possible prosecution and limits the prosecution of certain unlawful activity in the area of money laundering.

This legislation corrects the Santos decision and moves us forward so that profit or not, there is money laundering actually going on, we will have an opportunity to prosecute and hopefully succeed in the prosecution.

I yield the floor and suggest the absence of a quorum.

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