Money Laundering Charges for Misusing PPP Funds
So your probably wondering why your indictment includes money laundering charges in addition to bank fraud and wire fraud, and your trying to understand what prosecutors mean when they allege you “laundered” your PPP loan proceeds when all you did was spend the money after you received it. The answer is that federal money laundering statutes are extremely broad and criminalize a wide range of financial transactions involving proceeds from illegal activity, including simply depositing, transferring, or spending money that was obtained through fraud, even if you weren’t trying to hide anything or disguise the source of the funds.
Money laundering charges under 18 U.S.C. § 1956 and 18 U.S.C. § 1957 dramatically increase your sentencing exposure in PPP fraud cases because Section 1956 carries up to 20 years per transaction and Section 1957 carries up to 10 years per transaction, and prosecutors can charge dozens or even hundreds of separate money laundering counts based on individual financial transactions you made after receiving your PPP loan. What might have been a straightforward fraud case with a sentencing range of 3 to 5 years becomes a complex case with exposure exceeding 50 or even 100 years when multiple money laundering charges are stacked on top of the fraud charges.
In recent PPP fraud prosecutions, money laundering charges have been added when defendants used loan proceeds for personal expenses like luxury purchases, real estate transactions, gambling, or other non-business purposes, and then engaged in financial transactions to move or spend that money. For example, a Nevada man was sentenced to over 15 years in prison for fraudulently obtaining $11 million in PPP loans and then laundering the funds through real estate transactions, gambling activity, and luxury purchases. A Georgia defendant was convicted of bank fraud, wire fraud, and money laundering after obtaining a fraudulent $9.6 million PPP loan and moving the proceeds through various transactions.
We represent clients charged with money laundering in connection with PPP loans, and we know that these charges fundamentally change the nature of your case and your defense strategy. Money laundering allegations require prosecutors to prove not just that you obtained money through fraud, but that you then engaged in financial transactions involving that money with specific criminal intent or knowledge. Understanding what the government must prove, what constitutes money laundering versus legitimate spending, and what defenses are available is critical to fighting these charges and minimizing your exposure.
What Is Money Laundering Under 18 U.S.C. § 1956?
Section 1956 is the primary federal money laundering statute, and it prohibits conducting or attempting to conduct financial transactions involving proceeds from specified unlawful activity (including fraud) where the transaction is designed to promote further illegal activity, to conceal the nature or source of the proceeds, or to avoid transaction reporting requirements. This statute is incredibly broad and gives prosecutors powerful tools to charge multiple counts based on ordinary financial transactions that occur after fraud has been committed.
There are four main theories of money laundering under Section 1956: promotional money laundering, which involves using criminal proceeds to promote or facilitate additional criminal activity; concealment money laundering, which involves conducting transactions designed to conceal or disguise the nature, location, source, ownership, or control of criminal proceeds; international money laundering, which involves moving criminal proceeds into or out of the United States; and structuring to avoid reporting requirements, which involves conducting transactions in specific ways to evade federal reporting requirements for currency transactions over $10,000.
In PPP fraud cases, prosecutors most commonly charge concealment money laundering under Section 1956(a)(1)(B)(i), alleging that you conducted financial transactions involving your fraudulent PPP loan proceeds knowing that the transactions were designed to conceal or disguise the nature, location, source, ownership, or control of the proceeds. This might include transferring funds between multiple bank accounts, using PPP proceeds to purchase assets in other people’s names, making large cash withdrawals to hide how you spent the money, or engaging in series of transactions that obscure the trail of the fraudulent funds.
To convict you of money laundering under Section 1956, prosecutors must prove beyond a reasonable doubt that you conducted or attempted to conduct a financial transaction, that the transaction involved proceeds from specified unlawful activity (like bank fraud or wire fraud from your PPP loan), that you knew the property involved represented proceeds from some form of unlawful activity, and that the transaction was designed to conceal the nature or source of the proceeds (for concealment laundering) or to promote further illegal activity (for promotional laundering). Each of these elements has important nuances that affect both the government’s case and your defenses.
What Is Money Laundering Under 18 U.S.C. § 1957?
Section 1957 is a simpler but still serious money laundering statute that prohibits knowingly engaging in monetary transactions in property derived from specified unlawful activity where the transaction involves more than $10,000. Unlike Section 1956, which requires proof of specific intent to conceal or promote illegal activity, Section 1957 only requires proof that you knew the money came from illegal activity and that you conducted a transaction over $10,000 with it. This makes Section 1957 easier for prosecutors to prove but it carries lower maximum penalties—10 years per count versus 20 years for Section 1956.
In PPP fraud cases, Section 1957 charges typically arise when defendants spend large amounts of their fraudulent loan proceeds on personal purchases or expenses. If you used PPP funds to buy a car for $50,000, that’s a monetary transaction over $10,000 involving proceeds from fraud, which satisfies Section 1957. If you transferred $100,000 from your business account (where PPP funds were deposited) to your personal account, that’s another Section 1957 violation. If you paid off a $75,000 personal debt with PPP money, that’s another count. Each transaction over $10,000 can be charged as a separate violation with 10 years maximum exposure.
The elements prosecutors must prove for Section 1957 are simpler than Section 1956: you engaged in a monetary transaction, the transaction involved criminally derived property with a value greater than $10,000, you knew the property was derived from criminal activity, and the property was in fact derived from specified unlawful activity. The key element that defendants often challenge is knowledge—did you know that the property involved in the transaction came from illegal activity? If you genuinely believed your PPP loan was legitimate and that you were entitled to spend the funds, you lack the knowledge required for Section 1957 conviction.
How Do Prosecutors Prove Money Laundering in PPP Cases?
Proving money laundering in PPP fraud cases involves tracing the fraudulent loan proceeds through your financial accounts and documenting the transactions you conducted with those funds, then presenting evidence that you knew the funds were obtained illegally and that you conducted transactions with specific criminal intent (for Section 1956) or simply knowing the funds came from crime (for Section 1957). Understanding how prosecutors build these cases helps explain what evidence they’ll present and where vulnerabilities in there case might exist.
Prosecutors start by establishing the predicate offense—the underlying fraud that generated the criminal proceeds. In PPP cases, this means proving you obtained your PPP loan through bank fraud, wire fraud, or false statements, which makes the loan proceeds “criminally derived property” for purposes of the money laundering statutes. Once the predicate offense is established, every financial transaction you conducted with those proceeds becomes a potential money laundering charge.
The government uses bank records, account statements, wire transfer documents, and financial forensics to trace the PPP loan proceeds from the moment they were deposited into your account through all subsequent transactions. They’ll identify transfers to other accounts, purchases of assets, cash withdrawals, payments to creditors, and any other movement of the funds. Each significant transaction becomes evidence in there money laundering case, and transactions that appear designed to hide or disguise the money’s source are particularly incriminating.
For Section 1956 concealment laundering charges, prosecutors present evidence showing that your transactions were structured to hide what you were doing with the fraudulent proceeds. This might include testimony from forensic accountants analyzing your transaction patterns, evidence that you transferred funds through multiple intermediary accounts before using them, proof that you purchased assets in other people’s names to conceal your ownership, or communications showing you were concerned about detection and took steps to obscure the money trail. The government doesn’t have to prove the concealment was successful—just that the transaction was designed with concealment in mind.
For Section 1957 charges, the proof is more straightforward: prosecutors just need to show you conducted transactions over $10,000 using the fraudulent proceeds and that you knew they came from illegal activity. Knowledge is typically proven through circumstantial evidence—if you submitted a fraudulent PPP application and then spent the proceeds on luxury items, prosecutors argue you obviously knew the money came from fraud. Direct evidence of knowledge might include communications where you discussed the fraud, attempts to hide your spending, or reactions when confronted by investigators suggesting you knew you’d done something wrong.
What Types of Transactions Trigger Money Laundering Charges?
Understanding which types of financial transactions prosecutors target as money laundering in PPP cases is important because it affects both your exposure and your defenses. Not every transaction involving fraudulent proceeds constitutes money laundering—the government must show specific elements depending on whether they’re charging Section 1956 or Section 1957—but a wide range of ordinary financial activities can be characterized as money laundering when they involve criminally derived funds.
Using PPP funds for personal luxury purchases is one of the most common scenarios triggering money laundering charges. If you bought expensive cars, jewelry, boats, or other luxury items with your fraudulent PPP loan proceeds, each purchase over $10,000 can be charged as Section 1957 money laundering. If you structured the purchases through intermediaries or took other steps to hide that you were spending PPP money on personal items, prosecutors will add Section 1956 concealment laundering charges. The Nevada defendant who was sentenced to over 15 years faced money laundering charges based on using fraudulent PPP proceeds for “luxury purchases” along with gambling and real estate.
Gambling with PPP loan proceeds frequently results in money laundering charges because gambling is seen as both spending criminally derived funds (Section 1957) and as potentially laundering them by converting cash to casino chips and back to cash, which can obscure the source of funds. If you took your fraudulent PPP money to casinos and gambled with it, prosecutors will charge each substantial gambling transaction as money laundering, arguing you were both spending criminal proceeds and potentially cleaning the money through the casino’s financial system.
Real estate transactions using PPP funds are particularly likely to trigger money laundering charges because real estate is a classic money laundering vehicle and because real estate purchases almost always involve amounts over $10,000. If you used fraudulent PPP proceeds as a down payment on a house, to purchase rental properties, or to pay off your mortgage, those transactions are Section 1957 violations at minimum. If you purchased property in someone else’s name or through an LLC to hide your ownership, prosecutors will add Section 1956 concealment charges.
Transferring funds between accounts—particularly to personal accounts, offshore accounts, or accounts in other people’s names—is viewed by prosecutors as evidence of money laundering. If you deposited your PPP loan in your business account and then transferred large amounts to your personal account, especially if those transfers weren’t documented as legitimate business expenses or owner compensation, prosecutors argue you were laundering criminal proceeds by moving them out of the business context. Transfers to accounts in other countries or to cryptocurrency wallets are seen as particularly suspicious and typically result in multiple money laundering counts.
Cash withdrawals from accounts containing PPP proceeds can be charged as money laundering because converting funds to cash makes them harder to trace and suggests an intent to hide how you’re using the money. Large cash withdrawals that aren’t explained by legitimate business needs—particularly withdrawals just under $10,000 that appear designed to avoid currency transaction reporting requirements—are classic money laundering indicators that prosecutors emphasize in PPP fraud cases.
Can Using PPP Funds for Unauthorized Expenses Be Money Laundering?
Simply using PPP funds for unauthorized purposes—like owner compensation above program limits, paying off business debts, or covering non-payroll expenses that don’t qualify under the program rules—doesn’t automatically constitute money laundering, but it can support money laundering charges when combined with evidence that you tried to hide or disguise those unauthorized uses. The key distinction is between misuse of funds (which is fraud but not necessarily laundering) and misuse combined with efforts to conceal that misuse (which can be laundering).
If you used your PPP loan for prohibited expenses but documented those uses in your business records, deposited the funds in your regular business account, and spent them through normal business transactions, prosecutors will have difficulty charging money laundering because there’s no evidence you were trying to conceal or disguise the funds. The fraud is in obtaining the loan or in certifying improper uses for forgiveness, but the spending itself doesn’t involve the concealment or promotion elements required for Section 1956, and ordinary business expenditures might not meet the “monetary transaction” requirement for Section 1957.
However, if you used PPP funds for prohibited purposes AND you took steps to hide those uses—like transferring the money to personal accounts to avoid documenting business use, making cash withdrawals so there’s no record of what you bought, or creating false documentation claiming the funds were used for eligible expenses when they weren’t—prosecutors will argue those actions constitute money laundering. The concealment of the improper use satisfies the Section 1956 element of designing transactions to disguise the nature or use of criminal proceeds.
Similarly, if you spent PPP funds on items clearly unrelated to your business—like personal vacations, gambling, or luxury goods—those expenditures are easier for prosecutors to characterize as money laundering because you’re not just misusing business funds for unauthorized purposes, your converting fraudulent loan proceeds into personal assets. Each substantial personal purchase over $10,000 can be charged as Section 1957 even without proof you were trying to conceal anything, simply because you knowingly conducted monetary transactions with criminally derived property.
How Do Multiple Money Laundering Counts Increase Sentencing Exposure?
Multiple money laundering counts in PPP fraud cases create exponentially higher sentencing exposure because each count carries its own maximum penalty—20 years for Section 1956 and 10 years for Section 1957—and because prosecutors can charge separate counts for each financial transaction involving criminal proceeds. This multiplication effect can turn fraud cases with relatively modest guideline ranges into cases with exposure exceeding 50 or 100 years when there are dozens of money laundering counts.
The way federal sentencing works with multiple counts is that the judge first determines a guideline range for the most serious count (called the “controlling count”), which in fraud cases is usually calculated based on loss amount. Then for additional counts, the judge can impose additional penalties that run either concurrently (at the same time as the main sentence) or consecutively (added onto the main sentence). While judges often order fraud-related counts to run concurrently when they all arise from the same scheme, money laundering counts are frequently run consecutively because they represent distinct criminal conduct beyond just the fraud itself.
For example, if your PPP fraud guideline range is 37 to 46 months (roughly 3 to 4 years) based on the loss amount, and your convicted of five counts of money laundering involving five separate transactions with your fraudulent proceeds, the judge might impose the 3-year sentence for fraud plus consecutive sentences totaling another 5 to 10 years for the money laundering counts, resulting in a total sentence of 8 to 13 years. The money laundering counts effectively double or triple your prison time beyond what the fraud alone would have produced.
Even when money laundering sentences run concurrently rather than consecutively, having multiple money laundering convictions affects your criminal history and your supervised release term. Each count of conviction appears on your record and demonstrates that you engaged in sophisticated criminal conduct beyond just the underlying fraud. This affects future sentencing if you’re ever convicted of other crimes, and it impacts collateral consequences like professional licensing, employment opportunities, and immigration status for non-citizens.
What Defenses Apply to Money Laundering Charges?
While money laundering statutes are broad and federal prosecutors aggressively charge these offenses in PPP fraud cases, there are specific defenses that can defeat or reduce money laundering charges if the evidence supports them. Understanding where the vulnerabilities are in the government’s case and what affirmative defenses might apply is critical to developing an effective defense strategy.
The lack of knowledge defense challenges whether you knew the property involved in the transactions came from illegal activity. Both Section 1956 and Section 1957 require proof that you knew you were dealing with criminally derived property. If you genuinely believed your PPP loan was legitimate—perhaps because you relied on an accountant or loan preparer who assured you the application was accurate, or because you had a good-faith belief that you qualified for the loan—you lacked the knowledge required for money laundering conviction even if the loan was actually obtained through fraud. This defense requires credible evidence of your good faith belief and is strongest when you can show you would have qualified for some loan amount with accurate information.
Challenging whether the transactions were designed to conceal is the primary defense to Section 1956 concealment laundering charges. The government must prove the transaction was designed in whole or in part to hide or disguise the nature, location, source, ownership, or control of the proceeds. If you conducted ordinary business transactions, deposited funds in your regular accounts, and spent money through normal channels without taking steps to hide anything, prosecutors will struggle to prove the concealment element. We present evidence showing your transactions were transparent, documented in business records, and consistent with legitimate business operations rather than efforts to launder money.
The safe harbor provision in Section 1957 provides that transactions necessary to preserve a person’s right to representation don’t constitute money laundering. This means if you used fraudulent PPP proceeds to pay attorney fees for your criminal defense, that’s not money laundering under Section 1957. While this safe harbor doesn’t apply to all professional fees—just attorney fees for criminal defense—it can eliminate certain charges if prosecutors allege that paying your lawyers constituted money laundering.
Challenging the “financial transaction” or “monetary transaction” element can defeat money laundering charges in cases where your conduct doesn’t meet the statutory definitions. Section 1956 defines “financial transaction” as involving financial institutions or affecting interstate commerce, while Section 1957 defines “monetary transaction” as involving a financial institution. Some transactions involving criminally derived property might not meet these definitions—for example, informal transfers of cash between individuals that don’t involve banks or institutions. If prosecutors charge transactions that don’t fit the statutory elements, we can move to dismiss those counts.
How Do Money Laundering Charges Affect Plea Negotiations?
Money laundering charges dramatically affect plea negotiations in PPP fraud cases because they give prosecutors enormous leverage through the threat of exponentially higher sentences, and because defendants facing dozens of money laundering counts with cumulative exposure of 100+ years are under tremendous pressure to accept plea offers that dismiss most of the charges in exchange for guilty pleas to a few counts. Understanding how prosecutors use money laundering charges in negotiations is critical to evaluating plea offers and making strategic decisions.
A typical negotiation scenario involves an indictment with multiple fraud charges (bank fraud, wire fraud, false statements) plus 15 to 30 money laundering counts based on various transactions you conducted with your PPP proceeds. The theoretical maximum exposure might be 200 or 300 years if all counts were sentenced to maximum terms running consecutively. Prosecutors then offer a plea agreement where you plead guilty to one or two fraud counts and perhaps one money laundering count, with all other charges dismissed, reducing your counts from 20+ to two or three.
On its face, this looks like a massive concession by the government—you’re eliminating 90% of the charges against you. But the reality is more complex. First, sentences for the counts you’re pleading to will likely run concurrently, so your actual exposure is determined by the highest count, not the sum of all counts. Second, the sentencing guidelines calculation includes all “relevant conduct” regardless of what counts are dismissed, so your loss amount and offense level might be nearly identical whether your convicted on three counts or twenty counts. Third, the plea offer typically requires you to waive appeal rights and accept a sentencing range that might not be much lower than what you’d face if convicted at trial on fewer counts.
However, there are real benefits to accepting plea agreements that dismiss money laundering charges even if the sentencing impact is limited. You avoid the risk of consecutive sentences on money laundering counts, which judges sometimes impose when defendants go to trial and lose. You receive the acceptance of responsibility reduction for pleading guilty, which typically reduces your sentence by 25% to 35%. You eliminate the risk of conviction on all counts at trial, which would result in substantially higher sentences. And you may be able to negotiate cooperation provisions or sentencing recommendations that further reduce your exposure.
The key to evaluating plea offers involving money laundering charges is having experienced counsel analyze your realistic sentencing exposure under different scenarios—what guideline range you face with a plea versus what you face if convicted at trial, whether the plea offer includes beneficial sentencing provisions like cooperation credit or recommendations for low-end sentences, and whether the dismissed money laundering charges provide real value or are largely cosmetic given how relevant conduct works in federal sentencing.
How We Defend Against Money Laundering Charges
When you hire us to defend you against money laundering charges in a PPP fraud case, we provide strategic, aggressive representation designed to get the charges dismissed, to win acquittal if the case goes to trial, or to negotiate the most favorable resolution possible if conviction is unavoidable. We understand that money laundering charges fundamentally change your case and create enormous sentencing exposure, and we know how to challenge these charges and minimize your risk.
We start by conducting a thorough analysis of the financial transactions prosecutors are characterizing as money laundering. We trace the flow of funds from your PPP loan through your accounts and examine each transaction to determine whether it actually meets the elements of Section 1956 or Section 1957. We identify transactions that were ordinary business expenditures, legitimate uses of business funds, or that lacked the concealment element required for Section 1956. We challenge the government’s characterization of your conduct and present alternative explanations that undermine their money laundering theory.
We investigate and present evidence of your lack of knowledge that the property involved in transactions came from illegal activity. We gather evidence showing you believed your PPP loan was legitimate—communications with lenders, accountants, or advisors; documentation of your efforts to comply with program rules; evidence that your business genuinely needed the funds and that you used them for business purposes. By establishing your good-faith belief in the legitimacy of your loan, we defeat the knowledge element required for both money laundering statutes.
We challenge the concealment element in Section 1956 charges by showing your transactions were transparent and ordinary rather than designed to hide anything. We present your business records showing you documented your uses of PPP funds, evidence that you conducted transactions through normal banking channels, and testimony explaining legitimate business reasons for any fund transfers or expenditures. We compare your transaction patterns before and after receiving PPP funds to show there was nothing unusual or suspicious about how you used the money.
We negotiate aggressively with prosecutors to dismiss money laundering charges as part of plea agreements. We present legal arguments explaining weaknesses in the government’s money laundering case—lack of knowledge evidence, failure to prove concealment, transactions that don’t fit statutory definitions. We emphasize that money laundering charges in PPP cases are often overcharges that don’t accurately characterize defendants’ conduct, and we argue for plea agreements that focus on the underlying fraud without stacking money laundering counts that exponentially increase sentences.
If your case goes to trial, we defend aggressively against money laundering charges through cross-examination of government witnesses, expert testimony about financial transactions and business practices, and presentation of your evidence and testimony. We attack each element prosecutors must prove and create reasonable doubt about whether your transactions constituted money laundering or simply represented ordinary uses of what you believed were legitimate business funds. We’ve successfully defended clients against money laundering charges and obtained favorable verdicts.
At sentencing, if money laundering convictions are unavoidable, we fight to minimize the impact through arguments for concurrent rather than consecutive sentences, challenges to loss calculations and guideline enhancements, and presentation of mitigation evidence showing why harsh sentences aren’t warranted. We advocate for sentences at the low end of applicable ranges and we pursue every available mechanism for reducing your prison time.
Money laundering charges in PPP fraud cases are serious and can dramatically increase your sentencing exposure, but they’re also charges that can be defended against and defeated with proper legal representation. If your facing money laundering allegations in connection with your PPP loan, contact us immediately for a confidential consultation. Don’t let prosecutors use money laundering charges to force you into accepting unfavorable plea agreements or to impose devastating sentences. Let us fight to protect your freedom and your future.