BILL ANALYSIS Ó
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
AB 1395
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Analysis Prepared
by: Stella Choe / PUB. S. / (916) 319-3744