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Old 06-23-2016, 07:56 PM
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How is money laundering detected and proven?


Whether it's Al Capone or others, how does the police first suspect that someone is engaged in money laundering and then go about proving it?


Can layering make it impossible to trace the money as opposed to just requiring more work?

If someone involved in money laundering gets a "loan" from a shell company he set up, is it not rather easy to show that that company existed for little more than to "loan" him money?
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Old 06-23-2016, 08:15 PM
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Here's one that happened right in my little home town earlier this year. The article provides some details on how the feds caught on.
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Old 06-24-2016, 09:21 AM
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I used to work in these kinds of investigations. Typically, there's some other nefarious activity (drug dealing, in my world) that triggers an investigation. From there, you follow the money by getting legal access to bank accounts, investigating property (cars, houses, etc), and when "structuring" is suspected, using data sources such as FinCEN (Financial Crime Enforcement Network). FinCEN is the repository for Suspicious Activity Reports (SARs) and other reporting mechanisms that flag transactions that may indicate someone is trying to conceal ill-gotten gains.

It's actually pretty straight-forward from the investigative side.

We also ran some fake businesses that offered money laundering services to the bad guys... Heh, we charged them a fee to steal their money and send them to prison. Sort of a triple-slap.
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Old 06-24-2016, 10:01 AM
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I used to work in these kinds of investigations. Typically, there's some other nefarious activity (drug dealing, in my world) that triggers an investigation. From there, you follow the money by getting legal access to bank accounts, investigating property (cars, houses, etc), and when "structuring" is suspected, using data sources such as FinCEN (Financial Crime Enforcement Network). FinCEN is the repository for Suspicious Activity Reports (SARs) and other reporting mechanisms that flag transactions that may indicate someone is trying to conceal ill-gotten gains.
So, it's usually Capone-like cases where LE knows but can't prove the person is up to something and uses money laundering as an alternative?

When you follow the money, what counts as evidence that there was money laundering as opposed to just shifting money from account to account and cars/houses being bought?
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Old 06-24-2016, 10:33 AM
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We had a wannabe informant who said that his mob associated employers were laundering money through their bar. The scheme went like this: The bar/night club (which was fairly popular) would document many more drinks being sold than actually were. They would simply pour bottles of top shelf liquor down the drain during off hours and say that they sold the booze. They might go through five bottles of Stoly in a night but claim it was fifteen or twenty and put the dirty cash in the take for the night. It was now "clean" money. I don't know if it was true or not as the snitch was a pathological liar, we couldn't anyone else to corroborate the story and proving it would have been difficult. It seems like it would work, in theory, though.
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Old 06-24-2016, 10:33 AM
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...

If someone involved in money laundering gets a "loan" from a shell company he set up, is it not rather easy to show that that company existed for little more than to "loan" him money?
As I understand it, the feds can simply say "we believe this is income" and then it's a matter of preponderance of evidence to show this was a legitimate loan from a legitimate company. Then the principals of the loan company have to show up in court and explain how their business works, where they got the money, why it was a legitimate loan, and so on.

the whole process gets complicated, and as the linked article shows, the problem is in creating a viable false front. Without enough participants it's hard to fake a functional business. one thing I read said this is why the "mob" liked to buy legit businesses like pizza places that get a decent amount of money much of it cash, and sort of layer in the illegitimate proceeds as extra sales. (Remember the scene in Breaking Bad where the wife is punching in premium price sale after sale when nobody is around.) And then, if you funnel to much in fake sales, it becomes obvious that the location is doing an unreasonable amount of business - and the feds would likely stake out the place for a while to compare observed traffic with claimed throughput.
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Old 06-24-2016, 10:57 AM
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We had a wannabe informant who said that his mob associated employers were laundering money through their bar. The scheme went like this: The bar/night club (which was fairly popular) would document many more drinks being sold than actually were. They would simply pour bottles of top shelf liquor down the drain during off hours and say that they sold the booze. They might go through five bottles of Stoly in a night but claim it was fifteen or twenty and put the dirty cash in the take for the night. It was now "clean" money. I don't know if it was true or not as the snitch was a pathological liar, we couldn't anyone else to corroborate the story and proving it would have been difficult. It seems like it would work, in theory, though.
How does that make sense? If they're pouring expensive liquor down the drain, they're still paying for it. The illegal profits they're sneaking into the take will just end up being used to pay for the liquor they threw out.
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Old 06-24-2016, 11:03 AM
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How does that make sense? If they're pouring expensive liquor down the drain, they're still paying for it. The illegal profits they're sneaking into the take will just end up being used to pay for the liquor they threw out.
But not as much as they're taking in. $20 for a bottle of Stoli gets you 16 imaginary shots at $5 each. You're ahead $60 on each bottle, but you've got plenty of empty bottles and receipts to show the investigator.
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Old 06-24-2016, 11:07 AM
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Some years ago (I can't find a cite - sorry) the cops and HMRC staked out a big fuel station for several weeks before they rounded up several dozen people.

The fraud was that truck drivers would buy fuel and get a receipt for which they would be reimbursed. If they took, say, 200 litres and got a receipt for 300, they would pay the attendant half the cost of 100 litres (about 70 at the time). They could claim the full amount and made 35 profit.

The attendants were effectively buying fuel for half price and they needed to sell it to other drivers (mainly taxi drivers) for a discount (for cash naturally). They could then pocket the difference.

HMRC tried to prosecute a whole string of taxi drivers but failed t prove that they knew that the discounted fuel was fraudulent. The truck drivers that were investigated were prosecuted for theft. The filling station owners and many of their staff were done for tax avoidance and money laundering - many of them did time for it.

The original fraud was spotted by a truck operator who kept good records of fuel consumption on his trucks. He say how it went down when they filled up at that place and it escalated from there.
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Old 06-24-2016, 11:13 AM
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But not as much as they're taking in. $20 for a bottle of Stoli gets you 16 imaginary shots at $5 each. You're ahead $60 on each bottle, but you've got plenty of empty bottles and receipts to show the investigator.
But they're a bar. Their business is selling five dollar shots of Stoli. Every time they threw out a bottle of Stolis they were throwing out the sixty dollars of profit they would have made by serving it legitimately and replacing it with sixty dollars of illegal profits. How is that coming out ahead? They might as well quit the crime business and run a legitimate bar.
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Old 06-24-2016, 11:19 AM
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But they're a bar. Their business is selling five dollar shots of Stoli. Every time they threw out a bottle of Stolis they were throwing out the sixty dollars of profit they would have made by serving it legitimately and replacing it with sixty dollars of illegal profits. How is that coming out ahead? They might as well quit the crime business and run a legitimate bar.
The point of money laundering is to get illegitimately obtained cash into a legitimate business. Selling fake shots of liquor allows them to get their drug money (or whatever) into the cash register and then into their bank accounts and taxed and paid out via paychecks like any other business income.
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Old 06-24-2016, 11:30 AM
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Do I understand correctly that if someone doesn't attract the attention of the cops such that they do digging into his tax history and start asking how he got the money for his belongings, he can pretty much spend and own as much as he likes?



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As I understand it, the feds can simply say "we believe this is income" and then it's a matter of preponderance of evidence to show this was a legitimate loan from a legitimate company. Then the principals of the loan company have to show up in court and explain how their business works, where they got the money, why it was a legitimate loan, and so on.

the whole process gets complicated, and as the linked article shows, the problem is in creating a viable false front. Without enough participants it's hard to fake a functional business. one thing I read said this is why the "mob" liked to buy legit businesses like pizza places that get a decent amount of money much of it cash, and sort of layer in the illegitimate proceeds as extra sales. (Remember the scene in Breaking Bad where the wife is punching in premium price sale after sale when nobody is around.) And then, if you funnel to much in fake sales, it becomes obvious that the location is doing an unreasonable amount of business - and the feds would likely stake out the place for a while to compare observed traffic with claimed throughput.
When it comes to one's tax bill, it is indeed about preponderance of evidence. For criminal prosecution, the threshold is beyond reasonable doubt. That sounds like it would be a lot of difficult to prove.




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But they're a bar. Their business is selling five dollar shots of Stoli. Every time they threw out a bottle of Stolis they were throwing out the sixty dollars of profit they would have made by serving it legitimately and replacing it with sixty dollars of illegal profits. How is that coming out ahead? They might as well quit the crime business and run a legitimate bar.
They would make 60$ of profits if they had enough customers to sell it to. Failing that, they turn 80$ of dirty money into 60$ of apparently clean money.

Last edited by MichaelEmouse; 06-24-2016 at 11:30 AM.
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Old 06-24-2016, 12:01 PM
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Do I understand correctly that if someone doesn't attract the attention of the cops such that they do digging into his tax history and start asking how he got the money for his belongings, he can pretty much spend and own as much as he likes?

When it comes to one's tax bill, it is indeed about preponderance of evidence. For criminal prosecution, the threshold is beyond reasonable doubt. That sounds like it would be a lot of difficult to prove.

They would make 60$ of profits if they had enough customers to sell it to. Failing that, they turn 80$ of dirty money into 60$ of apparently clean money.
First - the problem is that any transactions are likely to attract the attention of the IRS. The problem with illegal money, is that it is cash. Using large amounts of cash is instantly going to attract the attention of the IRS and the Secret Service. Transactions over $10,000 must be reported. Structuring activities to avoid that limit is also a crime. (I.e. 10 deposits of $9,000). Financial institutions are required to report activity that appears suspicious, too. You want to deal truckloads of meth or bricks of cocaine, how do you turn pallets of cash into bank deposits so you write cheques for your Porsche and big mansion? A plumber doing occasional jobs under the table will likely get away with it, a major drug dealer has probably already attracted the attention of the DEA at least.

Seizing the money is just the first step. Then, they investigate the chain of money. Anyone who is participating will face indictment. While legitimate businesses might be able to use offshore accounts, even the famously private Swiss banks have agreed to cooperate when money laundering for organized crime is involved. (Plus for some tax evasion schemes) How do you propose to set up a company to "loan" you money and still make that company appear legit to the authorities? Loaning money to yourself as a principle in a company is fraud and tax evasion. Which dupe is going to run your company and how long will he keep quiet when faced with jail time? A company with no legitimate purpose? Tax evasion. Deliberate tax evasion is a crime. and so on...

The thing is, the bar is selling all the drinks it can sell. If it pours extra down the drain - well, taking a 25% bath to make their money legit is a small price to pay. IIRC some articles have mentioned typically a 50% loss on money laundering - a cost of doing business. Plus, if they were greedy they could pour the booze into no-name bottles and resell, or give it to the grunt workers, etc. Why bother? Just take the legitimate money.

Last edited by md2000; 06-24-2016 at 12:03 PM.
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Old 06-24-2016, 12:12 PM
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Banks and other financial institutions are required to file a Suspicious Activity Report, or SAR, if they see red flags that suggest wrongdoing. The feds investigate SAR filings, and it is fairly common for them to lead to prosecution. Most SARs do not involve money laundering, but some do.

Perhaps the most famous SAR was the one filed by Eliot Spitzer's bank when he tried to conceal his use of funds to conceal a payment for prostitution. He tried to structure the payments to avoid reporting requirements, which is illegal. It is not unusual in this area for the efforts to avoid detection actually leading to detection.
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Old 06-24-2016, 12:21 PM
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The bar/night club (which was fairly popular) would document many more drinks being sold than actually were. They would simply pour bottles of top shelf liquor down the drain during off hours and say that they sold the booze. They might go through five bottles of Stoly in a night but claim it was fifteen or twenty and put the dirty cash in the take for the night.
I don't understand this example, either. If I buy five bottles of liquor, pour it down the drain, and then report the sale of fifteen bottles, I haven't accomplished anything. The investigators will look at my receipts and see five bottles bought and fifteen sold... and I'm busted. This only works if there is a disparity between the wholesale price and the resale price of the item, and I could not sell the item at the price I claim.

This is why art is huge in money laundering circles. It is far easier to launder money when the value of the product is entirely arbitrary.

Last edited by Chihuahua; 06-24-2016 at 12:25 PM.
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Old 06-24-2016, 12:34 PM
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This only works if you are over-pricing each bottle.
Yes. This is how a bar works. You think they are selling shots at cost?

I buy a bottle of Captain Morgan for $20. I sell 20 shots for $5 each. I just made $80 profit on the bottle. I have receipts for the bottle I bought and the shots I sold so I can show $80 in profit and pay my taxes.

Now I buy ten bottles of Captain Morgan for $200. I sell 20 shots for $5 each and pour the rest down the drain and record fake sales for 180 more shots, for which I put drug money in the till. I have successfully laundered $900 in drug money. I deposit the cash in my bank and pay my taxes on my $800 net profit like a good citizen ($720 of which is illegitimate) and I have receipts showing that I bought 10 bottles and sold 200 shots.

Last edited by friedo; 06-24-2016 at 12:36 PM.
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Old 06-24-2016, 12:37 PM
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The would legitimately sell 5 bottles - 5x16=80 shots x $5 = $400 revenue ($100 expenses).
They would then take an additional 15 bottles when nobody was around, pour them down the the drain.
15x16x$5=$1200 "revenue" and $300 expenses to provide the liquor.
Put $1200 of drug money into the till, the deposit the next morning is $400 + $1200
After paying the bills, they now have $900 of drug money that looks like profits, so turned into legitimate income.

the question is, what ratio of real to fake revenue works, before it looks too good and attracts the attention of the police? A bar is good because it's much harder for an observer to track actual sales; with a pizza joint, for example, they could observe walk-in traffic, tap the phone and know what sales really should be.

Last edited by md2000; 06-24-2016 at 12:40 PM.
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Old 06-24-2016, 12:39 PM
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Isnt it alot of times because the participants just get too greedy and start flashing money around?
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Old 06-24-2016, 12:45 PM
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Isnt it alot of times because the participants just get too greedy and start flashing money around?
A surprisingly huge number of people are caught that way. Every once in a while somebody says, "waitaminute, how does a guy who owns a sandwich shop afford three houses and a collection of Ferraris?"
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Old 06-24-2016, 12:59 PM
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I used to work in these kinds of investigations. Typically, there's some other nefarious activity (drug dealing, in my world) that triggers an investigation. From there, you follow the money by getting legal access to bank accounts, investigating property (cars, houses, etc), and when "structuring" is suspected, using data sources such as FinCEN (Financial Crime Enforcement Network). FinCEN is the repository for Suspicious Activity Reports (SARs) and other reporting mechanisms that flag transactions that may indicate someone is trying to conceal ill-gotten gains.

It's actually pretty straight-forward from the investigative side. .
That's one good way. Another is to check over a Financial Institutions SAR and audit reports, that sometimes shows you someone suspicious you never thought to watch.

Banks and other Financial Institutions are tightly and heavily regulated on this and will report anything odd or suspicious. These can start an investigation.
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Old 06-24-2016, 01:01 PM
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Yes. This is how a bar works. You think they are selling shots at cost?
Of course not. If I was a launderer, liquor would be pretty high on my list of arbitrarily overpriced products.

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I buy a bottle of Captain Morgan for $20. I sell 20 shots for $5 each. I just made $80 profit on the bottle. I have receipts for the bottle I bought and the shots I sold so I can show $80 in profit and pay my taxes.

Now I buy ten bottles of Captain Morgan for $200. I sell 20 shots for $5 each and pour the rest down the drain and record fake sales for 180 more shots, for which I put drug money in the till. I have successfully laundered $900 in drug money. I deposit the cash in my bank and pay my taxes on my $800 net profit like a good citizen ($720 of which is illegitimate) and I have receipts showing that I bought 10 bottles and sold 200 shots.
Okay, so I think I get it. This only works out if they didn't/couldn't put forth the time and effort to sell the other bottles legitimately. That was the point of confusion. If I could wave a magic wand and sell 100% of my inventory each night, then there is no profit to be gained by laundering. The launderer is basically buying the unsold liquor from the bartender, who then gives him back a chunk of the money. The bartender makes some profit, even if it is less money than he would have if he sold the liquor at market price. The launderer gets to spend his newly clean money, even if he has lost some of it, so they both walk away happy.

Last edited by Chihuahua; 06-24-2016 at 01:03 PM.
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Old 06-24-2016, 01:06 PM
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Do I understand correctly that if someone doesn't attract the attention of the cops such that they do digging into his tax history and start asking how he got the money for his belongings, he can pretty much spend and own as much as he likes?
.
Nope. His bank, his neighbors, his ex-wife or his arrested confederate will likely turn him in.
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Old 06-24-2016, 01:33 PM
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The launderer is basically buying the unsold liquor from the bartender, who then gives him back a chunk of the money. The bartender makes some profit, even if it is less money than he would have if he sold the liquor at market price. The launderer gets to spend his newly clean money, even if he has lost some of it, so they both walk away happy.
You basically got it, but the point you're missing is that the launderer is the bartender. Criminals buy or start cash-intensive businesses precisely so they can use them to launder ill-gotten gains and make them appear legitimate.

If you want to level up, you also buy the liquor store. Then you can start generating phantom bottles for your phantom shots.
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Old 06-24-2016, 04:05 PM
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A surprisingly huge number of people are caught that way. Every once in a while somebody says, "waitaminute, how does a guy who owns a sandwich shop afford three houses and a collection of Ferraris?"
Yes. Which is why they commonly split amongst several "businesses". You also want to seen to be middling in success. If its too successful, you get attention anyway, if its empty most of the time, yet makes a huge amount of dough, then it flashes "front" to the investigators in neon signs. They like to do just enough to actually have reasonable amount of business to explain away the extra cash.

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But they're a bar. Their business is selling five dollar shots of Stoli. Every time they threw out a bottle of Stolis they were throwing out the sixty dollars of profit they would have made by serving it legitimately and replacing it with sixty dollars of illegal profits. How is that coming out ahead? They might as well quit the crime business and run a legitimate bar.
Its quite common for fronts to be successful businesses in their own right with actual staff who work at nothing but the purported business, and be innocent about the "extra-curricular". We had a poster here (WhyNot) if memory serves, apologies if I mixed you up), who was such a worker and had no idea or clue, even though they actually had some bookkeeping responsibility.

A legitimate bar or indeed any business is going to be a lot more easier to launder money or whatever through, compared to one which was a sham. You can show cash flows and put forward witnesses who will say truthfully, oh yeah we cetainly regularly had days when we must have made that much money.
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Old 06-24-2016, 04:17 PM
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Well in the bar scenario above your really only talking about maybe an extra $200 or so a day. Not really enough to launder the thousands they make off drugs.
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Old 06-24-2016, 04:22 PM
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Well in the bar scenario above your really only talking about maybe an extra $200 or so a day. Not really enough to launder the thousands they make off drugs.
If a bar has sales of $2000 a night, they can easily launder almost that amount. Just pad some receipts and markup some wines.

Its when the have sales of $100 a night, once every 6 months and yet claim that they had sales of $10,000 that they have a problem.
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Old 06-24-2016, 04:35 PM
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If a bar has sales of $2000 a night, they can easily launder almost that amount. Just pad some receipts and markup some wines.

Its when the have sales of $100 a night, once every 6 months and yet claim that they had sales of $10,000 that they have a problem.
Yesbut this really isnt the best way as you then have to pay all sorts of taxes on the income. Crooks dont like paying taxes.
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Old 06-24-2016, 04:59 PM
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They would make 60$ of profits if they had enough customers to sell it to. Failing that, they turn 80$ of dirty money into 60$ of apparently clean money.
It just seems to me a foolish way to go about it. Why destroy valuable inventory? Why not do the same thing at a place that sells services like a barber shop? The barber performs ten haircuts during the day at twenty dollars a piece for two hundred dollars. But at the end of the day you slip in three hundred dollars from some illegal business and the barber says he performed twenty-five haircuts during the day and that accounts for the five hundred dollars in the cash register. And you didn't have to destroy a hundred dollars worth of real inventory to do it.
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Old 06-24-2016, 05:20 PM
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It just seems to me a foolish way to go about it. Why destroy valuable inventory? .
or just sell it to another bar.
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Old 06-24-2016, 05:42 PM
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Yesbut this really isnt the best way as you then have to pay all sorts of taxes on the income. Crooks dont like paying taxes.
If you don't want to pay taxes on your income, you just keep it as cash.

The whole point of money laundering is to convert cash into real electronic money that can be used to buy expensive stuff. You can only buy so many things in this life with cash, for the rest you need hard money, which means money in a bank account.

So the money launderer needs to pay taxes on the laundered money, otherwise it isn't laundered money, it's still dirty money. That's the whole point, to convert dirty money into clean money.
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Old 06-24-2016, 05:53 PM
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If you don't want to pay taxes on your income, you just keep it as cash.

The whole point of money laundering is to convert cash into real electronic money that can be used to buy expensive stuff. You can only buy so many things in this life with cash, for the rest you need hard money, which means money in a bank account.

So the money launderer needs to pay taxes on the laundered money, otherwise it isn't laundered money, it's still dirty money. That's the whole point, to convert dirty money into clean money.
You cant buy a lot of stuff for cash.

So yeah, that's the whole point, but they still try to avoid paying taxes. Like by Smurfing, making many small deposits into a bank account- usually by having guys buy MO under $2900.
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Old 06-24-2016, 06:08 PM
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It just seems to me a foolish way to go about it. Why destroy valuable inventory? Why not do the same thing at a place that sells services like a barber shop? The barber performs ten haircuts during the day at twenty dollars a piece for two hundred dollars. But at the end of the day you slip in three hundred dollars from some illegal business and the barber says he performed twenty-five haircuts during the day and that accounts for the five hundred dollars in the cash register. And you didn't have to destroy a hundred dollars worth of real inventory to do it.
Because not using up enough inventory is an enormous red flag if anyone looks at your books. And I'd think that the difference between a 10-cut-a-day shop and a 25-cut-a-day shop would be really obvious to casual observation. (I would not fall over from shock if some of the perpetually-empty barber shops in my city were fronts)

I'm sure that the money launderers would love to clean their cash without spending any money on inventory, but the scheme actually seems rather good. For an illegal money laundering scheme.
  1. Invoices for inventory will match up to sales
  2. Busy bar doing $2000 in sales doesn't look too different from busy bar doing $2800 in 'sales'
  3. No one to say 'by the way, the booze for my underage kegger was bought under the table from bar-X' when they get caught by the cops for something unrelated
  4. Minimum of accomplices
  5. Scales up better than a service-only scheme

They whole point is to not get noticed (since I don't think there exists a money laundering scheme that would hold up under intense investigation) and the cost of inventory is cheap insurance. So long as you aren't doing it in front of someone will to turn informant, of course .
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Old 06-24-2016, 07:43 PM
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Originally Posted by The Lurker Above View Post
[*]Busy bar doing $2000 in sales doesn't look too different from busy bar doing $2800 in 'sales'
An important part of which is that alcoholic beverages come in a very wide range of prices. A dozen shots can vary from $20 to $1000 without looking much different. Haircut prices don't vary that much, at least not for haircuts offered at the same place, so if you suddenly make an order of magnitude more money, you'd better be doing an order of magnitude more business.
  #34  
Old 06-24-2016, 08:58 PM
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We had a poster here (WhyNot) if memory serves, apologies if I mixed you up), who was such a worker and had no idea or clue, even though they actually had some bookkeeping responsibility.
Kind of. I was a manager at a teen nightclub (no booze) that was owned by a bookie. The only bookkeeping I did was to count the till from the legitimate sales at the end of the night. I eventually figured out that something shady was going on in the office at the other end of the building, where the owner (who I don't think I ever actually met) was Not To Be Disturbed...EVER, but that was right around the time - probably not coincidentally - that $75 from my till went missing and I was invited to find a job elsewhere.

There was quite likely some money laundering going on as well, but I honestly don't know. I was 18 and quite naive.
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Old 06-24-2016, 10:51 PM
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or just sell it to another bar.
The problem is - at a certain point, the other bar may trigger an investigation - how come they sell so much but their receipts from the (legitimate) liquor supplier don't reflect it? The supplier may tip off the cops ("I think he's buying stolen liquor...") or someone will hear the boss bragging about a too-cheap source. The more people who are involved in this crooked scheme one way or another, the more "loose ends" like no empties to match the sales, etc. - the more likely you will be discovered.

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Yesbut this really isnt the best way as you then have to pay all sorts of taxes on the income. Crooks dont like paying taxes.
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If you don't want to pay taxes on your income, you just keep it as cash.

The whole point of money laundering is to convert cash into real electronic money that can be used to buy expensive stuff. You can only buy so many things in this life with cash, for the rest you need hard money, which means money in a bank account.

So the money launderer needs to pay taxes on the laundered money, otherwise it isn't laundered money, it's still dirty money. That's the whole point, to convert dirty money into clean money.
The whole point is to convert money from illegal activity to legitimate income. You can't really buy a Ferrari for cash - when the car dealer deposits $150,000 cash, he has to fill out a form telling the bank where he got it. You can't write a cheque if the money is not legitimately deposited in the bank. The problem is even worse when you buy that $2M mansion.

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You cant buy a lot of stuff for cash.

So yeah, that's the whole point, but they still try to avoid paying taxes. Like by Smurfing, making many small deposits into a bank account- usually by having guys buy MO under $2900.
The problem is - and this is why money laundering is easier than other crime tracking - if you want to live a millionaire lifestyle, you need to have legitimate income. Legit means paying taxes on it. If the feds notice you, they can start investigating. Paid cash for gas or groceries? no problem. Paid cash or money orders for your mortgage? Your car payment? Your trip to Vegas? Your $500/night hotel suite? Your gardener, your maid, your limo service? At a certain point they will notice.

What do you propose doing with dozens of money orders for $2900 each? You bank will file a suspicious activity report if you deposit 10 of these every month, or if they notice the same parade of people buying the same thing month after month.

Using a business as a front requires you to buy a legitimate front and run it like a legit business, just monkey with daily receipts to ensure the illicit money trickles in consistently. The more cash the business deals with, the better. That's why the mobs love bars, pizza joints, vending machines, etc.

For a small time operator - the old route was to deposit overseas ("Wolf of Wall Street") where the feds could not get details, and then transfer the money home. However, almost every country overseas is cooperating to stamp out money laundering, which is usually an attribute of organized drug smuggling. So regular large cash deposits are usually a flag overseas too. Taking money out of the country over $10,000 cash without declaring it is also a crime.

Plus, you then have to explain to the feds where this money is coming from when you transfer it back - and one requirement is that if you have "investments" overseas, you must declare any holdings valued over $100,000. So if you claim you are withdrawing from your late Uncle's estate, well, you should have declared the inheritance way back when, and there better be that $100M you claim to be withdrawing from. Plus any foreign banks with Americans as customers must declare their holdings or risk forfeiting a big fine and any chance of participating in financial transactions with American institutions.

So you still need to create a fake complete business that is somehow collecting cash and paying you a salary.

the screws are tightening more and more.

Last edited by md2000; 06-24-2016 at 10:55 PM.
  #36  
Old 06-24-2016, 11:06 PM
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or just sell it to another bar.
....and have to camouflage more income
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Old 06-24-2016, 11:39 PM
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What do you propose doing with dozens of money orders for $2900 each? You bank will file a suspicious activity report if you deposit 10 of these every month, or if they notice the same parade of people buying the same thing month after month.
Not if you deposit them in Mexico.
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Old 06-24-2016, 11:47 PM
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So you still need to create a fake complete business that is somehow collecting cash and paying you a salary.

the screws are tightening more and more.
Full service accounting/payroll firms can make alot of things very simple. My business deals in a not insignificant fraction of cash. Much like the scene from breaking bad I can easily blend an extra couple hundred a day into my business without even drawing a sidelong glance, with a little patience, that number could creep into the $1000/day range.

The larger the business, the easier it is to fudge in larger amounts of money. A fancy nightclub can very easily blend tens of thousands of dollars a day in peripheral items like bottle service, private VIP booths/rooms, and $500 bottles of champagne.
  #39  
Old 06-25-2016, 12:02 AM
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Now I buy ten bottles of Captain Morgan for $200. I sell 20 shots for $5 each and pour the rest down the drain and record fake sales for 180 more shots, for which I put drug money in the till. I have successfully laundered $900 in drug money. I deposit the cash in my bank and pay my taxes on my $800 net profit like a good citizen ($720 of which is illegitimate) and I have receipts showing that I bought 10 bottles and sold 200 shots.
All modern cash registers time-stamp their receipts, and keep electronic copies of them in a database. The bar owner also needs to be careful to disperse his fake sales throughout the day so there does not appear a flood of consecutive sales bunched together near the end of the day (let alone after hours ) That would be a red flag fer sure.
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Old 06-25-2016, 07:23 AM
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People seem really hung up on the "pour the booze down the drain" aspect. What if, at the end of drug dealing, the big boss just says to his goons, "congrats on that awesome drug traffic, here's a thousand dollars each to have a great night out, so long as you spend it at this bar I own and only drink top-shelf stuff".

He'll see (80% of) that money again as legitimate profits from his business with a complete paper trail and inventory/sales matching up, and none of the staff of the bar even have to be in on it. All pouring the booze down the drain does is reduce the incidence of alcohol poisoning among his henchmen.
  #41  
Old 06-25-2016, 07:39 AM
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People seem really hung up on the "pour the booze down the drain" aspect. What if, at the end of drug dealing, the big boss just says to his goons, "congrats on that awesome drug traffic, here's a thousand dollars each to have a great night out, so long as you spend it at this bar I own and only drink top-shelf stuff".

He'll see (80% of) that money again as legitimate profits from his business with a complete paper trail and inventory/sales matching up, and none of the staff of the bar even have to be in on it. All pouring the booze down the drain does is reduce the incidence of alcohol poisoning among his henchmen.
I think the real confusion was with the idea that the destroyed liquor could have been sold legitimately for profit. If I sell 100% of my inventory every night, I have not profited by setting aside certain bottles for laundering. Of course, a place will not sell 100% of its inventory, so the destroyed bottles are "extra" in the sense that they would otherwise have gone unsold.
  #42  
Old 06-25-2016, 07:47 AM
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Not if you deposit them in Mexico.
Let's say you just want to live a moderate upscale lifestyle - you "make" $290,000 a year. That means you have to buy and then deposit in Mexico 100 of these $2900 MO's each year.

First, you must explain where this money came from on your tax return - gift, earned (why?) or asset withdrawal.

But you don't have a $10M deposit in the Mexican bank so it can't be withdrawal - plus, you MUST report large foreign asset holdings. The Mexican bank will cooperate with the feds (they have no choice) and will report that the money comes from those money order deposits, which the feds trace back to bought a bank near your home.

So you're being paid for doing cybersecurity consulting for YoSoyRico.com in Mexico? Still, then the feds dig into that company. It has a bizarre source of income (MO's from near you) and apparently does no other business. So again, unless it's a front doing a decent amount of legitimate business, meaning another quasi-valid "front" business, you will also be caught.

Gift? From whom? I would imagine "gift" would ring the most alarm bells. Again, the feds will trace the money trail back to those MO's. If you have a bunch of flunkies buying them, one or more will turn state's evidence on you rather than go to jail.

You seem to think the feds will be stymied by a border. Almost every bank in the world now cooperates with the feds, and of course Mexican authorities, despite occasional corrupt officials, are fully cooperative with drug and money laundering initiatives. You too must disclose foreign holdings and accounts. Failure to disclose is a crime.

https://www.blankrome.com/index.cfm?...37&itemID=3249
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If you have received a letter from a foreign bank, your account has likely been identified as potentially having a U.S. tax nexus. FATCA generally requires foreign banks to identify accounts with a U.S. tax nexus, and, as discussed above, in order to avoid significant penalties, beginning July 1, 2014, FATCA will require the foreign bank to submit to the IRS certain information related to the accounts that have been identified as having a U.S. tax nexus.
(bolding is mine)
  #43  
Old 06-25-2016, 07:56 AM
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As far as I know (which is about this far l l ), business aren't required to have fancy electronic cash registers with time stamps. The bar/nightclub I was referring to was in a resort, selling overpriced booze legitimately and was a pretty popular place. During the summer season I wouldn't be surprised if they were pulling in well over $5000 a night. Dump in a couple of thousand a night in dirty money and it adds up pretty quickly. Plus, I believe bars are exempted to some extent for reporting cash income. I imagine the increase in the use of plastic has hurt these schemes somewhat.
  #44  
Old 06-25-2016, 08:53 AM
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As far as I know (which is about this far l l ), business aren't required to have fancy electronic cash registers with time stamps. The bar/nightclub I was referring to was in a resort, selling overpriced booze legitimately and was a pretty popular place. During the summer season I wouldn't be surprised if they were pulling in well over $5000 a night. Dump in a couple of thousand a night in dirty money and it adds up pretty quickly. Plus, I believe bars are exempted to some extent for reporting cash income. I imagine the increase in the use of plastic has hurt these schemes somewhat.
From what I've read about, nobody is "exempt" from reporting cash income. All cash deposits are recorded as such by financial institutions. Some businesses of course have regular large cash deposits - stores, restaurants, bars, etc. The thing that triggers IRS/Treasury questions is unusual cash deposits - one off, sudden changes, or "structured" apparently to avoid triggering reports. So a bar depositing $9,000 give or take every night? Normal. A bar deposits $3,000 a night and $35,000 one night? Banker will ask why. (Maybe it was New Years or Mardi Gras...) Bar deposits $3,000 each night and then jumps to $12,000 - maybe banker will ask why.

I think someone was talking about this in an earlier thread, but a bank is safer covering their ass by filing a SAR (suspicious activity report) than ignoring out-of-pattern activity. Apparently the vast majority result in no investigation. "Deposit - Joe got paid $12,000 cash for a roofing job." As long as Joe does not do this every month, nobody's suspicious.

Once this attracts the attention of the feds, then deeper analysis will come into play. Does the business (bar) have an unusually different cash to credit card ratio than other such businesses? Why? (Clientele?) Do they have the receipts for supplies to back up the sales amounts (where the liquor down the drain helps - purchase, empties) Maybe they'll be suspicious enough to do more detailed investigation... stake the place out. There were 30 people in the bar a typical night, talking quietly, but the books reflect $12,000 worth of business. If each person drank $400 worth of shots, they should all be dead. So it's dangerous to exaggerate receipts too much. And so on...
  #45  
Old 06-25-2016, 08:58 AM
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How effective is the "I went to Vegas and won a lot at the tables" justification?


So far, we've got bars, restaurants, vending machines as good fronts. What else tends to be popular?

I note that those businesses tend to 1) deal with the public in lots of small transactions, 2) sell common objects rather than services, 3) often have high markup on the goods sold. Am I missing anything else?
  #46  
Old 06-25-2016, 09:30 AM
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How effective is the "I went to Vegas and won a lot at the tables" justification?


So far, we've got bars, restaurants, vending machines as good fronts. What else tends to be popular?

I note that those businesses tend to 1) deal with the public in lots of small transactions, 2) sell common objects rather than services, 3) often have high markup on the goods sold. Am I missing anything else?
Well, the tight controls on casino licenses indicate that casinos - another business that rakes in a lot of cash - are also a favourite for mob money laundering.

As for "I won it at the casino" - I have heard that the casinos have IRS agents wandering the floors just waiting to find people who hit the big jackpot, to ensure they get the government share. Any decent sized win will already be documented. Again, the problem is not disposing of that one-time $50,000 windfall. you just buy groceries and pay bar tabs with cash etc. for the next few years. The problem is consistently laundering a good income of, say, $300,000 a year. That will be hard to claim as a lucky series of sub-$1000 wins in Atlantic City; certainly the feds can check the legendary casino video footage. Even Monte Carlo is likely to tell the feds whether or not you won big; they have no reason to be your alibi.
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Old 06-25-2016, 09:32 AM
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How effective is the "I went to Vegas and won a lot at the tables" justification?


So far, we've got bars, restaurants, vending machines as good fronts. What else tends to be popular?

I note that those businesses tend to 1) deal with the public in lots of small transactions, 2) sell common objects rather than services, 3) often have high markup on the goods sold. Am I missing anything else?
Well, the tight controls on casino licenses indicate that casinos - another business that rakes in a lot of cash - are also a favourite for mob money laundering.

As for "I won it at the casino" - I have heard that the casinos have IRS agents wandering the floors just waiting to find people who hit the big jackpot, to ensure they get the government share. Any decent sized win will already be documented. Again, the problem is not disposing of that one-time $50,000 windfall. you just buy groceries and pay bar tabs with cash etc. for the next few years. The problem is consistently laundering a good income of, say, $300,000 a year. That will be hard to claim as a lucky series of sub-$1000 wins in Atlantic City; certainly the feds can check the legendary casino video footage. Even Monte Carlo is likely to tell the feds whether or not you won big; they have no reason to be your alibi.

The problem is - any story has to stand up to scrutiny, and with the feds, deep scrutiny is likely what you get.
  #48  
Old 06-25-2016, 09:34 AM
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So far, we've got bars, restaurants, vending machines as good fronts. What else tends to be popular?

I note that those businesses tend to 1) deal with the public in lots of small transactions, 2) sell common objects rather than services, 3) often have high markup on the goods sold. Am I missing anything else?
Consulting.

Kind of a different breed of money laundering, and it breaks the rules we've been talking about so far. Consulting fees are often laundered bribes. Very little if any product (although they'll often add things like "printing fees" to enhance legitimacy.) High hourly fees mean you can launder quite a bit of money all at once for a week of "consulting" work.

Fraudulent consulting is white collar money laundering.
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Old 06-25-2016, 10:07 AM
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Consulting.

Kind of a different breed of money laundering, and it breaks the rules we've been talking about so far. Consulting fees are often laundered bribes. Very little if any product (although they'll often add things like "printing fees" to enhance legitimacy.) High hourly fees mean you can launder quite a bit of money all at once for a week of "consulting" work.

Fraudulent consulting is white collar money laundering.
I did think about that given the sums involved and the intangibility of the product (and sometimes the alleged benefits). It does require several accomplices who can credibly pay you large sums for consulting services.

It also means that they'll be spending more money on the books than they really do. Is there some scheme which is complementary with money laundering i.e.: people who would benefit from claiming that they paid the money launderer money when they in fact did not?
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Old 06-25-2016, 10:28 AM
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It also means that they'll be spending more money on the books than they really do. Is there some scheme which is complementary with money laundering i.e.: people who would benefit from claiming that they paid the money launderer money when they in fact did not?
You don't go to jail for bribery. You pay the money - you're just not paying it for actual consulting. You're paying money for a vote or a contract in your favor. Those things are illegal to take and to offer money for. Record it as "consulting services" and everyone stays out of jail.
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