What is the difference between embezzlement and money laundering?
Embezzlement generally means taking money or property you were trusted with, such as an employer's funds. In Texas it is charged as theft. Money laundering is knowingly handling, moving, spending, or hiding money that came from a crime. Money laundering is not a type of embezzlement, but embezzled money can be the "proceeds" that a laundering charge is built on, so one case can include both.
- Texas has no crime named "embezzlement." It is prosecuted as theft under Penal Code §31.03, and sometimes as misapplication of fiduciary property under §32.45.
- Texas money laundering, Penal Code §34.02, covers knowingly dealing with the proceeds of criminal activity.
- In Texas, the dollar value sets the grade of all three crimes, from a misdemeanor up to a first degree felony at $300,000 or more.
- Federal law has separate embezzlement statutes and two laundering statutes, 18 U.S.C. §§1956 and 1957.
- Value, intent, and whether you had authority to use the money are central questions in these cases.
Embezzlement and money laundering can appear in the same investigation, but they are different crimes. This guide explains both under Texas and federal law. Peter M. Barrett has been licensed in Texas since 1994 and has tried more than 150 jury trials. He is a Past President of the Dallas Criminal Defense Lawyers Association (2005). Learn more about our Dallas white collar crime defense.
Embezzlement vs. money laundering at a glance
| Embezzlement (Texas theft) | Money laundering (Texas) | |
|---|---|---|
| Statute | Penal Code §31.03 (theft), sometimes §32.45 (misapplication of fiduciary property) | Penal Code §34.02 |
| Core act | Unlawfully taking control of property with intent to deprive the owner | Knowingly possessing, hiding, moving, spending, or investing the proceeds of criminal activity |
| Needs another crime first? | No. The taking is the crime. | Usually. Most forms require proceeds of "criminal activity," defined as a felony. |
| Mental state | Intent to deprive the owner (theft); intentionally, knowingly, or recklessly (misapplication) | Knowingly |
| Lowest grade | Class C misdemeanor, under $100 | State jail felony, $2,500 to under $30,000 |
| Highest grade | First degree felony, $300,000 or more | First degree felony, $300,000 or more |
How Texas charges embezzlement
You will not find a Texas statute called "embezzlement." Penal Code §31.02 says theft, as defined in §31.03, is a single offense that replaces several older offenses. Embezzlement is on that list, along with "receiving or concealing embezzled property."
Under §31.03(a), a person commits theft if he unlawfully appropriates property with intent to deprive the owner of it. Taking is unlawful if it is without the owner's effective consent (§31.03(b)(1)). Consent is not effective if it was induced by deception or coercion (§31.01(3)).
Some cases are charged instead as misapplication of fiduciary property under §32.45. A fiduciary includes a trustee, an executor, and an employee or agent carrying on fiduciary functions for a fiduciary (§32.45(a)(1)). The offense is intentionally, knowingly, or recklessly misapplying property held as a fiduciary, or property of a financial institution, in a way that risks substantial loss to the owner (§32.45(b)). "Misapply" means dealing with property contrary to the agreement under which it is held, or contrary to law (§32.45(a)(2)).
For more on how these cases are built, see understanding Texas embezzlement charges and how prosecutors prove embezzlement.
How Texas defines money laundering
Under Penal Code §34.02(a), a person commits money laundering if he knowingly conceals, possesses, transfers, transports, invests, spends, or receives the proceeds of criminal activity, or conducts a transaction involving them. It also covers funds the person believes are proceeds, and financing that is intended to further criminal activity.
"Criminal activity" means an offense classified as a felony under Texas or federal law, or punishable by more than one year of confinement in another state (§34.01(1)). "Funds" includes cash, checks, electronic funds, and digital currency (§34.01(2)). The state does not have to prove the person knew the specific crime that produced the money (§34.02(a-1)).
Texas grading and punishment by dollar value
For all three Texas crimes, the value of the property or funds sets the grade. The value ranges for theft and misapplication are the same. The money laundering list starts at $2,500.
| Value | Theft §31.03(e) and misapplication §32.45(c) | Money laundering §34.02(e) | Punishment range |
|---|---|---|---|
| Under $100 | Class C misdemeanor | No grade listed | Fine up to $500 (§12.23) |
| $100 to under $750 | Class B misdemeanor | No grade listed | Up to 180 days in jail, fine up to $2,000, or both (§12.22) |
| $750 to under $2,500 | Class A misdemeanor | No grade listed | Up to 1 year in jail, fine up to $4,000, or both (§12.21) |
| $2,500 to under $30,000 | State jail felony | State jail felony | 180 days to 2 years in state jail, fine up to $10,000 (§12.35) |
| $30,000 to under $150,000 | Third degree felony | Third degree felony | 2 to 10 years in prison, fine up to $10,000 (§12.34) |
| $150,000 to under $300,000 | Second degree felony | Second degree felony | 2 to 20 years in prison, fine up to $10,000 (§12.33) |
| $300,000 or more | First degree felony | First degree felony | 5 to 99 years or life in prison, fine up to $10,000 (§12.32) |
The theft ladder also has special rules, such as for prior theft convictions, not shown here (§31.03(e)).
When the grade goes up
Under §31.03(f), a theft graded from Class C through second degree is raised to the next higher category if it is shown at trial that:
- the accused was a public servant who got control of the property by virtue of that status;
- the accused got control of the property through a contract with government, or as a Medicare provider under contract with the federal government;
- the owner was an elderly individual or a nonprofit organization; or
- the accused set off a fire exit alarm or defeated a retail theft detector during the offense.
Subsection (f) does not list private employment as a reason to raise the grade. For misapplication, the grade goes up one level if the offense was committed against an elderly individual (§32.45(d)).
How the two crimes appear together
Money laundering needs money from a crime, and embezzled funds can be that money. In Texas, theft of $2,500 or more is a felony (§31.03(e)(4) to (7)), and a felony is "criminal activity" (§34.01(1)). So spending, moving, or hiding the money afterward can be charged as laundering. When conduct violates §34.02 and another law, the person may be prosecuted under either or both (§34.02(h)).
Federal law makes the link directly. Its list of "specified unlawful activity" for laundering includes bank embezzlement (§656), theft of public money (§641), and theft from programs receiving federal funds (§666) (18 U.S.C. §1956(c)(7)(D)).
Federal embezzlement and money laundering statutes
These are the federal statutes most tied to this topic, with the maximums in their text. Our federal crimes defense page explains more about federal cases.
| Statute | What it covers | Maximum penalty |
|---|---|---|
| 18 U.S.C. §656 | A bank officer, director, agent, or employee who embezzles or willfully misapplies bank funds | $1,000,000 fine, 30 years, or both (1 year if $1,000 or less) |
| 18 U.S.C. §641 | Embezzling or stealing money or property of the United States | Fine, 10 years, or both (1 year if $1,000 or less) |
| 18 U.S.C. §666 | An agent of an organization or government receiving over $10,000 a year in federal benefits who embezzles property worth $5,000 or more | Fine, 10 years, or both |
| 18 U.S.C. §1956(a)(1) | Knowingly conducting a financial transaction with proceeds of specified unlawful activity, for example to promote it or to hide the proceeds | $500,000 or twice the value, whichever is greater, 20 years, or both |
| 18 U.S.C. §1957 | Knowingly engaging in a monetary transaction over $10,000 in criminally derived property from specified unlawful activity | Fine (or up to twice the property involved), 10 years, or both |
Under §1956, "knowing" means the person knew the property came from some form of felony, though not which one (§1956(c)(1)). Section 1957 has no intent to promote or conceal. A "monetary transaction" includes a deposit, withdrawal, or transfer through a financial institution (§1957(f)(1)).
Why value, intent, and authority matter to the defense
Value. In Texas, value sets the grade and the punishment range. Amounts taken under one scheme or continuing course of conduct may be added together to set the grade (§31.09), and laundering has the same rule (§34.02(f)). Federal lines also turn on value: $1,000 under §§641 and 656, $5,000 under §666, and over $10,000 under §1957.
Intent. Theft requires intent to deprive the owner (§31.03(a)). Laundering requires that the person act knowingly (§34.02(a)). A bookkeeping error or a dispute about pay is not the same as intent to deprive.
Authority. Theft requires a taking without the owner's effective consent (§31.03(b)(1)). Misapplication turns on whether property was handled contrary to the agreement or the law (§32.45(a)(2)). Proof that you were allowed to use the money goes to the heart of the charge.
What to do if you are accused or an investigation starts
- Do not talk to investigators without a lawyer. This includes company auditors, bank investigators, and law enforcement.
- Preserve records. Keep emails, pay records, and approvals showing you were allowed to use funds. Do not delete or change anything.
- Do not move money. If funds are proceeds of a crime, transferring them can be a separate offense (§34.02(a)).
- Do not sign a confession or repayment agreement before a lawyer reviews it.
- Call a criminal defense lawyer early. Our office is at (214) 526-0555. See also who gets charged with embezzlement.
Common questions
Is money laundering the same as embezzlement?
No. Embezzlement generally means taking property that was trusted to you. Money laundering is knowingly dealing with the proceeds of a crime. Embezzled money can be the proceeds in a laundering charge, so one case can include both.
Is embezzlement a felony in Texas?
It depends on value. Texas charges it as theft. Based on value alone, under $2,500 is a misdemeanor, and $2,500 or more is a felony. Some facts, such as being a public servant, raise the grade one level.
Can you be charged with both embezzlement and money laundering?
Yes. Texas law allows prosecution under the laundering statute, another law, or both when the same conduct violates each. Federal law lists several embezzlement crimes as sources of laundered proceeds.
What is the punishment for money laundering in Texas?
It depends on value. It ranges from a state jail felony (180 days to 2 years) for $2,500 to under $30,000, up to a first degree felony (5 to 99 years or life) at $300,000 or more.
What is the difference between federal money laundering under 1956 and 1957?
Section 1956(a)(1) requires a listed purpose, such as promoting the crime or hiding the proceeds, and carries up to 20 years. Section 1957 covers monetary transactions over $10,000 in criminally derived property, has no concealment element, and carries up to 10 years.
The law this article describes, at the source.
- Texas Penal Code, Chapter 31: theft (§§31.01, 31.02, 31.03, 31.09)
- Texas Penal Code, Chapter 32: misapplication of fiduciary property (§32.45)
- Texas Penal Code, Chapter 34: money laundering (§§34.01, 34.02)
- Texas Penal Code, Chapter 12: punishments (§§12.21 to 12.35)
- 18 U.S.C. §656: theft, embezzlement, or misapplication by bank officer or employee
- 18 U.S.C. §641: public money, property or records
- 18 U.S.C. §666: theft or bribery concerning programs receiving federal funds
- 18 U.S.C. §1956: laundering of monetary instruments
- 18 U.S.C. §1957: monetary transactions in property derived from specified unlawful activity
This article is general legal information about Texas and federal law, not legal advice about your case. Reading it does not create an attorney-client relationship. Laws change, so confirm the current rule with a licensed Texas criminal defense attorney about your specific facts. Request a free, confidential case review.