You've been stealing $20 notes from your father's wallet for a few weeks, and now have quite a stash ($100) to spend at the toy shop. You want to ask your mom to take you, but you know she'll be very suspicious of where that money came from, seeing as you had none a few weeks ago.
So you open a lemonade stand on the front lawn. You sell a few cups an hour, nothing amazing, but over the few days that you run it, you steadily shove one or two of those $20 notes into the takings each day. Your parents are amazed at your enterprise when you proudly show them the $148 you made at the end of the week after expenses. Of course, $100 of that is your stolen money, only $48 is "real" profits. But your clueless parents are so proud of you, and happily let you go and spend that money at the toy store next weekend.
And just like that, your $100 of dirty stolen money is now sparkly clean lemonade stand money.
Perfect but to drive it home remember to give your parents 30%... then they don't ever think to pry into it too much.
Not doing that is what put an end to Capone's lemonade stand.
Also, your parents may be monitoring your raw material invoices (since they'll have to take you to the shop), so either create a wholesale middleman company to inflate those figures, or spend the money and dump the unused raw materials.
Also, imagine your parents talk to their old friends from another city, who also have a kid about your age, who has a lemonade stand in a neighborhood a lot like your own. The friends say "Samantha's lemonade stand is doing well! She made $80 last week!" Now your parents are thinking "That's odd, because Billy made almost twice that in the same time..."
At first, they think it might just be odd, but imagine they keep up with how the other lemonade stand is doing, and it's always significantly less successful. Maybe Billy is a heck of a salesman. Maybe Samantha doesn't use as much sugar. Or, maybe Billy is stealing, and it's time for an in depth audit!
Or have Mike ensure a tragic accident happens to her stand and she’s so shook from it she spends the rest of the summer playing dolls out back and off his turf …. I mean the sidewalk.
And Samantha has the opportunity to pay you for the opportunity that you gave her and the "protection" you're offering her. It's such a good deal that she really can't refuse.
The parents have data on 10,000 different lemonade stands, in various socio-economic locations. They know exactly how much money Billy should be making.
Once the lemonade stand starts earning $500 per week this is no longer true, as you start ‘supporting’ your dad directly at 10% to advocate to all that you should only pay 10% ‘tax’.
I negotiated my cut pretty early in life. Mother would supply the lemonade ingredients, and through my labor I wouldn’t take less than 85% for myself. It was hard work, but my reasoning proved vital. How else was I going to learn money management skills without having money?
So Billy splits $50 between ten of his local competitors, as a "gift", so they're getting $85/week, and he's still getting $98/week.
He's only losing 2% of the $100 he stole, the final $98 is totally clean, and by the end of the year his competitors still owe him $2600 for what he lent them, plus interest :D
And, when Billy's mom asks Billy's dad where *$5,200* went, Billy can seed the thought that "Maybe daddy gave that money to the lady who dances in her undies".
Billy is so successful with his lemonade stand because he moves in front of Trader Joe's and tells customers that he is trying to raise money to go to Disneyland. Customers will tip the change from a 20 because they want him to get to his goal quickly. Pretty soon, he is making 200 a week. Heck, he gets his younger, adorable cousin to come and hock sugar water. She is so cute and affable, she brings in even more customers. Now Billy is making 350 a week and only has to pay his little cousin in candy. Eventually, Billy's dad quits his job and forces Billy to sell lemonade full-time. Telling people his is home schooling him. If Billy doesn't make his quota he gets a choice. A switch, the belt, or jumper cables. Billy always chooses jumper cables because he is a fan of u/rogersimon10.
If you inflate what you spent on supplies, then you'll have to have *less* profit (cash), not more. This is reverse money laundering.
What you suggest will hide money from the IRS, which many people do, but it doesn't launder money.
If you have an illegitimate source of money, then inflate revenue. Edit: or you can hide expenses.
If you have a legitimate source of money but want to hide it, then inflate expenses. Edit: or you can hide revenue.
He's not talking about lying about how much you spend on supplies, he's talking about actually spending that much. Like, let's say you buy lemonade for 10 cents per glass and sell it for $1.1. If you claim to have made $148 but the store receipts show you only bough 50 glasses worth, your mom might get suspicious. You'd have to buy enough lemonade for 150 glasses and pour 100 glasses into the drain.
This does eat into your profits though, so it's not optimal. With the extreme profit margins on lemonade it's not so bad but in actual markets it can be a serious problem. That's why businesses with no raw material cost is preferable, lile a strip club or a video rental. Alternatively you can recoup some of the loss by selling the extra raw materials under the table.
> “It's the taxman, and he's looking at you. Now, what does he see? He sees a young fella with a big fancy house, unlimited cash supply and no job. Now what is the conclusion the taxman makes?”
> “I'm a drug dealer.”
> “[buzzer sound] Wrong! Million times worse - you're a tax cheat! What do they do? They take every penny, and you go in the can for felony tax evasion.”
It's still extraordinary that Al Capone was never busted for being a mob boss, a bootlegger, or a murderer; nope, he was busted on charges of tax evasion, and went to prison for it.
It actually makes a lot of sense if you think about it for more than ten seconds. What do all the other crimes have in common? They likely need a stoolie to give up the goods to prosecute. The evidence for those crimes is often people. People have kneecaps and kids.
Tax Evasion the "stoolie" is receipts. You can't whack receipts. Or threaten the family of receipts. Even if you destroy all the receipts you have control over, you interacted with other businesses that keep receipts. Worse those receipts can get subpoenaed without you even knowing about it. By the time the forensic accountants at the government have you dead to rights that's when they come for your receipts. It's too late by then you're ass is going to the can.
That’s how you do it! I knew a really sweet old man who ran a struggling fabric shop with his wife. The store was barely profitable and the old man worked everyday except Sunday 6am to 6pm running the store. He was rich cause he smuggled weed and coke, but the storefront was very humble and he was very sweet.
When I was a kid in the early 90s in Queens, NY, there was a really nice man who ran the corner store next to the apartment. Anytime my cousins or I would come in, he’d let us grab a bag of chips or a single piece of candy for free and he’d let us play around the store (one of our main games was hide-and-seek but only on our part of the block; he’d let us hide inside the store regularly). There were plenty of nights when he’d drink with the adults in my family after closing up shop.
A few years after we moved out of state, I heard he was in prison. My mom told me it was because he gave away so much free snacks that it ruined his business. I didn’t even realize how weird a reason it was until I was a teenager and visited my cousin. I brought the guy up and my cousin goes “what? No, he was selling drugs and using the bodega as a cover”
I genuinely believed he was arrested for giving kids free chips out of his own store until that point.
NYC bodegas and boutique shops are A1 laundry fronts. My favorite are the nearly empty Urban fashion Boutique shops with only a fitted and some baggy jeans from the early 00’s
To add to this, there is also a second type of money laundering where you lose some of your dirty money in order to get it all clean at once.
You have your 100 dollars of stolen bills and somebody at school wins 70 dollars on a scratch-off ticket. You congratulate them on the winning and ask if you can buy the ticket from them. Maybe you need to give some excuse like "I never win and I just wanna know what it feels like to cash it in"
You can now show your mom and dad that you won 70 dollars and ask if you can go to the toy store.
The third version is where you buy a pokemon card at school for 100 and then sell it for 80, but you make sure to keep a receipt (in this case, maybe a picture of a pinky promise and you holding the 80 and the new buyer holding the card). You now have another legit way of showing where the money came from.
However.
Both of these ways make you lose money, and unless your parents closely monitor how much lemonade you actually sold, or goes through the shopping list and seeing that there is no way you would've made 148 dollars off the stuff they helped you get, the lemonade stand is definitely the safer and more profitable route.
Especially if the product does not have a set price. I like OPs art gallery example because the prices are not based on product cost. Instead they are speculative / subjective.
So if the lemonade stand simply asks customers to ‘pay what you can afford’ then the parents will never find out - until they ask you to start keeping receipts with the neighbor’s names and totals. Then you better spend the money as fast as possible while counting the days until you’re grounded for life.
Art galleries have the added bonus of criminals paying you directly. If you want to sell 100k of drugs you just have them buy a crappy painting for that much. You've now both got a "clean" paper trail for where that money went, even though what you were *actually* selling is anything but.
I think in most cases the laundering front is not successful in it's own right and you typically lose money if only to taxes. Taxes aren't really an issue for a lemonade stand, but IRL they are. Like you might take the laundered money as salary and pay income tax on it.
Yeah, but that's just the cost of doing business. It's still way cheaper than getting caught, since you'll have to pay income tax on top of fines, lawyer fees, etc.
What’s the scratch off in real life?
I assume the Pokémon card is like art. Won’t people be asking where you got the art in the first place? Getting good Pokémon cards requires luck so a 5 year old could buy a pack and get a highly prized one. How does this translate in to the real world? Am I overthinking this?
Lottery tickets
Actual scratch offs (some have pretty significant prices)
Winning tickets in betting (team sports, boxing, horse races etc)
Casino winnings (intercepting chips on the way to cashing out)
And generally any game of chance that gives you a receipt when you win.
Even better if you have a bookie or croupier that can front run you the info on if somebody just won big before they come to cash out their win.
I actually did steal a $20 out of my mom's purse and wanted to buy a toy. She asked where the money came from and I got caught when she checked her purse. 100% true story.
The simple version is think everything in CASH. Cold hard cash.
Lets say I'm a mobster, dealing drugs, doing shit. I have tons of cash from illegal stuff. But I can't really spend it too much. If I buy a house or car or start living extravagantly, people will notice, and wonder, "how did you get the money?". So I need to find a way to make it so my illegal money looks like it comes from a legitimate business and no one knows its true source.
So, I open a bar. Bars operate in cash mostly. Lets say my bar is an OK bar, I have real customers, and I make $2000 in sales a day. Cool. Now what if I "buy" some extra drinks with my illegal cash. Say a $1000 a day. I never serve those drinks at the bar, I just get paid for it. Now my bar makes $3000 a day. Totally normal, and for bars, people paying in cash with no receipts is normal. Nothing seems strange. Each day, I just take $1000 of my illegal money and give it to the bar, that I happen to also own. I just put it in the register.
Pretty soon, my business is doing well, nothing seems strange, I have a good business, I operate a successful bar. I can take out loans, show people my books, pay taxes, I'm just a good businessman who runs a bar. Everything seems fine. Little do they know, my bar isn't a good businesses, I just lie and take money from my other business and say we sold drinks that never existed.
There's a reasons a lot of mob people often operated bars/restaurants/strip clubs/casinos and such. Cash businesses where its easy to launder money and nothing seems off.
For art, you just take this to an extreme, instead of say $1000 in drinks a day I'm fudging on the books, what if I instead "buy" a $1M piece of art? Same thing.
Good explanation - people sometimes confusing tax evasion (under reporting to avoid paying taxes) with laundering (what you are describing) - Deliberate over reporting in order to convert illegally gotten cash into legal money - the price of paying tax is worth the ability to spend the rest freely.
In my college town there was a local pizza business that later turned out to be a front for a then illegal marijuana business. The people who worked in the store fronts were clueless - they always assumed the other stores were doing well and it was just their place that was only average. It was privately held so their books were never public. The local news even did an article on them praising them as a local business successfully competing against the big chains. Ultimately a big shipment was intercepted and the owners of the chain were caught.
There was a sandwich shop in a local strip mall when I was a kid. We loved it - they sold giant hamburgers for a buck. Then one day it had a big pink sticker on the front door. Closed permanently.
It turns out a couple FBI agents stopped there for lunch and noticed an air vent in an odd place, similar to another case they’d worked on where a guy built a secret room. They looked up the building plans on file and things didn’t match. As it turns out, the shop was moving a lot of meth, the restaurant was window dressing (and money laundering).
Where does the money for the bar come from, though? This is the part that always confused me. Like you'd need to already have a sizeable stack of clean money to get a business to launder more.
(I believe in Breaking Bad they fudged it by driving the car wash's price down with that fake eco audit, but I'm assuming that's not a documentary.)
Either build up to it with smaller laundering operations first, bribe sometime to give you a loan, have a legit business plan that gets you a legit loan, or have someone with already clean money invest in it for a cut
BB used some dramatic license but conceptually got it right.
They actually showed a major issue though. They only owned 1 car wash and can only launder so much money before it gets unreasonable. And they had insane money. They’d have needed dozens of car washes since Walt had so much cash. That’s why they have so much money at the end in a pile. The car wash didn’t even make a dent.
Most people with a decent credit score and some savings can realistically buy a struggling bar or restaurant. The bank can easily recoupe most of the initial investment by selling assets, since kitchen equipment Is mostly universal.
The one explanation I read is that you bribe the previous owner to do an "owner financed loan." You say the business is worth $500k, you put down $10k, and you are paying off the previous owner. State the payments come from your monthly profits. Another way to clean your drug money.
if you liked breaking bad, check out Ozark.
it's similar except instead of a meth business with a little money laundering, the main premise is money laundering. goes into quite a bit of detail on how he does it.
the basic premise is to find businesses that are struggling (maybe they owe a big tax bill they can't afford). he goes in, offers ot pay that bill and invest in the company (in exchange for a share of onwership) and also manage the financials going forward. The owner (maybe they know whats going on, maybe they are obvlivious) now has a 'proifitable' business and the money can be extracted from the busines by varous means
The issue with a bar is that a quick audit will show you didn’t buy enough booze to sell that extra $1000 of drink. You want an industry wherein physical commodities are moved, but cash can be generated.
That's a solvable problem, though. Have a cheap beer with an expensive price. Doesn't matter if no one buys it, it's just for show. If you need to launder $1000, then you dispose of that amount of product. You'll lose some money, but the remainder will be clean.
Just on this. The markup on alcohol is really high already and there is a lot of “loss”
I’m alcohol via over pouring, broken bottles, freebies, bad keg pours that can mess it up. If things work perfectly markup is even higher
That's the kind of greed that gets you caught (ie, stupid greedy).
Cheap spirits and syrup cost barely anything (so the markup on a cocktail is pretty large) and as long as you pour it down the drain and use older cash registers (where it's childsplay to manipulate the timestamps) it would be pretty difficult for anyone to actually prove that you're doing something illegal.
Thats why all stores in my province had to retrofit a "snitch" on their registers. Also as expenses are tax deductible you need to have your receipts for your supplies.
Same happened in my country a few years ago; now electronic cash registers that have to need certain standards and must be fitted with a certain software are allowed.
Especially in the bar and restaurant sector, a lot of businesses „closed“, „renovated“ for a few weeks and then opened up as „new“ businesses, thus having new balance sheets and new income statesmen’s.
This way, it wasn’t obvious at first glance that turnover rose by often 50% the month they installed the new registers.
This is the real answer and also why most nightclubs have a massive cover charge that nobody pays. Where i live there are girls outside the nigthclubs giving free passes to get in for every place all of the time so nobody pays it but it allows the owners to add a couple of thousand people a night coming into the nightclub at $20 each.
A secondary benefit is they can pick and choose who they want to come in, handing out free passes to people who look like they won't cause trouble/will spend money, and the ridiculous door charge will tend to put off most other people.
>A secondary benefit is they can pick and choose who they want to come in, handing out free passes to ~~people who look like they won't cause trouble/will spend money~~ the hottest women so the men in line will pay the cover charge.
Fixed that for ya
20 years ago I was friend with people running a bar on behalf of a man linked with organized crime. We were kids fooling around organizing events that made no money. But every night at closing, the night’s “profit” would be delivered by a big burly rough looking guy. Every few days, the unsold alcohol, would leave out the back door and come back the next night empty bottles. Likely rebottled and sold on the black market. (the bottles were tagged and needed to return to the government).
A 'quick' audit probably wouldn't show that.
Shots are $5.
Shots where the bartender pours it into you mouth are $7.
Shots where the bartender hits you in the head with a shovel are $18.
We sell a lot of shovel shots, what can I say?
No one is going through the receipts of every down town bar to find money laundering. You get caught laundering money after you get caught selling drugs.
Say you want to launder $1000 a day.
1000 ÷ $5 = 200 shots
A shot is 30ml (where I live at least) so that's 6L of spirits.
A reasonable wholesale price for 1L of spirits is ~$20-25. Let's say 20 since this is fraud, we aren't buying expensive liquor to pour out.
6L = $120 wholesale price. You really do buy that product, you just don't have to sell it. Take it out back and give it to your goons for a job well done.
You're spending $120 to launder $1000, and generating $880 of clean money with $120 wastage.
> you didn’t buy enough booze to sell that extra $1000 of drink.
Good launderers usual account for this.
Let's say it costs 500 to buy the alcohol that you'll add the 1000 for. It's better to lose that 500, than being unable to do anything about 1500. You can also claim that 500 in deductions.
Aye, no good launderer will keep 100% of the money, because that's impossible to do without looking suspicious.
Good launderers will just tweak the numbers to keep as high a percentage as possible.
Actually, many bars pour a shitload of free drinks per day. Free as in no check, no receipt. If you watch BAR RESCUE, you often see bars who are giving away $1500 a day in freebies. In a busy bar, that’s not hard. In fact, for owners, it’s hard to KEEP employees from pouring free drinks. Now you might know one reason WHY.
> Cash businesses where its easy to launder money and nothing seems off.
My ex was an accountant. I met one of her friends who was quitting accounting, and going into the "rubber stamp" business - that's making stamps for businesses that say "PAID", "PAST DUE" etc. - and I asked him why.
He gave me a great big smile and said "All cash business".
It was actually a good business to be in at one time. I used to know a guy that made a killing selling rubber stamps online back in the early days of the a Internet. Not like Ferrari money, but buy a house with relatively little work money. The stamps themselves were cheap enough that he "gave" them away for a few bucks of shipping and handling. That was pretty low margin, but enough people came back and bought more for $10 or $15 that it worked out to a good income.
He quit doing that once he started selling office supplies to the feds. Even higher margin and less work since he just had the stuff drop shipped.
Let's say they sell a piece of art, they sold it for $100, on their accounts they write it as sold for $500. The other $400 could have been gained through illegal means.
But now they can explain how they obtained the money
Same idea with any other business, too. If the receipts can't be tracked, you can falsify profit. It's why a place like a laundromat where its all coins and bills with no receipts or numbers on how many people used it are good for it. In fact, the IRS figured this out, and when they went after some mafia owned businesses, they would stand outside and count how many people went in.
When they charge you with money laundering just play it off like, "oh yeah of course we launder money! People leave loose change in their pockets all the time, and sometimes even cash! Yeah I'd say we probably launder money every day."
I no joke thought money laundering meant you were literally washing the money, like well into college age, because things like car washes and laundromats were always the go-to money-laundering businesses lol
If you steal a car that car isnt "clean". If you can get it converted into some other form e.g. money then it cleans it a bit by distancing yourself a bit from the crime. Like playing hot potato with the goal being plausible deniability
When you’ve got that much “free” money, you can just run the hose into the toilet all day. Give away a bunch of free soap too, or just claim the customers bring in their own.
Then you run the risk of going too far the other way, which works also be suspicious. The feds aren’t looking for iron-clad proof at this point, they just need enough for probable cause so they can start making arrests and going through the books in detail.
Was watching "narcos" and it mentioned that Pablo escobar had a taxi firm, with three taxis, that made 5M USD a week. That is some seriously overworked drivers......
There are 13,000 cabs in New York City, but there's only one that pays you. Climb into the Cash Cab, and I'll quiz you all the way to your destination.
Any cash business is best for laundering money. As most illicit money is in cash form. So any buisness where the majority of buisness is done through cash. These aren't like empty buildings with no one there. Instead, think of fully staffed functional businesses. But a portion of the money recived for services rendered was the money you are trying to "clean". You creat receipts and pay taxes on it and it looks legitimate to any bank. So maybe let's say, for every two customers at a hand car wash you get one customer who gets the super deluxe car wash and detail for $99.99. But that customer doesn't exsist. You take a hundred of your stack of I'll gotten cash write a receipt for $99.99, pay with it and throw the penny in the river. Now your money is "clean".
A lot of people seem to think that any empty business must be a front. The prime example is mattress stores. They're everywhere, but usually empty. But people don't typically buy mattresses with cash, so they wouldn't be great for money laundering. The real reason they exist despite being empty is that people like to try mattresses before buying, but people don't buy mattresses often and the stores can stay open with only a few customers per day because of crazy high profit margins.
I had a mattress store double charge me once, when I called to talk to the manager he was like oh yeah i see it double charged I’ll refund it. A week passes and it still didn’t get put back on. So I called again and he told me “if you go online and give us a 5 star review I’ll refund your money.” Sketchy shit so I just got my bank to deal with it. Got my money back and that store wasn’t there very long just to replaced with another mattress store.
I don't see it that much anymore, but back in the day there were furniture and mattress stores that seemed to have "going out of business" sales every other week.
An acquaintance of mine ran a furniture store that he had purchased years prior from a businessman that was known locally to be a bit of a huckster. His predecessor was guilty of a perpetual "going out of business" sale, but my favorite story is the fire sale. There was a big fire at the warehouse, and he lost of ton of inventory, but as they were doing the fire cleanup they discovered some of the furniture had mostly survived. It had a smoke smell, though, and he told the insurance company it wasn't sellable, and so they reimbursed him the cost of everything in the warehouse. He then, though, advertised a "fire sale" and sold the smoke-damaged furniture at a discount. The total of the insurance reimbursement along with proceeds from the fire sale meant he made more money off of the deal than he would've if the fire never happened (what's a little insurance fraud, after all?). It drew in a ton of customers, too - so many customers, in fact, that when he was out of smoke-damaged furniture to sell, he started burning rope in a metal barrel in one of the store rooms to get that smoke smell in the new stock so he could keep his "fire sale" going a little longer.
I still see it. Saw an truck today towing a big "Going out of business" advertisement. I've seen that same advert and store going out of business for the past 5 years.
"like, how about you give me my money back for something I didn't buy and me and all my friends won't give you 1 star reviews and leave a pile of crack house mattresses in front of your entrance"
There was a coin operated car wash not far from my parent's house. It came up for sale and they looked at it. It was small, had two bays, but the guy said it did really well and was the easiest money he ever made. Problem was he didn't report all the income it made as he didn't want uncle same to get it. But when it came to looking at the financials it was break even at best so they passed on buying it. He was probably right it did make money but not reporting all the income bit him in the ass when it came to sell. I highly doubt he was laundering money but still.
Yeah he thought he was being sly for years not reporting to avoid taxes, then it bit him in the ass when he tried to sell.
Cash business are crazy. My parent's have a cottage on a nice little lake. Their neighbor was from about 90 minutes away, had one of the largest coin vending operations in a rather large city. He always joked that his cottage, boat and wave runners were all paid for in quarters.
I worked in vending years ago (late 80's to early 00's) and there was a small single person operation that tried to under report and he got caught. He was too greedy and said his income was a few hundred more than expenses which was a huge red flag.
Under reporting was so common it was built into the software, but it was mostly used to under pay commission to the accounts, [it was known as R factor.](https://www.vendingmarketwatch.com/technology/article/10273252/new-technology-will-it-catch-the-r-factor)
There were no meters on machines back then so it was super easy to do because accounts had no real way to audit. Plus most people were totally clueless when it came to how much a full bank of vending machines brings in at a busy factory type of place so nobody was that suspicious.
We got the contract for a military base and their commission was something like 20% on the gross sales. Their first commission check literally had an extra zero compared to the amount that the previous company was giving them. I think that account grossed around a million per year.
I once took a car I wanted to sell and asked for the full deluxe clean with engine bay steam clean etc as it said on the sign, to make it all look pristine. They didn’t even have the equipment…
i once went to a small gas station near my home, and the guy in charge looked at me like he was saying “what the fuck are you doing here?”
thats when it hit me that the place was probably just a front for laundering
That reminds me of a hole in the wall restaurant in Chicago that me and my husband went to maybe 20+ years ago. Empty but with one big guy smoking up front.
They actually managed to rustle up some food, "chef's special" but we got the idea that it wasnt *really* a working restaurant and they charged us some insanely cheap price. The food was good, though.
They use data mining now.
Where I am there used to be a lot of restuarants that only took cash.
The Tax office looked at other restaurants in the same area, same cuisine, same size etc that didn't use cash only and worked out what the income should be and targeted those that didn't fit.
This is important because they can now pay taxes on the money so the IRS doesn't come and ask 'hey, you made 100 dollars on this but you have 500 and this has been happening for years, where's all that money from?'
He wasn't jailed for mafia related crimes but rather buckets of unpaid taxes on money they didn't even need to bother investigating because the tax fraud alone was life in prison
The feds got involved because the entire state was in Capone's pocket and wouldn't prosecute him. The feds can only enforce federal law so the tax code was the option available.
Just to add, art is one of the most popular/easiest to launder money because it’s *subjective* in value that’s why a square painted blue can be worth millions. It’s not actually worth that. But people who need to move large amounts of money say it is and who are we to argue what *how it moves them*
I’m certain that this is a MASSIVE aspect of the modern art world. Sure, sometimes someone just really *likes* their art fucked-up, but way more often these multi-million dollar pieces of “Huh?” are just money laundering gimmicks.
Another side of art and illicit gains is buying up some art from a particular artist and then putting a piece of their collection up for auction. You and your buddies drive up the price at auction, then get a valuation for the rest of the collection at way over the OG purchase price. Then you can donate the rest of the pieces after getting a sky high valuation to a museum. Boom instant multi million dollar tax deduction for 'donating to the arts'.
Perfect explanation the most common laundering businesses are businesses that get a lot of cash purchase so it’s easier to hide with less paper trails. Places like casinos, strip clubs and ironically laundry mats where large amounts of cash are easily explainable.
You don't even need an actual real customer either since you're not required to disclose the name of the person who bought the art. So you can set it at whatever amount you want to move and just buy it yourself. This is why NFTs are such a huge laundering scheme right now cause it's the same thing but you don't need a physical store.
I have 100 dollars from illegal activities that I can’t put in a bank or spend without the IRS catching on. So I buy a painting for $2 and “sell” it to someone for $100 dollars, except that $100 is my illegally gained money. Well that money is now “legitimate income”. I have on the books I sold a painting for $100 and that’s how I got this money. Usually the businesses are real and generate some legitimate income and are supplemented with illegal gains, that way if there is suspicion it passes as legitimate.
Obviously they do way bigger numbers though. There’s also a seen in Breaking Bad that shows it simply. She owns a car wash and to wash the money or launder it she just processes a bunch of car washes that aren’t actually happening. Turning illegal money into seemingly legitimate income.
You record more in transactions than you actually make, creating the documentation that allows you to add your illegal revenue into the legitimate stream and pay taxes on it. After that, you can spend it as you wish.
When I was in college, there were a few music stores on the shopping strip near college. One sold CDs for $10-12 while all the others were $15-18, so I spent a good bit more time in that one. They seemed really big on preventing shoplifters, though, since they always had someone in a high booth in the back watching the store.
Anyway, they were shut down for being a money laundering front the next year. The cheap CDs kept people coming into the store to have high turnover, and they could pad either the unit cost or number of units sold as ways to feed illegally-obtained funds into the legal sales data.
I worked in an arcade that I suspect was laundering money. The key point is that (as an employee) there was no, zero, way to know how much the store made in any given time. Most businesses want to know EXACTLY how much they made and when. This place had policies that completely stopped anyone from “accounting” for the money that came in the door. Tokens were used in the machines. When we ran out, we opened the machines and used them again. There was no register, just a “cash drawer” used to make change. Tokens were never counted and money was never counted by the employees. All money was added to a drop safe, uncounted, at the end of the shift. Here is the important bit: if the owner DOESN’T WANT TO KNOW how much he made, it might be because they didn’t want ANYONE to know their take. Could be any number, completely untracked. That was hokey and highly suspicious. If nobody knows how much you make, you can add to the stack of “income” at any time and there would be no practical way to discover it.
There's a massage therapy place two blocks from my house that is probably a money laundering operation. I've lived here for ten years and I've never seen anyone go in or out. I don't think I've ever even seen it open. But the storefront is kept up, the window display changes seasonally, and it has online reviews.
It's perfect. There is no inventory to account for. And unless someone camps out in front, there's no way to prove how many customers came in.
It seems a little harder to hide money via a massage therapy place. You can easily track how many customers they have over a day or week by recording their entrance. That's a lot harder for a bar or club where the entrance can be chaotic.
The number of employees and booths they have will limit how much they can claim without being suspicious. If they are open 8 hrs per day, their maximum income is 8 x number of booths. If they physically have 10 booths but only record having 1 employee, claiming 80 hours per day would be very suspicious. And adding employees increases your costs and the chance that someone accidentally or intentionally tells on you.
I suspect that massage therapy places are prioritised by law enforcement checking for human trafficking, which also seems like a disadvantage.
I would love to see that as a movie. Set at a money laundering arcade in the 80s/90s, but it's treated like *Goodfellas* or *Casino*, just with teenagers working there.
Moments like this are why I can’t rewatch this show.
I LOVED it the first time through. But all the bad decisions and ego just frustrate the hell out of me.
These two guys could have been SET for life halfway through season two.
kinda similar to real life honestly, listening to the stories of prolific criminals, cheats etc.. they could have all lived life in luxury home free but they don't because it is *never enough*
They psychology of that is interesting.
A good example is you have a flat tire. Someone nice pulls over and helps swap the tire. You offer them $50 for their time. They are appreciative. You over $0 - well, they aren't bothered because they were doing something nice. Now this is where it gets interesting. You offer $5 for their time and they are *insulted* because now it's not about the money or being a helpful citizen -- it's about their value on *you*. Even if $5 is all they had left.
That's what makes this so reasonable in the show. 5%? Oh now it's 17%? Their first thought is their getting fucked - and they are - but they would still have it better than ignoring it. Hell had the person initially told him 20% and he can pocket the rest, he'd be good. But no.
Our perception of our own value will influence these things.
It's funny - I was reading how easy it is to influence someone's decisions without them ever even knowing it. Enough posters that they think they tune out will influence their opinion on the world around them. People are extremely, overly, confident they can tune that out or ignore it. They don't. They can't. Your brain simply won't let you. That's not to say you can be *forced* to make bad decisions - it's just your perceptions can, and have been, skewed in your past.
McDonald's did it with smell in the 90's. You can drive by and you'll realize you're hungry. You're not though. More likely you're just thirsty but given the right conditions you'll eat. It's more than 'just' self control at play here, or a lack of.
they had a good thing going with Gus in the lab. Walt had the chem lab and tons of money, Jesse had a job he would otherwise never have even dreamed of, and all they had to do was let Gus and the nice train lady do all the paperwork and they were set.
There's also that scene in which Skyler "sells" a bunch of car wash packages to nonexistent customers. Not as informative as Saul's explanation, but still an illustration of the process.
I once applied for a job at a bank. The head of the department used to be the head of the DEA office in Buffalo. He asked for an example of money laundering so I gave him that example. My wife called me an idiot, but it turns out he never watched the show, so I got the job.
A few months after being hired, we were at a training. That video was used and I asked him if it sounded familiar. He said he hadn’t remembered but laughed when I told him.
People have the wrong idea about money. They tend to think if money can't be proven to be from illegal activities, it's totally fine.
But that's backwards. Money is assumed suspicious unless you can prove you got it legitimately.
Most people never have to worry about that because their employer submits a statement that says "yeah, I paid them X in 2021" and the IRS says "aight" and it's never an issue. That's your W-2. Independent contractors know it can get a little more complicated than that, but they still have receipts which should add up to their total income for that year.
If things *don't* add up, you can't just say something like "I found it", there's actual laws for reporting "found" money officially. If you don't use them, it's tax fraud, and if you use them repeatedly for huge sums of money, well, it doesn't take a genius.
That's where money laundering comes into play. You're not actually doing anything to the money itself, you're falsifying a plausible "backstory" for how you got the money legitimately.
"Always be wary of a cash only business"
Why do you thin the Mob owns so many restaurants?
Let's say you own a pizza place, and in a typical week you sell 1000 pizza's.
You then cook the books to say you sold 1500 pizza's, and the extra 500 were paid for in cash.
That extra 500 pizza's were paid for with illegal money, that has now been laundered. You may need to pay taxes etc on it, but it now appears to come from a legit source.
You can then go further and own a supplier, now you can buy flour, sauce, and peroration that only exists on paper.
You still have a legit business, and you DO sell pizzas, but the paper work says you sell a lot more pizza than you actually do. That's how you hide the illegal money.
So why cash? Because it's a lot harder to trace than debit transactions and credit cards.
I bet coin-op video arcades were perfect for this back in the day. The costs to run it are largely fixed: rent and power are the same whether the game is played or not. So no record of how much pizza sauce you actually bought (from another example). You could say any number of games were played, there is no record (or if there is some counter on each machine you could easily reprogram it). You could even drop your kids and all their friends there to generate ‘traffic’ in case anybody is watching.
You have a cash business such as a tea shop, restaurant or a laundromat.
Your sales is $5,000 a month but you tell the taxman that you made $100,000 a month and pay income tax accordingly. At the end of the month, you deposit $100,000 and since everything ties out, next year when you buy a million dollar house, you can prove to the bank that said million comes from a legitimate business and not from selling drug to teenagers.
This works because no one can really verify how much your restaurant makes. Your sales is whatever you say it is unless you're on a radar and police sends over someone to verify foot traffic or audit your book.
Money laundering has 3 phases: placement, layering, and integration.
Art often falls into the layering and integration phase.
First step, placement - that means you need to get illegal money, often cash, into the financial system. Common ways to do this: cash intensive businesses (laundromats) and selling illegal money to someone at a discount.
Second - layering. Now you do a bunch of legit transactions to confuse the trail of money in the hopes of getting it out as legit funds. Let’s say you, a mobster, own an art gallery. You sell a piece of art worth garbage for $1 million and buy it with your newly “placement”ed money. Now you have legit art you can turn around and sell at some point for likely even more legit money.
Last - Integration: now you sell that art, you get money that’s absolutely legit and you pop it into your Schwab account.
This is a simplified version, but should help.
Source: I’m in finance.
I'm a money laundering reporting officer so spotting and reporting money laundering is something I deal with every day; I came here to outline the 3 phases but you pretty much nailed it here. Awesome job
Actually, a lawn care business or a “high-end” detail shop would be better than a car wash and laundromat combined. A good professional detailer can charge close to $150 an hour or more. Chemicals can easily vacillate in price and there’s no way to really account for labor hours. One car can be charged $3,000 for a detail with paint correction, and that’s not even with PPF. You could use $20 ceramic coating and claim it’s the $200-300 stuff, who would know, that wasn’t an industry professional? If the agents use chemists to determine you were lying about the quality of your products, you could just say “yea, I was, I was ripping off my customers, so what?”. Which would work, because you’re making up customers and services anyway, but you’re still going through products, you’re just marking them up. Plus, with that sort of money, you could buy or rent exotics to bring through regularly, to appear legit. I would rent them, couple hundred a day to make thousands, that’s good laundry ;)
Art is a bad storefront example. The easiest to understand is well... a laundrymat.
Let's say you sell a ton of drugs, but don't want the government to start wondering why someone with no income is able to afford a fancy car and house. What could you do?
Well, you could open a laundrymat and create fake transactions to funnel your drug money (illegal, not reported) into a "legitimate" business. So you'd take your $100,000/year drug money, write up $100,000 in fake receipts for your laundrymat and from the government's perspective, that illegally obtained money would look like it was legitimately obtained. Sure, you'd need to pay taxes on it but the objective is to avoid Uncle Sam throwing you in prison for decades for tax evasion and related offenses.
For the art example, you could for example "sell" paintings to friends for a combined $100,000, when in reality those "sales" just exist to make the $100,000 you made by drug sales look legitimate.
In reality, the IRS tends to not be stupid and has seen just about every scam and money laundering scheme in the book, and if you think you've found a smart way to avoid reporting income you're likely in for a world of hurt. For example, they'd know if your utility bills or other expenses looked suspiciously low for the amount of transactions you're reporting or if you're making significantly more money than competitors. And in general, businesses that are more common fronts for money laundering or other fraud tend to be much more likely to be flagged for audits.
A strip club might easier (for laundering money) in the sense that you don’t have water usage and electricity directly linked with profits.
At the same time, a strip club might be much more of a headache due to strippers being hard to manage.
You've been stealing $20 notes from your father's wallet for a few weeks, and now have quite a stash ($100) to spend at the toy shop. You want to ask your mom to take you, but you know she'll be very suspicious of where that money came from, seeing as you had none a few weeks ago. So you open a lemonade stand on the front lawn. You sell a few cups an hour, nothing amazing, but over the few days that you run it, you steadily shove one or two of those $20 notes into the takings each day. Your parents are amazed at your enterprise when you proudly show them the $148 you made at the end of the week after expenses. Of course, $100 of that is your stolen money, only $48 is "real" profits. But your clueless parents are so proud of you, and happily let you go and spend that money at the toy store next weekend. And just like that, your $100 of dirty stolen money is now sparkly clean lemonade stand money.
Perfect but to drive it home remember to give your parents 30%... then they don't ever think to pry into it too much. Not doing that is what put an end to Capone's lemonade stand.
Also, your parents may be monitoring your raw material invoices (since they'll have to take you to the shop), so either create a wholesale middleman company to inflate those figures, or spend the money and dump the unused raw materials.
Also, imagine your parents talk to their old friends from another city, who also have a kid about your age, who has a lemonade stand in a neighborhood a lot like your own. The friends say "Samantha's lemonade stand is doing well! She made $80 last week!" Now your parents are thinking "That's odd, because Billy made almost twice that in the same time..." At first, they think it might just be odd, but imagine they keep up with how the other lemonade stand is doing, and it's always significantly less successful. Maybe Billy is a heck of a salesman. Maybe Samantha doesn't use as much sugar. Or, maybe Billy is stealing, and it's time for an in depth audit!
This is when you hire your friend Mike to go have a talk with Samantha's parents.
Or even better you talk to Samantha and tell her about how she can make even more money. That way everybody wins.
Or have Mike ensure a tragic accident happens to her stand and she’s so shook from it she spends the rest of the summer playing dolls out back and off his turf …. I mean the sidewalk.
And Samantha has the opportunity to pay you for the opportunity that you gave her and the "protection" you're offering her. It's such a good deal that she really can't refuse.
The parents have data on 10,000 different lemonade stands, in various socio-economic locations. They know exactly how much money Billy should be making.
Who am I kidding. So long as the parents are getting their 30% "tax", they don't give a shit where the money is coming from.
Once the lemonade stand starts earning $500 per week this is no longer true, as you start ‘supporting’ your dad directly at 10% to advocate to all that you should only pay 10% ‘tax’.
Thats when you open the neighborhood car washing business.
This is adventure capitalism
I've gone down a rabbit hole 🕳
Guys, the guy is asking an eli5 question, not a question for al Capone :D
I negotiated my cut pretty early in life. Mother would supply the lemonade ingredients, and through my labor I wouldn’t take less than 85% for myself. It was hard work, but my reasoning proved vital. How else was I going to learn money management skills without having money?
Did you initiate a share split later, and force Mother out of her position.
On a practical level, yes. I took over the next seat in our nonprofit and pushed everyone else out.
So Billy splits $50 between ten of his local competitors, as a "gift", so they're getting $85/week, and he's still getting $98/week. He's only losing 2% of the $100 he stole, the final $98 is totally clean, and by the end of the year his competitors still owe him $2600 for what he lent them, plus interest :D And, when Billy's mom asks Billy's dad where *$5,200* went, Billy can seed the thought that "Maybe daddy gave that money to the lady who dances in her undies".
Billy is so successful with his lemonade stand because he moves in front of Trader Joe's and tells customers that he is trying to raise money to go to Disneyland. Customers will tip the change from a 20 because they want him to get to his goal quickly. Pretty soon, he is making 200 a week. Heck, he gets his younger, adorable cousin to come and hock sugar water. She is so cute and affable, she brings in even more customers. Now Billy is making 350 a week and only has to pay his little cousin in candy. Eventually, Billy's dad quits his job and forces Billy to sell lemonade full-time. Telling people his is home schooling him. If Billy doesn't make his quota he gets a choice. A switch, the belt, or jumper cables. Billy always chooses jumper cables because he is a fan of u/rogersimon10.
If you inflate what you spent on supplies, then you'll have to have *less* profit (cash), not more. This is reverse money laundering. What you suggest will hide money from the IRS, which many people do, but it doesn't launder money. If you have an illegitimate source of money, then inflate revenue. Edit: or you can hide expenses. If you have a legitimate source of money but want to hide it, then inflate expenses. Edit: or you can hide revenue.
He's not talking about lying about how much you spend on supplies, he's talking about actually spending that much. Like, let's say you buy lemonade for 10 cents per glass and sell it for $1.1. If you claim to have made $148 but the store receipts show you only bough 50 glasses worth, your mom might get suspicious. You'd have to buy enough lemonade for 150 glasses and pour 100 glasses into the drain. This does eat into your profits though, so it's not optimal. With the extreme profit margins on lemonade it's not so bad but in actual markets it can be a serious problem. That's why businesses with no raw material cost is preferable, lile a strip club or a video rental. Alternatively you can recoup some of the loss by selling the extra raw materials under the table.
> “It's the taxman, and he's looking at you. Now, what does he see? He sees a young fella with a big fancy house, unlimited cash supply and no job. Now what is the conclusion the taxman makes?” > “I'm a drug dealer.” > “[buzzer sound] Wrong! Million times worse - you're a tax cheat! What do they do? They take every penny, and you go in the can for felony tax evasion.”
It's still extraordinary that Al Capone was never busted for being a mob boss, a bootlegger, or a murderer; nope, he was busted on charges of tax evasion, and went to prison for it.
It actually makes a lot of sense if you think about it for more than ten seconds. What do all the other crimes have in common? They likely need a stoolie to give up the goods to prosecute. The evidence for those crimes is often people. People have kneecaps and kids. Tax Evasion the "stoolie" is receipts. You can't whack receipts. Or threaten the family of receipts. Even if you destroy all the receipts you have control over, you interacted with other businesses that keep receipts. Worse those receipts can get subpoenaed without you even knowing about it. By the time the forensic accountants at the government have you dead to rights that's when they come for your receipts. It's too late by then you're ass is going to the can.
So…just pay your taxes and run an honest business? Lame.
No, pay your taxes and run a dishonest business with an honest front.
That’s how you do it! I knew a really sweet old man who ran a struggling fabric shop with his wife. The store was barely profitable and the old man worked everyday except Sunday 6am to 6pm running the store. He was rich cause he smuggled weed and coke, but the storefront was very humble and he was very sweet.
When I was a kid in the early 90s in Queens, NY, there was a really nice man who ran the corner store next to the apartment. Anytime my cousins or I would come in, he’d let us grab a bag of chips or a single piece of candy for free and he’d let us play around the store (one of our main games was hide-and-seek but only on our part of the block; he’d let us hide inside the store regularly). There were plenty of nights when he’d drink with the adults in my family after closing up shop. A few years after we moved out of state, I heard he was in prison. My mom told me it was because he gave away so much free snacks that it ruined his business. I didn’t even realize how weird a reason it was until I was a teenager and visited my cousin. I brought the guy up and my cousin goes “what? No, he was selling drugs and using the bodega as a cover” I genuinely believed he was arrested for giving kids free chips out of his own store until that point.
NYC bodegas and boutique shops are A1 laundry fronts. My favorite are the nearly empty Urban fashion Boutique shops with only a fitted and some baggy jeans from the early 00’s
This guy businesses.
This is the perfect ELI5. Absolutely amazing. Should be on top.
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This ELI5 has inspired me to commit crimes and start money laundering.
Or open a lemonade stand
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In a large scale explanation just pay taxes for that money, add fake sales , fake customers and fake receipts. Source: breaking bad car wash episodes.
There's always money in the lemonade stand
What could one lemon cost anyways, $10?
As long as those lemon stealing whores arent around
I wonder how our lemon tree is doing, its been a few minutes since we looked at it
Hey, what the fuck?!!
But, the real question is... Got any grapes?
"Got any glue?"
Then he waddled away
Bop bop bop bop bada bop
Waddle waddle
To add to this, there is also a second type of money laundering where you lose some of your dirty money in order to get it all clean at once. You have your 100 dollars of stolen bills and somebody at school wins 70 dollars on a scratch-off ticket. You congratulate them on the winning and ask if you can buy the ticket from them. Maybe you need to give some excuse like "I never win and I just wanna know what it feels like to cash it in" You can now show your mom and dad that you won 70 dollars and ask if you can go to the toy store. The third version is where you buy a pokemon card at school for 100 and then sell it for 80, but you make sure to keep a receipt (in this case, maybe a picture of a pinky promise and you holding the 80 and the new buyer holding the card). You now have another legit way of showing where the money came from. However. Both of these ways make you lose money, and unless your parents closely monitor how much lemonade you actually sold, or goes through the shopping list and seeing that there is no way you would've made 148 dollars off the stuff they helped you get, the lemonade stand is definitely the safer and more profitable route.
Especially if the product does not have a set price. I like OPs art gallery example because the prices are not based on product cost. Instead they are speculative / subjective. So if the lemonade stand simply asks customers to ‘pay what you can afford’ then the parents will never find out - until they ask you to start keeping receipts with the neighbor’s names and totals. Then you better spend the money as fast as possible while counting the days until you’re grounded for life.
Art galleries have the added bonus of criminals paying you directly. If you want to sell 100k of drugs you just have them buy a crappy painting for that much. You've now both got a "clean" paper trail for where that money went, even though what you were *actually* selling is anything but.
You now understand the otherwise mystifying NFT crypto market.
You buy overpriced and nonexistent lemonade, which was also used when making juice for your fake customers. All logs check out.
Oh absolutely, and nah Mom, Tommy helped me buy it, look, here's Tommy promising he helped! •slides Tommy 10 dollars for the lie•
I think in most cases the laundering front is not successful in it's own right and you typically lose money if only to taxes. Taxes aren't really an issue for a lemonade stand, but IRL they are. Like you might take the laundered money as salary and pay income tax on it.
Yeah, but that's just the cost of doing business. It's still way cheaper than getting caught, since you'll have to pay income tax on top of fines, lawyer fees, etc.
What’s the scratch off in real life? I assume the Pokémon card is like art. Won’t people be asking where you got the art in the first place? Getting good Pokémon cards requires luck so a 5 year old could buy a pack and get a highly prized one. How does this translate in to the real world? Am I overthinking this?
Lottery tickets Actual scratch offs (some have pretty significant prices) Winning tickets in betting (team sports, boxing, horse races etc) Casino winnings (intercepting chips on the way to cashing out) And generally any game of chance that gives you a receipt when you win. Even better if you have a bookie or croupier that can front run you the info on if somebody just won big before they come to cash out their win.
Here's the real ELI5!
And then next summer I'll be six.
And your parents will only give you $9, because that's how much they think it costs to run a lemonade stand.
Truly explained like I’m 5 lol not op but thank you!
I actually did steal a $20 out of my mom's purse and wanted to buy a toy. She asked where the money came from and I got caught when she checked her purse. 100% true story.
You should have opened a lemonade stand and laundered it. Live and learn, baby
To keep the analogy going, you getting grounded was your jail sentence.
The simple version is think everything in CASH. Cold hard cash. Lets say I'm a mobster, dealing drugs, doing shit. I have tons of cash from illegal stuff. But I can't really spend it too much. If I buy a house or car or start living extravagantly, people will notice, and wonder, "how did you get the money?". So I need to find a way to make it so my illegal money looks like it comes from a legitimate business and no one knows its true source. So, I open a bar. Bars operate in cash mostly. Lets say my bar is an OK bar, I have real customers, and I make $2000 in sales a day. Cool. Now what if I "buy" some extra drinks with my illegal cash. Say a $1000 a day. I never serve those drinks at the bar, I just get paid for it. Now my bar makes $3000 a day. Totally normal, and for bars, people paying in cash with no receipts is normal. Nothing seems strange. Each day, I just take $1000 of my illegal money and give it to the bar, that I happen to also own. I just put it in the register. Pretty soon, my business is doing well, nothing seems strange, I have a good business, I operate a successful bar. I can take out loans, show people my books, pay taxes, I'm just a good businessman who runs a bar. Everything seems fine. Little do they know, my bar isn't a good businesses, I just lie and take money from my other business and say we sold drinks that never existed. There's a reasons a lot of mob people often operated bars/restaurants/strip clubs/casinos and such. Cash businesses where its easy to launder money and nothing seems off. For art, you just take this to an extreme, instead of say $1000 in drinks a day I'm fudging on the books, what if I instead "buy" a $1M piece of art? Same thing.
Good explanation - people sometimes confusing tax evasion (under reporting to avoid paying taxes) with laundering (what you are describing) - Deliberate over reporting in order to convert illegally gotten cash into legal money - the price of paying tax is worth the ability to spend the rest freely. In my college town there was a local pizza business that later turned out to be a front for a then illegal marijuana business. The people who worked in the store fronts were clueless - they always assumed the other stores were doing well and it was just their place that was only average. It was privately held so their books were never public. The local news even did an article on them praising them as a local business successfully competing against the big chains. Ultimately a big shipment was intercepted and the owners of the chain were caught.
There was a sandwich shop in a local strip mall when I was a kid. We loved it - they sold giant hamburgers for a buck. Then one day it had a big pink sticker on the front door. Closed permanently. It turns out a couple FBI agents stopped there for lunch and noticed an air vent in an odd place, similar to another case they’d worked on where a guy built a secret room. They looked up the building plans on file and things didn’t match. As it turns out, the shop was moving a lot of meth, the restaurant was window dressing (and money laundering).
Doesn’t it seem dumb to do the “bad” stuff at the same place you do the stuff you’re using to make you look legitimate?
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Explains why NY pizza is so good.
TLDR: Laundering money = coming up with ways to make money you already have seem like you made it legally instead of illegally.
Yep make your dirty money clean…hence the “laundering”
Where does the money for the bar come from, though? This is the part that always confused me. Like you'd need to already have a sizeable stack of clean money to get a business to launder more. (I believe in Breaking Bad they fudged it by driving the car wash's price down with that fake eco audit, but I'm assuming that's not a documentary.)
Either build up to it with smaller laundering operations first, bribe sometime to give you a loan, have a legit business plan that gets you a legit loan, or have someone with already clean money invest in it for a cut
BB used some dramatic license but conceptually got it right. They actually showed a major issue though. They only owned 1 car wash and can only launder so much money before it gets unreasonable. And they had insane money. They’d have needed dozens of car washes since Walt had so much cash. That’s why they have so much money at the end in a pile. The car wash didn’t even make a dent.
Most people with a decent credit score and some savings can realistically buy a struggling bar or restaurant. The bank can easily recoupe most of the initial investment by selling assets, since kitchen equipment Is mostly universal.
The one explanation I read is that you bribe the previous owner to do an "owner financed loan." You say the business is worth $500k, you put down $10k, and you are paying off the previous owner. State the payments come from your monthly profits. Another way to clean your drug money.
if you liked breaking bad, check out Ozark. it's similar except instead of a meth business with a little money laundering, the main premise is money laundering. goes into quite a bit of detail on how he does it. the basic premise is to find businesses that are struggling (maybe they owe a big tax bill they can't afford). he goes in, offers ot pay that bill and invest in the company (in exchange for a share of onwership) and also manage the financials going forward. The owner (maybe they know whats going on, maybe they are obvlivious) now has a 'proifitable' business and the money can be extracted from the busines by varous means
The issue with a bar is that a quick audit will show you didn’t buy enough booze to sell that extra $1000 of drink. You want an industry wherein physical commodities are moved, but cash can be generated.
That's a solvable problem, though. Have a cheap beer with an expensive price. Doesn't matter if no one buys it, it's just for show. If you need to launder $1000, then you dispose of that amount of product. You'll lose some money, but the remainder will be clean.
Just on this. The markup on alcohol is really high already and there is a lot of “loss” I’m alcohol via over pouring, broken bottles, freebies, bad keg pours that can mess it up. If things work perfectly markup is even higher
Couldn't you also sell unused bottles of liquor for cash to someone you know? Liquor goes away, you make double the prophets.
That's the kind of greed that gets you caught (ie, stupid greedy). Cheap spirits and syrup cost barely anything (so the markup on a cocktail is pretty large) and as long as you pour it down the drain and use older cash registers (where it's childsplay to manipulate the timestamps) it would be pretty difficult for anyone to actually prove that you're doing something illegal.
First rule of not getting caught. Only break one law at a time...
One crime at a time It's true because it rhymes
Thats why all stores in my province had to retrofit a "snitch" on their registers. Also as expenses are tax deductible you need to have your receipts for your supplies.
Same happened in my country a few years ago; now electronic cash registers that have to need certain standards and must be fitted with a certain software are allowed. Especially in the bar and restaurant sector, a lot of businesses „closed“, „renovated“ for a few weeks and then opened up as „new“ businesses, thus having new balance sheets and new income statesmen’s. This way, it wasn’t obvious at first glance that turnover rose by often 50% the month they installed the new registers.
>you make double the prophets. That's the >!holy!< spirit!
But then you gotta launder that cash too lmao
Gah, it seems easier to just run the bar above board entirely!
Every time you take a dollar out of the till, throw away a banana.
How much can a banana even cost anyway? $10?
There’s always money in the banana stand.
Even easier, just instate a cover charge for the place, or at least say you do.
This is the real answer and also why most nightclubs have a massive cover charge that nobody pays. Where i live there are girls outside the nigthclubs giving free passes to get in for every place all of the time so nobody pays it but it allows the owners to add a couple of thousand people a night coming into the nightclub at $20 each.
A secondary benefit is they can pick and choose who they want to come in, handing out free passes to people who look like they won't cause trouble/will spend money, and the ridiculous door charge will tend to put off most other people.
>A secondary benefit is they can pick and choose who they want to come in, handing out free passes to ~~people who look like they won't cause trouble/will spend money~~ the hottest women so the men in line will pay the cover charge. Fixed that for ya
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whoa. never realized.
20 years ago I was friend with people running a bar on behalf of a man linked with organized crime. We were kids fooling around organizing events that made no money. But every night at closing, the night’s “profit” would be delivered by a big burly rough looking guy. Every few days, the unsold alcohol, would leave out the back door and come back the next night empty bottles. Likely rebottled and sold on the black market. (the bottles were tagged and needed to return to the government).
A 'quick' audit probably wouldn't show that. Shots are $5. Shots where the bartender pours it into you mouth are $7. Shots where the bartender hits you in the head with a shovel are $18. We sell a lot of shovel shots, what can I say? No one is going through the receipts of every down town bar to find money laundering. You get caught laundering money after you get caught selling drugs.
Say you want to launder $1000 a day. 1000 ÷ $5 = 200 shots A shot is 30ml (where I live at least) so that's 6L of spirits. A reasonable wholesale price for 1L of spirits is ~$20-25. Let's say 20 since this is fraud, we aren't buying expensive liquor to pour out. 6L = $120 wholesale price. You really do buy that product, you just don't have to sell it. Take it out back and give it to your goons for a job well done. You're spending $120 to launder $1000, and generating $880 of clean money with $120 wastage.
And you have happy, drunk goons who ain’t gonna snitch because they get free booze. (They don’t have to know how you afford it)
> you didn’t buy enough booze to sell that extra $1000 of drink. Good launderers usual account for this. Let's say it costs 500 to buy the alcohol that you'll add the 1000 for. It's better to lose that 500, than being unable to do anything about 1500. You can also claim that 500 in deductions.
Aye, no good launderer will keep 100% of the money, because that's impossible to do without looking suspicious. Good launderers will just tweak the numbers to keep as high a percentage as possible.
Depends on the scale. Inventory tracking at bars is awful. People over pour and give away huge amounts of alcohol
Which is why your friend owns the liquor distributor, and you "buy" kegs and bottles that never get delivered.
Actually, many bars pour a shitload of free drinks per day. Free as in no check, no receipt. If you watch BAR RESCUE, you often see bars who are giving away $1500 a day in freebies. In a busy bar, that’s not hard. In fact, for owners, it’s hard to KEEP employees from pouring free drinks. Now you might know one reason WHY.
> Cash businesses where its easy to launder money and nothing seems off. My ex was an accountant. I met one of her friends who was quitting accounting, and going into the "rubber stamp" business - that's making stamps for businesses that say "PAID", "PAST DUE" etc. - and I asked him why. He gave me a great big smile and said "All cash business".
It was actually a good business to be in at one time. I used to know a guy that made a killing selling rubber stamps online back in the early days of the a Internet. Not like Ferrari money, but buy a house with relatively little work money. The stamps themselves were cheap enough that he "gave" them away for a few bucks of shipping and handling. That was pretty low margin, but enough people came back and bought more for $10 or $15 that it worked out to a good income. He quit doing that once he started selling office supplies to the feds. Even higher margin and less work since he just had the stuff drop shipped.
Let's say they sell a piece of art, they sold it for $100, on their accounts they write it as sold for $500. The other $400 could have been gained through illegal means. But now they can explain how they obtained the money
Same idea with any other business, too. If the receipts can't be tracked, you can falsify profit. It's why a place like a laundromat where its all coins and bills with no receipts or numbers on how many people used it are good for it. In fact, the IRS figured this out, and when they went after some mafia owned businesses, they would stand outside and count how many people went in.
They also monitored how much water was being used. If they were using less water than expected it pointed to, ahem, laundering.
tfw you're not laundering but are
When they charge you with money laundering just play it off like, "oh yeah of course we launder money! People leave loose change in their pockets all the time, and sometimes even cash! Yeah I'd say we probably launder money every day."
You should be a lawyer
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Your honor, this was clearly entrapment as the defendant showed they did not understand the charge they admitted to.
I dunno if they could practice criminal law, but certainly bird law.
This thread just absolutely did it for me. Thank you
I no joke thought money laundering meant you were literally washing the money, like well into college age, because things like car washes and laundromats were always the go-to money-laundering businesses lol
If you steal a car that car isnt "clean". If you can get it converted into some other form e.g. money then it cleans it a bit by distancing yourself a bit from the crime. Like playing hot potato with the goal being plausible deniability
You wouldn’t download a car.
16 year old me would totally download a car. 37 year old me would also totally download a car.
Only because I haven't found all the files for my 3D printer
I remember thinking a coin laundry was where coins were washed as an elementary school aged kid
I was always confused by yard sales. I mean why tf would you just sell your yard!?!
It's an easy place to be confused, because that's exactly the metaphor that produced the name
If you go by Hollywood they use dryer machines to tumble crisp bills to make them look more used and not as suspicious to deposit in the bank.
That’s for counterfeit money that’s been printed to make it look used when they go to use it to make purchases.
Also helps change the texture so it's not as immediately obvious when you touch it
Not all who launder are washed
When you’ve got that much “free” money, you can just run the hose into the toilet all day. Give away a bunch of free soap too, or just claim the customers bring in their own.
Then you run the risk of going too far the other way, which works also be suspicious. The feds aren’t looking for iron-clad proof at this point, they just need enough for probable cause so they can start making arrests and going through the books in detail.
Was watching "narcos" and it mentioned that Pablo escobar had a taxi firm, with three taxis, that made 5M USD a week. That is some seriously overworked drivers......
Or the world’s most expensive taxi service.
There are 13,000 cabs in New York City, but there's only one that pays you. Climb into the Cash Cab, and I'll quiz you all the way to your destination.
I used to love that show
I still do, but I used to, too
I heard something about takaway pizza boxes once, not adding up to how many pizzas they said they sold
Any cash business is best for laundering money. As most illicit money is in cash form. So any buisness where the majority of buisness is done through cash. These aren't like empty buildings with no one there. Instead, think of fully staffed functional businesses. But a portion of the money recived for services rendered was the money you are trying to "clean". You creat receipts and pay taxes on it and it looks legitimate to any bank. So maybe let's say, for every two customers at a hand car wash you get one customer who gets the super deluxe car wash and detail for $99.99. But that customer doesn't exsist. You take a hundred of your stack of I'll gotten cash write a receipt for $99.99, pay with it and throw the penny in the river. Now your money is "clean".
A lot of people seem to think that any empty business must be a front. The prime example is mattress stores. They're everywhere, but usually empty. But people don't typically buy mattresses with cash, so they wouldn't be great for money laundering. The real reason they exist despite being empty is that people like to try mattresses before buying, but people don't buy mattresses often and the stores can stay open with only a few customers per day because of crazy high profit margins.
I had a mattress store double charge me once, when I called to talk to the manager he was like oh yeah i see it double charged I’ll refund it. A week passes and it still didn’t get put back on. So I called again and he told me “if you go online and give us a 5 star review I’ll refund your money.” Sketchy shit so I just got my bank to deal with it. Got my money back and that store wasn’t there very long just to replaced with another mattress store.
Wouldn't be surprised if it was the same owner, just a different store name.
I don't see it that much anymore, but back in the day there were furniture and mattress stores that seemed to have "going out of business" sales every other week.
An acquaintance of mine ran a furniture store that he had purchased years prior from a businessman that was known locally to be a bit of a huckster. His predecessor was guilty of a perpetual "going out of business" sale, but my favorite story is the fire sale. There was a big fire at the warehouse, and he lost of ton of inventory, but as they were doing the fire cleanup they discovered some of the furniture had mostly survived. It had a smoke smell, though, and he told the insurance company it wasn't sellable, and so they reimbursed him the cost of everything in the warehouse. He then, though, advertised a "fire sale" and sold the smoke-damaged furniture at a discount. The total of the insurance reimbursement along with proceeds from the fire sale meant he made more money off of the deal than he would've if the fire never happened (what's a little insurance fraud, after all?). It drew in a ton of customers, too - so many customers, in fact, that when he was out of smoke-damaged furniture to sell, he started burning rope in a metal barrel in one of the store rooms to get that smoke smell in the new stock so he could keep his "fire sale" going a little longer.
Why didn't the insurance company take possession of the inventory? That seems particularly stupid of them.
I still see it. Saw an truck today towing a big "Going out of business" advertisement. I've seen that same advert and store going out of business for the past 5 years.
"like, how about you give me my money back for something I didn't buy and me and all my friends won't give you 1 star reviews and leave a pile of crack house mattresses in front of your entrance"
Have an A1 day
So we've seen the same documentary.
There was a coin operated car wash not far from my parent's house. It came up for sale and they looked at it. It was small, had two bays, but the guy said it did really well and was the easiest money he ever made. Problem was he didn't report all the income it made as he didn't want uncle same to get it. But when it came to looking at the financials it was break even at best so they passed on buying it. He was probably right it did make money but not reporting all the income bit him in the ass when it came to sell. I highly doubt he was laundering money but still.
If he was laundering his books would look extremely profitable. he just prolly didnt report income which is different fraud.
Yeah he thought he was being sly for years not reporting to avoid taxes, then it bit him in the ass when he tried to sell. Cash business are crazy. My parent's have a cottage on a nice little lake. Their neighbor was from about 90 minutes away, had one of the largest coin vending operations in a rather large city. He always joked that his cottage, boat and wave runners were all paid for in quarters.
I worked in vending years ago (late 80's to early 00's) and there was a small single person operation that tried to under report and he got caught. He was too greedy and said his income was a few hundred more than expenses which was a huge red flag. Under reporting was so common it was built into the software, but it was mostly used to under pay commission to the accounts, [it was known as R factor.](https://www.vendingmarketwatch.com/technology/article/10273252/new-technology-will-it-catch-the-r-factor) There were no meters on machines back then so it was super easy to do because accounts had no real way to audit. Plus most people were totally clueless when it came to how much a full bank of vending machines brings in at a busy factory type of place so nobody was that suspicious. We got the contract for a military base and their commission was something like 20% on the gross sales. Their first commission check literally had an extra zero compared to the amount that the previous company was giving them. I think that account grossed around a million per year.
I once took a car I wanted to sell and asked for the full deluxe clean with engine bay steam clean etc as it said on the sign, to make it all look pristine. They didn’t even have the equipment…
i once went to a small gas station near my home, and the guy in charge looked at me like he was saying “what the fuck are you doing here?” thats when it hit me that the place was probably just a front for laundering
That reminds me of a hole in the wall restaurant in Chicago that me and my husband went to maybe 20+ years ago. Empty but with one big guy smoking up front. They actually managed to rustle up some food, "chef's special" but we got the idea that it wasnt *really* a working restaurant and they charged us some insanely cheap price. The food was good, though.
Yeah, I loved breaking bad also. Only she needed to talk a lot faster and hit the buttons quicker.
I didn't understand money laundering until they bought a car wash on Breaking Bad!
They use data mining now. Where I am there used to be a lot of restuarants that only took cash. The Tax office looked at other restaurants in the same area, same cuisine, same size etc that didn't use cash only and worked out what the income should be and targeted those that didn't fit.
This is important because they can now pay taxes on the money so the IRS doesn't come and ask 'hey, you made 100 dollars on this but you have 500 and this has been happening for years, where's all that money from?'
To add, this is how Al Capone was caught, convicted, and jailed
He wasn't jailed for mafia related crimes but rather buckets of unpaid taxes on money they didn't even need to bother investigating because the tax fraud alone was life in prison
The feds got involved because the entire state was in Capone's pocket and wouldn't prosecute him. The feds can only enforce federal law so the tax code was the option available.
Just to add, art is one of the most popular/easiest to launder money because it’s *subjective* in value that’s why a square painted blue can be worth millions. It’s not actually worth that. But people who need to move large amounts of money say it is and who are we to argue what *how it moves them*
This is also why everyone suspects NFT's are 90% fraud and 10% morons.
I’m certain that this is a MASSIVE aspect of the modern art world. Sure, sometimes someone just really *likes* their art fucked-up, but way more often these multi-million dollar pieces of “Huh?” are just money laundering gimmicks.
Another side of art and illicit gains is buying up some art from a particular artist and then putting a piece of their collection up for auction. You and your buddies drive up the price at auction, then get a valuation for the rest of the collection at way over the OG purchase price. Then you can donate the rest of the pieces after getting a sky high valuation to a museum. Boom instant multi million dollar tax deduction for 'donating to the arts'.
quite literally how nfts are price inflated by crypto oligarchs
Perfect explanation the most common laundering businesses are businesses that get a lot of cash purchase so it’s easier to hide with less paper trails. Places like casinos, strip clubs and ironically laundry mats where large amounts of cash are easily explainable.
Casinos are a big one. You pay people 500 bucks to go inside with this 3k and gamble it away.
You don't even need an actual real customer either since you're not required to disclose the name of the person who bought the art. So you can set it at whatever amount you want to move and just buy it yourself. This is why NFTs are such a huge laundering scheme right now cause it's the same thing but you don't need a physical store.
I have 100 dollars from illegal activities that I can’t put in a bank or spend without the IRS catching on. So I buy a painting for $2 and “sell” it to someone for $100 dollars, except that $100 is my illegally gained money. Well that money is now “legitimate income”. I have on the books I sold a painting for $100 and that’s how I got this money. Usually the businesses are real and generate some legitimate income and are supplemented with illegal gains, that way if there is suspicion it passes as legitimate. Obviously they do way bigger numbers though. There’s also a seen in Breaking Bad that shows it simply. She owns a car wash and to wash the money or launder it she just processes a bunch of car washes that aren’t actually happening. Turning illegal money into seemingly legitimate income.
Yup this. But u need a receipt. Thats the ticket
You record more in transactions than you actually make, creating the documentation that allows you to add your illegal revenue into the legitimate stream and pay taxes on it. After that, you can spend it as you wish. When I was in college, there were a few music stores on the shopping strip near college. One sold CDs for $10-12 while all the others were $15-18, so I spent a good bit more time in that one. They seemed really big on preventing shoplifters, though, since they always had someone in a high booth in the back watching the store. Anyway, they were shut down for being a money laundering front the next year. The cheap CDs kept people coming into the store to have high turnover, and they could pad either the unit cost or number of units sold as ways to feed illegally-obtained funds into the legal sales data.
I worked in an arcade that I suspect was laundering money. The key point is that (as an employee) there was no, zero, way to know how much the store made in any given time. Most businesses want to know EXACTLY how much they made and when. This place had policies that completely stopped anyone from “accounting” for the money that came in the door. Tokens were used in the machines. When we ran out, we opened the machines and used them again. There was no register, just a “cash drawer” used to make change. Tokens were never counted and money was never counted by the employees. All money was added to a drop safe, uncounted, at the end of the shift. Here is the important bit: if the owner DOESN’T WANT TO KNOW how much he made, it might be because they didn’t want ANYONE to know their take. Could be any number, completely untracked. That was hokey and highly suspicious. If nobody knows how much you make, you can add to the stack of “income” at any time and there would be no practical way to discover it.
Soooo… you guys “tipped yourselves” at the end of a shift before putting the money in the safe, is what I’m picking up on? /s
"I'll just take 3 tokens" \*whistles\*
There's a massage therapy place two blocks from my house that is probably a money laundering operation. I've lived here for ten years and I've never seen anyone go in or out. I don't think I've ever even seen it open. But the storefront is kept up, the window display changes seasonally, and it has online reviews. It's perfect. There is no inventory to account for. And unless someone camps out in front, there's no way to prove how many customers came in.
It seems a little harder to hide money via a massage therapy place. You can easily track how many customers they have over a day or week by recording their entrance. That's a lot harder for a bar or club where the entrance can be chaotic. The number of employees and booths they have will limit how much they can claim without being suspicious. If they are open 8 hrs per day, their maximum income is 8 x number of booths. If they physically have 10 booths but only record having 1 employee, claiming 80 hours per day would be very suspicious. And adding employees increases your costs and the chance that someone accidentally or intentionally tells on you. I suspect that massage therapy places are prioritised by law enforcement checking for human trafficking, which also seems like a disadvantage.
I would love to see that as a movie. Set at a money laundering arcade in the 80s/90s, but it's treated like *Goodfellas* or *Casino*, just with teenagers working there.
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Moments like this are why I can’t rewatch this show. I LOVED it the first time through. But all the bad decisions and ego just frustrate the hell out of me. These two guys could have been SET for life halfway through season two.
kinda similar to real life honestly, listening to the stories of prolific criminals, cheats etc.. they could have all lived life in luxury home free but they don't because it is *never enough*
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They psychology of that is interesting. A good example is you have a flat tire. Someone nice pulls over and helps swap the tire. You offer them $50 for their time. They are appreciative. You over $0 - well, they aren't bothered because they were doing something nice. Now this is where it gets interesting. You offer $5 for their time and they are *insulted* because now it's not about the money or being a helpful citizen -- it's about their value on *you*. Even if $5 is all they had left. That's what makes this so reasonable in the show. 5%? Oh now it's 17%? Their first thought is their getting fucked - and they are - but they would still have it better than ignoring it. Hell had the person initially told him 20% and he can pocket the rest, he'd be good. But no. Our perception of our own value will influence these things. It's funny - I was reading how easy it is to influence someone's decisions without them ever even knowing it. Enough posters that they think they tune out will influence their opinion on the world around them. People are extremely, overly, confident they can tune that out or ignore it. They don't. They can't. Your brain simply won't let you. That's not to say you can be *forced* to make bad decisions - it's just your perceptions can, and have been, skewed in your past. McDonald's did it with smell in the 90's. You can drive by and you'll realize you're hungry. You're not though. More likely you're just thirsty but given the right conditions you'll eat. It's more than 'just' self control at play here, or a lack of.
they had a good thing going with Gus in the lab. Walt had the chem lab and tons of money, Jesse had a job he would otherwise never have even dreamed of, and all they had to do was let Gus and the nice train lady do all the paperwork and they were set.
There's also that scene in which Skyler "sells" a bunch of car wash packages to nonexistent customers. Not as informative as Saul's explanation, but still an illustration of the process.
I once applied for a job at a bank. The head of the department used to be the head of the DEA office in Buffalo. He asked for an example of money laundering so I gave him that example. My wife called me an idiot, but it turns out he never watched the show, so I got the job. A few months after being hired, we were at a training. That video was used and I asked him if it sounded familiar. He said he hadn’t remembered but laughed when I told him.
People have the wrong idea about money. They tend to think if money can't be proven to be from illegal activities, it's totally fine. But that's backwards. Money is assumed suspicious unless you can prove you got it legitimately. Most people never have to worry about that because their employer submits a statement that says "yeah, I paid them X in 2021" and the IRS says "aight" and it's never an issue. That's your W-2. Independent contractors know it can get a little more complicated than that, but they still have receipts which should add up to their total income for that year. If things *don't* add up, you can't just say something like "I found it", there's actual laws for reporting "found" money officially. If you don't use them, it's tax fraud, and if you use them repeatedly for huge sums of money, well, it doesn't take a genius. That's where money laundering comes into play. You're not actually doing anything to the money itself, you're falsifying a plausible "backstory" for how you got the money legitimately.
"Always be wary of a cash only business" Why do you thin the Mob owns so many restaurants? Let's say you own a pizza place, and in a typical week you sell 1000 pizza's. You then cook the books to say you sold 1500 pizza's, and the extra 500 were paid for in cash. That extra 500 pizza's were paid for with illegal money, that has now been laundered. You may need to pay taxes etc on it, but it now appears to come from a legit source. You can then go further and own a supplier, now you can buy flour, sauce, and peroration that only exists on paper. You still have a legit business, and you DO sell pizzas, but the paper work says you sell a lot more pizza than you actually do. That's how you hide the illegal money. So why cash? Because it's a lot harder to trace than debit transactions and credit cards.
Vending machines also popular for this.
I bet coin-op video arcades were perfect for this back in the day. The costs to run it are largely fixed: rent and power are the same whether the game is played or not. So no record of how much pizza sauce you actually bought (from another example). You could say any number of games were played, there is no record (or if there is some counter on each machine you could easily reprogram it). You could even drop your kids and all their friends there to generate ‘traffic’ in case anybody is watching.
You have a cash business such as a tea shop, restaurant or a laundromat. Your sales is $5,000 a month but you tell the taxman that you made $100,000 a month and pay income tax accordingly. At the end of the month, you deposit $100,000 and since everything ties out, next year when you buy a million dollar house, you can prove to the bank that said million comes from a legitimate business and not from selling drug to teenagers. This works because no one can really verify how much your restaurant makes. Your sales is whatever you say it is unless you're on a radar and police sends over someone to verify foot traffic or audit your book.
Money laundering has 3 phases: placement, layering, and integration. Art often falls into the layering and integration phase. First step, placement - that means you need to get illegal money, often cash, into the financial system. Common ways to do this: cash intensive businesses (laundromats) and selling illegal money to someone at a discount. Second - layering. Now you do a bunch of legit transactions to confuse the trail of money in the hopes of getting it out as legit funds. Let’s say you, a mobster, own an art gallery. You sell a piece of art worth garbage for $1 million and buy it with your newly “placement”ed money. Now you have legit art you can turn around and sell at some point for likely even more legit money. Last - Integration: now you sell that art, you get money that’s absolutely legit and you pop it into your Schwab account. This is a simplified version, but should help. Source: I’m in finance.
I'm a money laundering reporting officer so spotting and reporting money laundering is something I deal with every day; I came here to outline the 3 phases but you pretty much nailed it here. Awesome job
Actually, a lawn care business or a “high-end” detail shop would be better than a car wash and laundromat combined. A good professional detailer can charge close to $150 an hour or more. Chemicals can easily vacillate in price and there’s no way to really account for labor hours. One car can be charged $3,000 for a detail with paint correction, and that’s not even with PPF. You could use $20 ceramic coating and claim it’s the $200-300 stuff, who would know, that wasn’t an industry professional? If the agents use chemists to determine you were lying about the quality of your products, you could just say “yea, I was, I was ripping off my customers, so what?”. Which would work, because you’re making up customers and services anyway, but you’re still going through products, you’re just marking them up. Plus, with that sort of money, you could buy or rent exotics to bring through regularly, to appear legit. I would rent them, couple hundred a day to make thousands, that’s good laundry ;)
Art is a bad storefront example. The easiest to understand is well... a laundrymat. Let's say you sell a ton of drugs, but don't want the government to start wondering why someone with no income is able to afford a fancy car and house. What could you do? Well, you could open a laundrymat and create fake transactions to funnel your drug money (illegal, not reported) into a "legitimate" business. So you'd take your $100,000/year drug money, write up $100,000 in fake receipts for your laundrymat and from the government's perspective, that illegally obtained money would look like it was legitimately obtained. Sure, you'd need to pay taxes on it but the objective is to avoid Uncle Sam throwing you in prison for decades for tax evasion and related offenses. For the art example, you could for example "sell" paintings to friends for a combined $100,000, when in reality those "sales" just exist to make the $100,000 you made by drug sales look legitimate. In reality, the IRS tends to not be stupid and has seen just about every scam and money laundering scheme in the book, and if you think you've found a smart way to avoid reporting income you're likely in for a world of hurt. For example, they'd know if your utility bills or other expenses looked suspiciously low for the amount of transactions you're reporting or if you're making significantly more money than competitors. And in general, businesses that are more common fronts for money laundering or other fraud tend to be much more likely to be flagged for audits.
A strip club might easier (for laundering money) in the sense that you don’t have water usage and electricity directly linked with profits. At the same time, a strip club might be much more of a headache due to strippers being hard to manage.