Unlicensed Striver

United States v. Mazza-Alaluf, No. 09-3940-cr (2d Cir. September 22, 2010) (Sack, Raggi, Lynch, CJJ)

Mazza-Alaluf operated an unlicensed money-transfer business that, while based in Chile, sent millions of dollars through New York, Illinois and Michigan, without acquiring the appropriate state licenses. After a bench trial, the district court convicted him of violating 18 U.S.C. § 1960(a) and (b)(1)(A), which make it a crime to conduct an “unlicensed money transmitting business.” The statue defines this phrase as any such business that affects interstate or foreign commerce and “is operated without an appropriate money transmitting license in a State where such operation is [a crime] whether or not the defendant knew [that a license was required].”

On appeal, Mazza-Alaluf argued that the evidence was legally insufficient because the government failed to prove that his company was a “money transmitting business,” as referenced in 31 U.S.C. § 5313, which relates to “domestic financial institution[s].” But the circuit disagreed that this language applied to § 1960(b)(1)(A) prosecutions at all. The actual definition of “money transmitting business” is contained in 31 U.S.C. § 5330(d)(1)(B), but that section expressly provides that its definitions apply only for “purposes of this section.” And the court “declined to apply a definition from one statutory provision to another under such circumstances.”

Accordingly, the trial evidence supported Mazza-Alaluf’s conviction “without respect to whether” his business was a “domestic financial institution” operating as a “money transmitting business.” In any event, even if the statute of conviction applied only to “domestic financial institutions,” the district court’s finding that the business’ “substantial activities in the United States” made it a “domestic financial institution” was correct.

Mazza-Alaluf also argued, in the alternative, that he was not subject to the licensing requirements in New York, Illinois and Michigan because his business was “Chilean to its core.” The court disagreed. His firm conducted substantial money transmitting business those states, thus it had to be licensed in each.

First, New York: Mazza-Alaluf brought cash from Chile to the United States, deposited it into domestic bank accounts and transmitted it in New York. The relevant New York criminal statute clearly required a license for this. Illinois also has a statute requiring a license to “engage … in the business of … transmitting money.” Mazza-Alaluf deposited more than $200 million into an Illinois bank and transferred it out. Since the statute covers persons both located in and “doing business in” Illinois, the trial evidence supported the district court’s finding that he operated a money transmitting business there without an appropriate license. Finally, Michigan also requires anyone who “provide[s] money transmission services” there to obtain a license. Mazza-Alaluf ran about $42 million through a Michigan bank account, and it did not matter that the transactions were directed from Chile.

Mazza-Alaluf also challenged his forty-two month, below-Guideline sentence. Although he had completed the sentence and was awaiting removal, the court concluded that the challenge was not moot: Mazza-Alaluf was still in the country, might on some theory be able to reenter, and the district court could “presumably” shorten his term of supervised release on remand.

That said, however, the court affirmed the sentence. Mazza-Alaluf’s primary argument had to do with unwarranted sentencing disparities: he claimed that (1) a defendant in an unrelated, but arguably similar case received a sentence of one year of probation, and (2) that he would not have faced any federal criminal sanction at all if he had operated in different states. Here, however, the district court expressly noted that it had considered § 3553(a)(6) and its findings were not erroneous.