AUGUST 2, 2010, 1:01 P.M. ET

By Samuel Rubenfeld    Of DOW JONES NEWSWIRES 

Two recent decisions by the Sixth U.S. Circuit Court of Appeals have tightened requirements for prosecutors seeking to prove money-laundering charges, lawyers said.

The cases, U.S.A. v. Faulkenberry and U.S.A. v. Ayers, were appeals by two National Century Financial Enterprises Inc. executives who were convicted in March 2008 for plotting and executing a $2.4 billion health-care financing Ponzi scheme that unraveled in 2002, when the company ceased operations. The executives, Donald Ayers and Roger Faulkenberry, are serving 15 years and 10 years in prison, respectively, for money-laundering and conspiracy to commit money laundering, and concurrent five-year sentences for each fraud count, including wire and securities fraud. Both appealed the sentence.

The court struck down the money-laundering convictions July 28, and ordered the defendants to be resentenced. At the same time, the court found that to secure a conviction for money laundering, a prosecutor must prove a defendant didn't just design a transaction to conceal it, but that the purpose for concealment was to launder the money.

"Knowing how the Sixth Circuit interpreted this, [prosecutors] will be more careful in how they make their case to show there was in fact money laundering," said Kevin Ford, managing director of Regulatory Datacorp's risk-consulting arm. Ford was previously Goldman Sachs Group Inc.'s (GS) first U.K. money laundering reporting officer, and before that was a special assistant U.S. Attorney for the Southern District of New York.

Ford also said the effect of the decision will be limited compared with the recent landmark Supreme Court decision concerning "honest services fraud," a tool long used by prosecutors pursuing public and private corruption cases. In that decision, the Supreme Court pared back that law to only cover bribery and kickbacks, rather than the expansive way it had been used for the previous quarter century.

"That case is now overturning convictions of many businessmen and politicians," Ford said. "This one is much more limited."

Benjamin Rosenberg, partner at Dechert LLP, said the money-laundering cases applied another recent Supreme Court decision, Cuellar v. U.S., to financial crime. That case involved a Texas sheriff pulling over a man on his way to Mexico for driving erratically and a canine unit discovering a hidden compartment in his car containing $81,000 in cash. The Court found that it was not enough that the money was hidden to convict for money laundering, but that the defendant must know the purpose of transporting the concealed money.

'"How' one moves the money is distinct from 'why' one moves the money. Evidence of the former, standing alone, is not sufficient to prove the latter," wrote Justice Clarence Thomas in a unanimous opinion.

But, Rosenberg noted in an interview, that case was not a white-collar crime. "The question was how it would be applied in a white-collar case," he said. That issue has now been addressed by the Court of Appeals.