Health & Safety Code § 11370.9 HS – Laundering of Drug Money in California

California Health and Safety Code 11370.9 HS makes it a crime to launder the proceeds of an unlawful drug sale. “Laundering” means hiding or disguising the source of the drug money. Violating this section can lead to felony charges and time in jail or prison.

The language of HS 11370.9 states that “it is unlawful for any person knowingly to receive or acquire proceeds, or engage in a transaction involving proceeds, known to be derived from [a controlled substances offense] with the intent to conceal or disguise…the nature…of the proceeds or to avoid a transaction reporting requirement under state or federal law.”

Examples of illegal acts

• receiving money from a drug deal and depositing the cash in small amounts over a long period of time.
• paying cash for a large home using money from a drug transaction.
• receiving proceeds from a drug deal to help a drug dealer hide the money.

Legal Defenses

Our criminal defense attorneys advise clients that there are three effective defenses to accusations under this statute. These include the defendant showing that he/she:

• did not know that money was from a controlled substances offense,
• did not intend to conceal money, and/or
• laundered money in an amount less than $25,000.

Penalties

A violation of these laws is a wobbler offense. A wobbler is a crime that a prosecutor can charge as either a misdemeanor or a felony.

A misdemeanor conviction is punishable by custody in county jail for up to one year.

A felony conviction is punishable by imprisonment in state prison for up to four years.

Note, too, that if a person is guilty under this statute, law enforcement can seize or take any and all drug money from the defendant. This is known as “asset forfeiture.”

Our California criminal defense attorneys will explain the following in this article:

• 1. When is laundering drug money a crime?
• 2. Can an accused raise a defense?
  • 2.1 No knowledge
  • 2.2 No intent to conceal
  • 2.3 Amount of money under $25,000
• 3. What are the Health & Safety Code 11370.9 HS penalties?
• 4. Can a person get a conviction expunged?
• 5. Are there related crimes?
  • 5.1 Money laundering – PC 186.10
  • 5.2 Sale or transportation of a controlled substance – HS 11352
  • 5.3 Manufacturing a controlled substance – HS 11379.6

HS 11370.9 prohibits laundering drug money in California.

1. When is laundering drug money a crime?

A prosecutor must prove the following to convict a defendant under HS 11370.9:

1. the accused received, acquired, or engaged in a transaction involving money or property that he/she knew was derived from a controlled substances offense (e.g., selling a controlled substance),
2. the defendant did so because he/she intended to conceal or disguise the source, ownership, or control of the money, and
3. the total amount of laundered money was more than $25,000 in a thirty-day period.¹

2. Can an accused raise a defense?

A defendant has a right to challenge a laundering accusation with a legal defense. Three common defenses include the accused showing that:

1. he/she did not know that money was from a drug crime.
2. he/she did not intent to hide money.
3. the money involved was less than $25,000.

2.1 No knowledge

A person is only guilty under this statute if he/she knew that the money involved came from a drug offense. This means it is always a defense for an accused to show that he/she did not have this knowledge.

2.2 No intent to conceal

An accused cannot commit this crime unless he/she acts with the intent to hide or conceal money. A defendant, then, can challenge an accusation by saying he/she did not act with this intent. Perhaps, for example, a person used drug money to buy an expensive sports car because he/she really wanted one (and not to disguise any money).

2.3 Amount of money under $25,000

Recall that a prosecutor must show that the amount of money in a given case is over $25,000 to secure a guilty conviction under HS 11370.9. Therefore, a defendant can use the defense that the amount of money in his/her case was below this amount.

3. What are the Health & Safety Code 11370.9 HS penalties?

Laundering of drug money is a wobbler defense. This means a prosecutor can charge the crime as either a misdemeanor or a felony.

A misdemeanor conviction is punishable by:

• imprisonment in county jail for up to one year, and/or
• a maximum fine of $1,000.²

A felony conviction is punishable by:

• custody in state prison for up to four years, and/or
• a fine of up to $250,000 or twice the amount laundered (whichever is greater).³

Note that for either a misdemeanor or a felony conviction, a judge can award a defendant with probation in lieu of jail/prison time (such as misdemeanor probation).

Laundering drug money can be a misdemeanor or felony in California.

4. Can a person get a conviction expunged?

A person convicted of misdemeanor drug money laundering can get the conviction expunged. This is provided he/she successfully completes:

• jail time, or
• probation (whichever was imposed).

Note, though, that under California law, a person cannot get a felony conviction expunged if he/she received prison time as the result of the conviction.

5. Are there related crimes?

There are three crimes related to this statute. These are:

1. money laundering – PC 186.10,
2. sale or transportation of a controlled substance – HS 11352, and
3. manufacturing a controlled substance – HS 11379.6.

5.1 Money laundering – PC 186.10

Penal Code 186.10 PC is the California statute that makes it a crime for a person to conduct a transaction through a bank with either:

1. an intent to promote criminal activity, or
2. knowledge that the money involved was from a criminal activity.

Unlike HS 11370.9, the money laundered under this statute can come from any crime, not just a drug offense.

5.2 Sale or transportation of a controlled substance – HS 11352

California Health and Safety Code 11352 HS prohibits selling or transporting certain controlled substances (such as cocaine and heroin).

Note that if a person commits this offense, and then tries to launder the proceeds from the crime, he/she can be charged under both:

• HS 11352, and
• HS 11370.9.

5.3 Manufacturing a controlled substance – HS 11379.6

Health and Safety Code 11379.6 HS is the California statute that makes it a crime for a person to manufacture a controlled substance.

As with HS 11379.6, there is a knowledge element to this offense. This means a defendant is only guilty of manufacturing a drug if he/she knew of the substance’s nature as a narcotic.

Legal References:

1. 1. California Health and Safety Code 11370.9 HS.

      (a)  It is unlawful for any person knowingly to receive or acquire proceeds, or engage in a transaction involving proceeds, known to be derived from any violation of this division or Division 10.1 with the intent to conceal or disguise or aid in concealing or disguising the nature, location, ownership, control, or source of the proceeds or to avoid a transaction reporting requirement under state or federal law.(b)  It is unlawful for any person knowingly to give, sell, transfer, trade, invest, conceal, transport, or maintain an interest in, or otherwise make available, anything of value which that person knows is intended to be used for the purpose of committing, or furthering the commission of, any violation of this division or Division 10.1 with the intent to conceal or disguise or aid in concealing or disguising the nature, location, ownership, control, or source of the proceeds or to avoid a transaction reporting requirement under state or federal law.

      (c)  It is unlawful for any person knowingly to direct, plan, organize, initiate, finance, manage, supervise, or facilitate the transportation or transfer of proceeds known to be derived from any violation of this division or Division 10.1 with the intent to conceal or disguise or aid in concealing or disguising the nature, location, ownership, control, or source of the proceeds or to avoid a transaction reporting requirement under state or federal law.

      (d)  It is unlawful for any person knowingly to conduct a transaction involving proceeds derived from a violation of this division or Division 10.1 when the transaction is designed in whole or in part to conceal or disguise the nature, location, source, ownership, or control of the proceeds known to be derived from a violation of this division or Division 10.1 with the intent to conceal or disguise or aid in concealing or disguising the nature, location, ownership, control, or source of the proceeds or to avoid a transaction reporting requirement under state or federal law.

      (e)  A violation of this section shall be punished by imprisonment in a county jail for not more than one year or in the state prison for a period of two, three, or four years, by a fine of not more than two hundred fifty thousand dollars ($250,000) or twice the value of the proceeds or property involved in the violation, whichever is greater, or by both that imprisonment and fine. Notwithstanding any other provision of law, each violation of this section shall constitute a separate, punishable offense without limitation.

      (f)  This section shall apply only to a transaction, or series of related transactions within a 30-day period, involving over twenty-five thousand dollars ($25,000) or to proceeds of a value exceeding twenty-five thousand dollars ($25,000).

      (g)  In consideration of the constitutional right to counsel afforded by the Sixth Amendment to the United States Constitution and Section 15 of Article 1 of the California Constitution, this section is not intended to apply to the receipt of, or a related transaction involving, a fee by an attorney for the purpose of providing advice or representing a person in a criminal investigation or prosecution.

      (h)  For the purposes of this section, the following terms have the following meanings:

      (1)  “Proceeds” means property acquired or derived directly or indirectly from, produced through, or realized through any violation of this division or Division 10.1.

      (2)  “Transaction” includes a purchase, sale, trade, loan, pledge, investment, gift, transfer, transmission, delivery, deposit, withdrawal, payment, electronic, magnetic, or manual transfer between accounts, exchange of currency, extension of credit, purchase or sale of any monetary instrument, or any other acquisition or disposition of property by whatever means effected.

      (3)  “Represented by a law enforcement officer” means any representation of fact made by a peace officer as defined in Section 7 of the Penal Code, or a federal officer described in subsection (e) of Sections 1956 and 1957 of Title 18 of the United States Code, or by another person at the direction of, or with the approval of, that peace officer or federal officer.

      (Amended by Stats. 1993, Ch. 589, Sec. 89. Effective January 1, 1994.)

   2. See same.
   3. See same. As to the fine amount, see People v. Bush (2017) Cal.App.5^th 457.