This page was written, edited, reviewed & approved by Brian LaVine following our comprehensive editorial guidelines. Brian LaVine the Founding Partner, 10+ years of legal experience as criminal defense attorney.
Key Takeaways
The three stages of money laundering are placement, layering, and integration, and each one leaves behind a different kind of evidence. Most people never think about those labels until a bank freezes an account, a subpoena arrives, or an agent asks why a deposit was split across two days. By then, investigators have often been reading financial records for months.
State and federal prosecutors both use this framework to explain a paper trail to a jury. LaVine Law Firm defends people accused of moving money the government believes came from criminal activity. You can reach our team for a free case evaluation before you answer questions about your accounts.
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Investigators, compliance officers, and defense lawyers use the same three-stage model to describe how criminal proceeds are cleaned. It grew out of international anti-money laundering work.
Real cases are messier than the model suggests. Funds may skip a stage, repeat one for years, or run through all three in a week. The stages describe a pattern, not a checklist prosecutors must satisfy.
Placement is the moment illegal proceeds first enter the financial system or a legitimate business channel. Cash deposits, prepaid cards, money service transfers, and high value purchases all belong here. Placement sits closest to the original conduct, which is why banks watch it carefully.
Reporting duties also tend to trigger at this stage. A teller who notices repeated deposits just below a reporting threshold may flag the account. Federal prosecutors in Texas once charged an officer with transporting roughly $700,000 he believed came from drug sales, an allegation aimed squarely at placement.
Layering covers the transfers, conversions, and entity structures used to put distance between funds and their origin. Wire transfers, asset resales, shell company transactions, and cryptocurrency conversions are common examples. The Texas money laundering statute defines funds broadly enough to include digital currency and stored value cards, so a chain of crypto transfers can support a state charge.
Layering is also where lawful conduct is most often misread. A contractor moving money between an operating account, a holding company, and a personal account may be following ordinary practice. The government's theory usually depends on showing a pattern with no business purpose other than concealment.
Integration is where money reappears as ordinary income, property, or investment returns. Real estate, reported business revenue, vehicle purchases, and loan repayment structures show up repeatedly. On paper the funds look clean, which is why prosecutors build these counts from documents rather than testimony about the underlying crime.
Tax returns, contracts, ownership records, and bank statements carry the weight here. When reported income does not match asset purchases, that gap becomes the centerpiece of the government's case.
Texas does not charge placement, layering, or integration as separate offenses. Section 34.02 of the Texas Penal Code makes it a crime to knowingly acquire, conceal, possess, transfer, or transport the proceeds of criminal activity, and to conduct, supervise, or facilitate transactions involving those proceeds. Conduct at any stage can fit inside those verbs.
The knowledge requirement is narrower than many people expect. Under Section 34.02(a-1), the state does not have to prove a person knew which specific crime produced the money. Proof that the person knew the funds were proceeds of some felony is enough.
One more provision deserves attention. When a peace officer, or someone acting at an officer's direction, tells a person that funds are criminal proceeds, the statute presumes the person believed it. That presumption is what makes reverse sting operations work.
Texas treats money laundering as an offense against property, and the value involved drives nearly everything. The same conduct can be a state jail felony or a first degree felony depending on the total.
Section 34.02 sorts the offense into several tiers based on the value of the funds involved, with felony terms served in the Texas Department of Criminal Justice:
These tiers turn on the value the state can prove, not the number of transactions charged.
Aggregation is what moves most cases up that ladder. When proceeds relate to one scheme or continuing course of conduct, the state may add their values together. If ten $35,000 transactions are proven to be part of one scheme or continuing course of conduct, Texas law may allow their values to be aggregated. A combined value of $350,000 would fall within the first-degree felony range.
Chapter 34 contains its own defenses, which is unusual. It is a defense that a person acted to facilitate a lawful seizure or forfeiture of property tied to a crime, or acted for another legitimate law enforcement purpose.
It is also a defense that funds were received as bona fide legal fees by a licensed attorney who did not actually know the money came from criminal activity.
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Many Houston cases are charged federally, and the exposure changes sharply when they are. Prosecutors in the Southern District of Texas routinely add laundering counts to indictments built around drug trafficking, health care fraud, or wire fraud.
Two statutes carry most federal prosecutions. Section 1956 of Title 18 reaches transactions conducted to promote a crime or to conceal the nature, source, ownership, or control of criminal proceeds. It carries up to 20 years in federal prison plus a fine of up to $500,000 or twice the property value, whichever is greater.
Section 1957 reaches a narrower act, knowingly engaging in a monetary transaction in criminally derived property worth more than $10,000. It carries up to ten years in federal prison and requires no proof of a design to conceal, which matters most at integration.
The reporting system that produces most placement stage evidence comes from the Bank Secrecy Act. Banks file currency transaction reports for cash transactions above $10,000, and other businesses file Form 8300 when they receive more than $10,000 in cash. Institutions also file suspicious activity reports when transactions look inconsistent.
Breaking deposits apart to stay under those thresholds is its own offense. Structuring carries up to five years in federal prison, and up to ten years when it occurs alongside another federal violation or as part of a pattern involving more than $100,000 in twelve months. Intent decides these cases, because depositing $9,000 is lawful unless the purpose was to prevent a required report.
These cases rarely begin with an arrest. They begin quietly, often months before anyone is contacted, and tend to follow a familiar path:
The distance between the first step and the last is the window where a defense lawyer can do the most work.
That arc has played out locally, including a federal case charging more than a dozen people with operating illegal game rooms and concealing the proceeds. If agents have contacted you, or your bank closed an account without explanation, call LaVine Law Firm at 713-965-7305 for a free case evaluation.
A money laundering defense is built transaction by transaction rather than through one sweeping argument. What the government calls a stage, we treat as specific acts that each need an explanation.
State and federal law both require a culpable mental state, and that requirement is where many cases turn. Our attorneys examine what a person actually knew about the origin of funds at the time of each transaction.
Prosecutors often respond with a willful blindness argument, claiming obvious warning signs were deliberately ignored. Owners of cash heavy businesses, family members handling transfers, and employees following instructions usually have reasons that have nothing to do with concealment.
Records are the most valuable asset in these cases. Invoices, contracts, loan documents, tax filings, and messages showing why a transaction happened can turn an apparent layering chain back into ordinary commerce.
Timing also limits the government. Texas prosecutors generally have seven years from the date of the offense to bring a money laundering indictment, while the default federal deadline is five years. Those deadlines can decide whether older transactions belong in a case at all.
Placement is usually the most detectable. Cash entering a bank triggers reporting duties and creates records tied to a specific person, date, and branch.
Yes. When transactions belong to one scheme or continuing course of conduct, the state may aggregate their value, which can raise the allegation to a higher felony level.
No. A deposit below the reporting threshold becomes a federal structuring offense only when the purpose is to keep the bank from filing a required report.
Texas generally allows seven years from the date of the offense. Most federal charges carry a five-year deadline instead.
Yes. Texas law expressly permits prosecution under the state statute, another law, or both, and federal prosecutors make their own charging decisions.
A single deposit can look ordinary until an investigator lines it up beside eleven others and calls the pattern a scheme. That is how a question about one transaction becomes a felony allegation covering years of financial history.
LaVine Law Firm defends people accused of handling the proceeds of criminal activity. Brian LaVine, our founding attorney, interned at the Harris County District Attorney's Office before building a criminal defense practice.
Our team reviews financial records, source of funds questions, and transaction history before anyone speaks with investigators. No lawyer can promise a particular result, though early review shapes which options remain open.
If your accounts, your business, or your transactions are being questioned, call 713-965-7305 or reach us through our contact page for a free case evaluation. Understanding the 3 stages of money laundering is useful, and having someone answer the government's version of them is what protects you.
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