Money Laundering: An Abridged Overview of 18 U.S.C. 1956 and Related Federal Criminal Law

Charles Doyle
Senior Specialist in American Public Law

This is an overview of the elements of federal criminal money laundering statutes and the sanctions imposed for their violation. The most prominent is 18 U.S.C. 1956. Section 1956 outlaws four kinds of money laundering—promotional, concealment, structuring, and tax evasion laundering of the proceeds generated by designated federal, state, and foreign underlying crimes (predicate offenses)—committed or attempted under one or more of three jurisdictional conditions (i.e., laundering involving certain financial transactions, laundering involving international transfers, and stings). Its companion, 18 U.S.C. 1957, prohibits depositing or spending more than $10,000 of the proceeds from a section 1956 predicate offense. Violations of section 1956 are punishable by imprisonment for not more than 20 years; section 1957 carries a maximum penalty of imprisonment for 10 years. Property involved in either case is subject to confiscation. Misconduct which implicates sections 1956 and 1957 may implicate other federal criminal statutes as well. Federal racketeer influenced and corrupt organization (RICO) provisions outlaw acquiring or conducting the affairs of an enterprise (whose activities affect interstate or foreign commerce) through the patterned commission of a series of underlying federal or state crimes. RICO violations are also 20-year felonies. Every RICO predicate offense, including each “federal crime of terrorism,” is automatically a section 1956 money laundering predicate offense. A second related statute, the Travel Act (18 U.S.C. 1952), punishes interstate or foreign travel, or the use of interstate or foreign facilities, conducted with the intent to distribute the proceeds of a more modest list of predicate offenses or to promote or carry on such offenses when an overt act is committed in furtherance of that intent. Such misconduct is punishable by imprisonment for not more than five years. Other federal statutes proscribe, with varying sanctions, bulk cash smuggling, layering bank deposits to avoid reporting requirements, failure to comply with federal anti-money laundering provisions, or conducting an unlawful money transmission business.

The Supreme Court has held that the section 1956 ban on attempted international transportation of tainted proceeds for the purpose of concealing their ownership, source, nature, or ultimate location is limited to instances where concealment is a purpose rather than an attribute of the transportation (simple smuggling is not proscribed as such), United States v. Cuellar, 553 U.S. 550 (2008). In a second case, the Court indicated that for purposes of section 1956 the “proceeds” of a predicate offense often referred to the profits rather than the gross receipts realized from the offense, United States v. Santos, 553 U.S. 507 (2008). Congress responded by defining “proceeds” for purposes of sections 1956 and 1957 as the property obtained or retained as a consequence of a predicate offense, including gross receipts, P.L. 111-21, 123 Stat. 1618 (2009)(S. 386)(111th Cong.).

This is an abridged version of CRS Report RL33315, Money Laundering: An Overview of 18 U.S.C. 1956 and Related Federal Criminal Law , by Charles Doyle, without the footnotes, appendices, or most of the citations to authority found in the longer report. Related CRS Reports include CRS Report RL33020, Terrorist Financing: U.S. Agency Efforts and Inter-Agency Coordination, by Martin A. Weiss et al., and CRS CRS Report RS21547, Financial Institution Customer Identification Programs Mandated by the USA PATRIOT Act, by M. Maureen Murphy.


Date of Report: February 8, 2012
Number of Pages: 9
Order Number: RS22401
Price: $29.95

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Evaluating the Current Stance of Monetary Policy Using a Taylor Rule

Marc Labonte
Specialist in Macroeconomic Policy

Oversight of the Federal Reserve’s (Fed’s) monetary policy decisions rests with Congress. But oversight is encumbered by the absence of a straightforward relationship between interest rates and economic performance. Further, the Fed’s policy decisions are discretionary, meaning there is no objective, transparent “yardstick” for evaluating their decisions. The Fed’s conventional policy tool is to target the federal funds rate, the overnight interest rate at which banks lend to each other. A simple rule of thumb guide to monetary policy decisions called a “Taylor rule” is an intuitive way to judge actual policy against some objective, albeit simplistic, ideal. Taylor rules prescribe a federal funds target based on inflation and the output gap (i.e., the difference between actual gross domestic product [GDP] and potential GDP) and can be adjusted to reflect a variety of policy goals.

The Fed eased monetary policy aggressively to counteract the recent recession and financial crisis and has kept a stimulative policy stance in place after the recession ended because of a persistently large output gap. This report compares current policy to a number of Taylor rules. Taylor rules take into account only a limited number of variables, which its proponents consider a strength, but its detractors consider a weakness. Since the Taylor rules considered in this report are based only on inflation and the output gap, they cannot consider other factors that might currently counsel in favor of the Fed’s “unconventional,” stimulative policy actions, such as the goal of stabilizing the financial system. This fact may explain why actual rates have been a little lower than what many Taylor rules currently prescribe.


Date of Report: January 30, 2012
Number of Pages: 10
Order Number: RS21821
Price: $29.95

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Monetary Policy and the Federal Reserve: Current Policy and Conditions

Marc Labonte
Specialist in Macroeconomic Policy

The Federal Reserve (Fed) defines monetary policy as the actions it undertakes to influence the availability and cost of money and credit. Since the expectations of market participants play an important role in determining prices and growth, monetary policy can also be defined to include the directives, policies, statements, and actions of the Fed that influence how the future is perceived. In addition, the Fed acts as a “lender of last resort” to the nation’s financial system, meaning that it ensures continued smooth functioning of financial intermediation by providing financial markets with adequate liquidity. This role has become of great importance following the onset of the recent financial crisis.

Traditionally, the Fed has three means for achieving its goals: open market operations involving the purchase and sale of U.S. Treasury securities, the discount rate charged to banks who borrow from the Fed, and reserve requirements that governed vault cash or deposits with the Fed as a proportion of deposits. Historically, open market operations have been the primary means for executing monetary policy. Recently, in response to the financial crisis, direct lending became important once again and the Fed has created a number of new ways for injecting reserves, credit, and liquidity into the banking system, as well as making loans to firms that are not banks. As financial conditions normalized, direct lending tapered off. Emergency lending programs have been wound down, with the exception of foreign central bank liquidity swaps.

The Fed traditionally conducts open market operations by setting an interest rate target that it believes will allow it to achieve price stability and maximum sustainable employment. The interest rate targeted is the federal funds rate, the price at which banks buy and sell reserves on an overnight basis. This rate is linked to other short-term rates and these, along with inflation expectations, influence longer-term interest rates. Interest rates affect interest-sensitive spending such as business capital spending on plant and equipment, household spending on consumer durables, and residential investment. Through this channel, monetary policy can be used to stimulate or slow aggregate spending in the short run. In the long run, monetary policy mainly affects inflation. A low and stable rate of inflation promotes price transparency and, thereby, sounder economic decisions by households and businesses.

The Fed has frequently changed the federal funds target to match changes in expected economic conditions. Beginning September 18, 2007, in a series of 10 moves, the target was reduced from 5.25% to a range of 0% to 0.25% on December 16, 2008, where it now remains. Since then, the Fed has added liquidity to the financial system beyond what is needed to meet its federal funds target through direct lending and, more recently, purchases of Treasury and governmentsponsored enterprise (GSE) securities. This practice is sometimes referred to as quantitative easing, which has tripled the size of the Fed’s balance sheet since financial turmoil began. A second round of quantitative easing began in November 2010 and ended in June 2011.

Congress has delegated responsibility for monetary policy to the Fed, but retains oversight responsibilities to ensure that the Fed is adhering to its statutory mandate “maximum employment, stable prices, and moderate long-term interest rates.” H.R. 245 would switch to a single mandate of price stability. The Dodd-Frank Act enhanced the GAO’s ability to audit the Fed, and required a review of its emergency programs. H.R. 459/H.R. 1496/S. 202 would remove all remaining restrictions on GAO’s audit powers. H.R. 1512 would remove the regional Fed bank presidents from the Federal Open Market Committee.


Date of Report: January 30, 2012
Number of Pages: 20
Order Number: RL30354
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Social Security: The Windfall Elimination Provision (WEP)

Alison M. Shelton
Analyst in Income Security

The windfall elimination provision (WEP) reduces the Social Security benefits of workers who also have pension benefits from employment not covered by Social Security. Its purpose is to remove an advantage or “windfall” these workers would otherwise receive as a result of the interaction between the Social Security benefit formula and the workers’ relatively short careers in Social Security-covered employment. Opponents contend that the provision is basically imprecise and can be unfair.


Date of Report: January 30, 2012
Number of Pages: 10
Order Number: 98-35
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Small Business Mentor-Protégé Programs

Robert Jay Dilger
Senior Specialist in American National Government

Kate M. Manuel
Legislative Attorney

Mentor-protégé programs typically seek to pair new businesses with more experienced businesses in mutually beneficial relationships. Protégés may receive financial, technical, and/or management assistance from mentors in obtaining and performing federal contracts or subcontracts, or serving as suppliers under such contracts or subcontracts. Mentors may receive credit toward subcontracting goals, reimbursement of certain expenses, or other incentives.

The federal government currently has several mentor-protégé programs that seek to aid small businesses in various ways. For example, the 8(a) Mentor-Protégé Program is a government-wide program designed to assist small businesses “owned and controlled by socially and economically disadvantaged individuals” that are participating in the Small Business Administration’s (SBA’s) Minority Small Business and Capital Ownership Development Program (commonly known as the 8(a) Program) in obtaining and performing federal contracts. Toward that end, mentors may (1) form joint ventures with protégés that are eligible to perform federal contracts set aside for small businesses; (2) make certain equity investments in protégé firms; (3) lend or subcontract to protégé firms; and (4) provide technical or management assistance to their protégés. The Department of Defense (DOD) Mentor-Protégé Program, in contrast, is agency-specific. It is designed to assist various types of small businesses and other entities in obtaining and performing DOD subcontracts and serving as suppliers on DOD contracts. Mentors may (1) make advance or progress payments to their protégés that DOD reimburses; (2) award subcontracts to their protégés on a noncompetitive basis when they would not otherwise be able to do so; (3) lend money to or make investments in protégé firms; and (4) provide or arrange for other assistance.

Other agencies also have agency-specific mentor-protégé programs designed to assist various types of small businesses or other entities in obtaining and performing subcontracts under agency prime contracts. The Department of Homeland Security, for example, has a mentor-protégé program wherein mentors may provide protégés with rent-free use of facilities or equipment, temporary personnel for training, property, loans, or other assistance. Because these programs are not based in statute, unlike the SBA and DOD programs, they generally rely upon preexisting authorities (e.g., authorizing use of evaluation factors) or publicity to incentivize mentor participation. See Table A-1 for a summary comparison.

Although there are some issues with the accuracy and thoroughness of some federal agency records, there are currently more than 1,100 mentor-protégé agreements in place.

Congressional interest in small business mentor-protégé programs has increased in recent years, in part because of reports that large businesses serving as mentors have improperly received federal contracting assistance intended for small businesses. The SBA’s suspension (and later reinstatement) of a mentor in the 8(a) Mentor-Protégé Program for possible fraud, as well as reports of other fraud in several of the SBA’s contracting programs, has also contributed to congressional interest. The first session of the 112th Congress enacted legislation (P.L. 112-81) extending the DOD mentor-protégé program through FY2015 for the formation of new agreements, and FY2018 for the reimbursement of incurred costs under existing agreements. The 111th Congress had previously enacted legislation (P.L. 111-240) authorizing the SBA to establish mentor-protégé programs for small businesses not participating in the 8(a) Program, which the SBA is in the process of doing. P.L. 111-240 also required the Government Accountability Office (GAO) to assess the effectiveness of mentor-protégé programs generally, a requirement which GAO fulfilled with a report issued on June 15, 2011.


Date of Report: January 6, 2012
Number of Pages: 25
Order Number: R41722
Price: $29.95

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