Penal Code § 186.10 PC – Money Laundering – California Law

California Penal Code § 186.10 defines the crime of money laundering. This is where money obtained from illegal or criminal activity is channeled into bank accounts or other legitimate uses so that the source of the funds becomes untraceable.

Money laundering under 186.10 PC is a wobbler, meaning the state can prosecute it as a misdemeanor or a felony. A misdemeanor charge carries up to one year in jail, and a felony carries up to four years in jail or prison.

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

• 1. What is “money laundering”?
• 2. Are there legal defenses?
• 3. Is money laundering a felony?
• 4. Are there related offenses?

1. What is “money laundering”?

Under California law, a prosecutor must prove the following to convict you of money laundering:

1. you conducted, or attempted to conduct, a financial transaction or a series of transactions through a bank,¹
2. the transaction or series of transactions involved a total value of more than $5,000 in a seven-day period, or more than $25,000 in a 30-day period,² and
3. you acted with a specific intent to promote criminal activity, or with the knowledge that the source of the money or proceeds involved in the transaction came from criminal activity.³

As to the third element above, according to Oakland criminal defense attorney Reve Bautista:

“The legal definition of PC 186.10 money laundering has specific intent or knowledge as one of its key elements. This means that you are not guilty of money laundering if you unknowingly initiated a banking transaction that turned out to be connected with a crime.”⁴

Example: Doug asks his mother, Mary, for a loan of $10,000. He tells her he wants to use the money to start a business. Mary writes him a check for this amount.

Doug’s “business” turns out to be purchasing materials to start a meth lab, in violation of California’s laws against the manufacturing of controlled substances. Mary does not know this when she gives Doug the money.

Mary is not guilty of money laundering because she did not specifically intend to support Doug’s criminal enterprise.

Money laundering activities typically involve layering, which is trying to camouflage the source of the “proceeds of crime” by making it look like the funds came from a legitimate source.

Some money laundering schemes are relatively crude, involving using money orders and making wire transfers to conceal “dirty money” through a legitimate financial system. Other scams involve very intricate organized crime rings putting illicit funds in shell companies, offshore banking accounts, real estate, and in recent years, cryptocurrencies and bitcoin.

2. Are there legal defenses?

If you are accused of committing the crime of money laundering, you can challenge the accusation with a legal defense. Three common defenses include showing that:

1. you did not act with criminal intent.
2. you deposited only a small amount of money.
3. police violated one of your constitutional rights.

Typical evidence includes suspicious activity reports (SARs) from the financial sector and other monetary instrument/cash transaction reporting.

No criminal intent

Recall that you are only guilty under this law if you acted with either:

• a specific intent to promote criminal activity, or
• knowledge that the money involved came from criminal activity.

This means it is always a defense to show that you did not act with this intent or with this knowledge. Perhaps, for example, you deposited money for your spouse without knowing that it was the proceeds of a crime. This defense is also called “mistake of fact.”

Minimum amounts deposited

Recall, too, that you are not guilty under this statute unless you engage in certain financial transactions that involve more than $5,000 or $25,000 (over a seven-or 30-day period of time). Showing that a transaction involved only a minimal amount of money, or less than the amount listed in the statute, could shield you from a conviction.

Violation of a constitutional right

You can contest a charge under this law by showing that law enforcement violated one of your constitutional rights.

Perhaps, for example, law enforcement personnel:

• conducted an unlawful search or seizure,
• stopped or arrested you without probable cause,
• coerced a confession, or
• failed to read you your Miranda rights.

If any of the above applies, then a judge can reduce or drop your money laundering charges.

3. Is money laundering a felony?

A violation of PC 186.10 is a wobbler. Prosecutors can charge wobblers as either misdemeanors or felonies depending on:

• the facts of the case, and
• your criminal history.

If charged as a misdemeanor, the crime is punishable by:

• up to one year in county jail (as opposed to a state prison term), and/or
• a maximum fine of up to $1,000.⁵

If charged as a felony, the crime is punishable by:

• up to four years in jail (rather than a prison sentence) under California’s realignment program, and/or
• a fine of up to $250,000 or twice the amount of money laundered (whichever is greater).⁶

The maximum fine increases to $500,000 or five times the laundered amount (whichever is larger) if you are found guilty of money laundering on more than one occasion.⁷

Also, the maximum jail sentence for money laundering can increase by one year if the amount of money laundered is more than $50,000. Plus you face an extra four years if the money laundered is more than $2,500,000.⁸

4. Are there related offenses?

There are three laws related to money laundering. These are:

1. laundering drug money – HS 11370.9,
2. California’s freeze and seize penalty enhancement – PC 186.11, and
3. federal law on money laundering – 18 U.S.C. 1956.

Laundering drug money – HS 11370.9

Per Health and Safety Code 11370.9 HS, laundering drug money is the crime where you launder the proceeds of an unlawful drug sale or drug trafficking.

“Laundering money” under this statute takes place in the same manner as laundering under PC 186.10.

Further, as with charges under PC 186.10, you can contest charges brought under this law by showing that you did not act with criminal intent.

Freeze and seize penalty enhancement – PC 186.11

Under Penal Code 186.11, the freeze and seize penalty enhancement is the law that says you will face an additional consecutive prison term (of one to five years) if:

1. you are convicted of two or more fraud or embezzlement related felonies in a single case, and
2. the crimes involve the taking of over $100,000.

Unlike with violations of PC 186.10, violations of this law result in custody in state prison and not county jail.

Federal money laundering – 18 U.S.C. 1956 & 1955

Money laundering can be both a California state crime and a federal crime.

Under 18 U.S.C. 1956, federal money laundering occurs when you:

1. transfer money (that comes from criminal activity) into legitimate channels, and
2. do so in an attempt to disguise the illegal source of the funds.

You are only guilty under this law if you:

1. know that the money involved in a financial transaction came from proceeds of unlawful activity, or
2. conduct a financial transaction involving money from unlawful activity.

If you violate this federal law, you will serve up to 20 years in federal prison. You do not have the option to serve a term of imprisonment in a state-based jail.

This law prohibits all types of money laundering schemes, from tax evasion to terrorist financing.

Helpful Resources

• Department of Justice (justice.gov) – money laundering and asset recovery
• Department of the Treasury – money laundering
• Financial Crimes Enforcement Network – History of Anti-Money Laundering (AML) Laws
• Financial Action Task Force (FATF) (U.S. is a member state) – Private sector news
• United Nations Office on Drugs and Crime
• Money Laundering Control Act
• History of Anti-Money Laundering Laws, FinCEN
• Bank Secrecy Act (BSA)
• European Union – European Commission
• International Monetary Fund – Anti-Money Laundering / Combating the Financing of Terrorism
• U.S. Department of the Treasury – Terrorism and Financial Intelligence
• New York State Department of Financial Services
• Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT), International Monetary Fund
• Patriot Act
• Caribbean Financial Action Task Force (includes news on sanctions)
• Customer Due Diligence — Overview, Federal Financial Institutions Examination Council’s (FFIEC)

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