United States v. Santos
Citation: 553 U.S. 507 (2008)
Facts
Benedicto Santos operated an illegal lottery in Indiana. He was convicted of federal money laundering under 18 U.S.C. § 1956, which prohibits transactions involving the “proceeds” of specified unlawful activity. The government argued that lottery receipts paid to winners and runners were “proceeds” of the illegal lottery, even though those payments were costs of operating the business.
Issue
Does the word “proceeds” in the federal money laundering statute mean gross revenues from a specified unlawful activity, or only profits (net revenues)?
Holding
A plurality held that “proceeds” means profits, not gross receipts. Because the statute was ambiguous, the rule of lenity required adoption of the narrower definition favoring the defendant.
Rule
The term “proceeds” in the federal money laundering statute (§ 1956) means profits — the net revenues of the unlawful activity — not all gross receipts. Applying the statute to gross receipts used to pay the ordinary costs of the criminal enterprise would criminalize too broad a range of conduct and violate the rule of lenity.
Significance
Santos is important both for limiting money laundering prosecutions (especially “merger” problems where the predicate offense and laundering are the same conduct) and as a leading example of the rule of lenity. Congress subsequently amended § 1956 to define “proceeds” as gross receipts for certain predicate offenses.