BILL ANALYSIS                                                                                                                                                                                                    



                                                                    AB 1395


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          Date of Hearing:  January 12, 2016
          Counsel:               Stella Choe

                         ASSEMBLY COMMITTEE ON PUBLIC SAFETY


                                  Bill Quirk, Chair





          AB  
                       1395 (Salas) - As Amended  January 4, 2016




          SUMMARY:  Adds to the list of crimes for which a person can be  
          prosecuted for money laundering.  Specifically, this bill  
          expands the definition of "criminal activity" to include  
          misdemeanor gambling violations for purposes of money  
          laundering.


          EXISTING LAW:  


          1)States that any person who conducts or attempts to conduct a  
            transaction within a seven-day period involving a monetary  
            instrument or instruments of a total value exceeding $5,000,  
            or a total value exceeding $25,000 within a 30-day period,  
            through one or more financial institutions with the specific  
            intent to promote, manage, establish, carry on, or facilitate  
            the promotion, management, establishment, or carrying on of  
            any criminal activity, or knowing that the monetary instrument  
            represents the proceeds of, or is derived directly or  
            indirectly from the proceeds of, criminal activity, as  
            defined, is guilty of the crime of money laundering.  (Pen.  
            Code,  186.10, subd. (a).)










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          2)Defines "criminal activity" for purposes of money laundering  
            to mean a criminal offense punishable under the laws of this  
            state by death, imprisonment in the state prison, or  
            imprisonment in a county-jail-eligible felony or from a  
            criminal offense committed in another jurisdiction punishable  
            under the laws of that jurisdiction by death or imprisonment  
            for a term exceeding one year.  (Pen. Code,  186.9, subd.  
            (e).)


          3)Provides that a person convicted of money laundering may be  
            punished by imprisonment in county jail for either a  
            misdemeanor with a maximum of one year or a felony and by a  
            fine of not more than $250,000 or twice the value of the  
            property transacted, whichever is greater. On a second or  
            subsequent conviction, the maximum fine that may be imposed is  
            $500,000 or five times the value of the property transacted,  
            whichever is greater.  (Pen. Code,  186.10, subd. (a).)


          4)Enhances the penalty of a person convicted of money laundering  
            as follows:


             a)   A mandatory additional term of one year to be served  
               consecutive to the punishment if the value of the  
               transaction or transactions exceeds $50,000 but is less  
               than $150,000;


             b)   A mandatory additional term of two years to be served  
               consecutive to the punishment if the value of the  
               transaction or transactions exceeds $150,000 but is less  
               than $1,000,000;


             c)   A mandatory additional term of three years to be served  
               consecutive to the punishment if the value of the  
               transaction or transactions exceeds $1,000,000 but is less  
               than $2,500,000; or










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             d)   A mandatory additional term of four years to be served  
               consecutive to the punishment if the value of the  
               transaction or transactions exceeds $2,500,000.  (Pen.  
               Code,  186.10, subd. (c)(1).)


          5)Prohibits lotteries, with exceptions for the California State  
            Lottery, bingo for charitable purposes, and charitable raffles  
            conducted by a non-profit, tax-exempt organization, and makes  
            the violation of those crimes punishable as a misdemeanor.   
            (Pen. Code,  319-329.) 


          6)Defines a "lottery" as any scheme for the disposal or  
            distribution of property by chance, among persons who have  
            paid or promised to pay any valuable consideration for the  
            chance of obtaining such property or a portion of it, or for  
            any share or any interest in such property, upon agreement,  
            understanding or expectation that it is to be distributed or  
            disposed of by lot or chance whether called a lottery, raffle,  
            or gift enterprise, or by whatever name the same may be known.  
             (Pen. Code,  319.)


          7)States that every person who deals, plays, or carries on,  
            opens, or causes to be opened, or who conducts either as owner  
            or employee, whether for hire or not, any game of faro, monte,  
            roulette, lansquenet, rouge et noire, rondo, tan, fan-tan,  
            seven-and-a-half, twenty-one, hokey-pokey, or any banking or  
            percentage game played with cards, dice, or any device, for  
            money, checks, credit, or other representative of value, and  
            every person who plays or bets at or against any of those  
            prohibited games is guilty of a misdemeanor punishable by a  
            fine not less than $1,000 or by imprisonment in the county  
            jail not exceeding 6 months, or by both the fine and  
            imprisonment.  (Pen. Code,  330.)


          8)Prohibits any person from using or offering for use any method  
            intended to be used by a person interacting with an electronic  
            video monitor to simulate gambling or play gambling-themed  
            games in a business establishment that (A) directly or  








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            indirectly implements the predetermination of sweepstakes  
            cash, cash-equivalent prizes, or other prizes of value, or (B)  
            otherwise connects a sweepstakes player or participant with  
            sweepstakes cash, cash-equivalent prizes, or other prizes of  
            value, except as specified.  (Bus. & Prof. Code,  17539.1,  
            subd. (a)(12).)


          FISCAL EFFECT:  Unknown.


          COMMENTS:


          1)Author's Statement:  According to the author, "In 2014, I  
            authored Assembly Bill (AB) 1439 to clarify that gambling at  
            sweepstakes cafes is illegal. Specifically, the bill made  
            internet gambling sweepstakes at these cafes an unfair  
            business practice and gave the Attorney General, district  
            attorneys, and city attorneys the authority to bring civil  
            suit to subject operators to civil penalties for violations.



            "On June 25, 2015 the California Supreme Court ruled in People  
            ex rel. v. Grewal that computerized sweepstakes found at  
            internet cafes are illegal under state gambling laws. In a  
            unanimous ruling, the court rejected arguments that the  
            sweepstakes are different from slot machines because they have  
            predetermined outcomes. 





            "Despite AB 1439 and the Grewal decision, new examples of  
            illegal gambling establishments have emerged. These operators  
            claim they are not offering gambling or sweepstakes, but  
            rather 'social gaming and mining.' While the business model  
            may have changed, the underlying nature of the games these  
            cafes are offering has not. 









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            "AB 1395 would provide law enforcement with the ability to use  
            criminal remedies when combatting egregious cases of  
            organized, illegal gambling. Specifically, the bill  
            incorporates violations of the gambling laws into organized  
            crime and money laundering statutes. This approach has been  
            used successfully in other states and will give law  
            enforcement the right tools to go after illegal gambling."


          2)Penalties for Money Laundering:  Under current law, money  
            laundering is punishable as a "wobbler," meaning that it may  
            be punished as a misdemeanor or a felony.  The crime of money  
            laundering requires the defendant to conduct a transaction  
            with money or funds knowing that the money or funds, rather  
            than the transaction, represents the proceeds of, or is  
            derived directly or indirectly from the proceeds of, criminal  
            activity.  The money or funds must be composed of at least $  
            5,000 of proceeds from criminal activity.  In order to be  
            guilty of money laundering, the defendant must either (1) have  
            the specific intent to promote, manage, establish, carry on,  
            or facilitate the promotion, management, establishment, or  
            carrying on of any criminal activity, or (2) know the monetary  
            instrument represents the proceeds of, or is derived directly  
            or indirectly from the proceeds of, criminal activity.  (See  
            People v. Mays (2007) 148 Cal. App. 4th 13; Pen. Code,   
            186.10, subd. (a).)


            The penalties may be enhanced with additional jail time for  
            felony money laundering if the transaction amount exceeds  
            $50,000.  (Pen. Code,  186.10, subd. (c).)  The defendant may  
            also be fined up to $250,000 or two times the value of the  
            property transacted, or on a second or subsequent offense,  
            $500,000 or five times the value of the property transacted,  
            whichever is greater.  (Pen. Code,  186.10, subd. (a).)


            This bill would authorize the use of the money laundering  








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            penalty scheme for unlawful gambling and lotteries, which are  
            misdemeanor offenses.  Currently, only felonies may be  
            prosecuted under money laundering.  In order to receive the  
            enhanced penalty for money laundering, the defendant must have  
            committed the underlying offense, here unlawful gambling or  
            lotteries, and in addition the elements of money laundering  
            must be proven.


          3)Argument in Support:  According to the Kern County District  
            Attorney's Office, the sponsor of this bill, "Based on the new  
            sweepstakes law and the Grewal decision, one might think that  
            the industry responsible for developing and promoting this  
            form of gambling would abdicate.  Unfortunately, however, they  
            have not been dissuaded.  To the contrary, the industry  
            continues to slightly modify their business model in an effort  
            to avoid the new sweepstakes law and the Grewal decision.  The  
            current models they are using were designed to give the  
            appearance that the games involve 'social gaming and mining'  
            or 'games of skill.'



          "Although the law enforcement community intends to continue  
            pursing these gambling promoters, current California law  
            offers prosecutors very limited tools with which to fight this  
            battle.  Specifically, all violations of the Penal Code  
            provisions regarding slot machines and lotteries are  
            misdemeanors, and misdemeanors only.  As it stands now, a  
            large, organized criminal enterprise engaged in operating  
            illegal slot machines or lotteries can only be charged under  
            the gambling statutes with misdemeanors.  Although the  
            operators could be charged for violations related to unfair  
            business practices, the prospect of paying civil penalties  
            does not seem particularly appropriate for egregious criminal  
            conduct and this far has only been partially effective.  We  
            strongly support the passage of AB 1395 because it would  
            enable prosecutors to pursue money laundering violations in  
            limited, severe cases of illegal gambling when the proceeds of  
            the gambling operations exceed $5000.00 within a seven-day  
            period or $25,000.00 within a thirty-day period.  We believe  
            that without this proposed legislative change, the industry  








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            responsible for developing and promoting this form of gambling  
            may very well continue to move forward with their operations  
            with the understanding that it is 'worth the risk.'"
          4)Argument in Opposition:  None.


          5)Prior Legislation:  AB 1439 (Salas), Chapter 592, Statutes of  
            2014, prohibited any person, when conducting a contest or  
            sweepstakes, from using an electronic video monitor to  
            simulate gambling or play gambling-themed games that offers  
            the opportunity to win sweepstakes cash, cash equivalent  
            prizes, or other prizes of value.


          REGISTERED SUPPORT / OPPOSITION:




          Support


          Kern County District Attorney's Office (Sponsor)


          California District Attorneys Association


          San Diego District Attorney's Office




          Opposition


          None













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          Analysis Prepared  
          by:              Stella Choe / PUB. S. / (916) 319-3744