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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, 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, 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, 10:57 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, 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, 12:39 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, 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, 01:33 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 06-25-2016, 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 06-24-2016, 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, 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, 11:13 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, 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, 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, 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, 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, 12:37 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 06-25-2016, 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.
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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.
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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.
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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...
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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?
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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.
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Old 06-25-2016, 09:34 AM
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Originally Posted by MichaelEmouse View Post
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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Old 06-27-2016, 12:16 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?
I've often heard that the art world is hugely mixed up in money laundering. Art is basically the ultimate in arbitrary and nonsensical value. If I buy a bar of gold, for instance, the authorities can easily check whether the price I claimed matches the market value for the product. Art is entirely in the eye of the beholder. A person might pay literally millions for any stupid bullshit if they think it is artistic, or it comes from a famous artist, or it was owned by a famous person at some point. There is no objective measure for what a certain piece "should" cost, so the authorities have no way to assess what price is legitimate.

(And not to rag on artists, but I've seen some pieces of art that I would pay someone to throw away get sold for tens of millions of dollars. So I can see why it would be attractive to money launderers.)
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Old 06-27-2016, 01:07 AM
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I've often heard that the art world is hugely mixed up in money laundering. Art is basically the ultimate in arbitrary and nonsensical value. If I buy a bar of gold, for instance, the authorities can easily check whether the price I claimed matches the market value for the product. Art is entirely in the eye of the beholder. A person might pay literally millions for any stupid bullshit if they think it is artistic, or it comes from a famous artist, or it was owned by a famous person at some point. There is no objective measure for what a certain piece "should" cost, so the authorities have no way to assess what price is legitimate.

(And not to rag on artists, but I've seen some pieces of art that I would pay someone to throw away get sold for tens of millions of dollars. So I can see why it would be attractive to money launderers.)
But art and consulting are ways to pay bribes, or pass someone money. The person who wants to pay you presumably has a pile of legitimate money in the banking system already. (BTW IIRC congress and senate members are not allowed to get consulting fees and even their speaking fees are strictly controlled?)

The problem with illegal activities (bookmaking, drugs, protection racket, armoured car heist, whatever) is that you end up with the proverbial pallet of cash bills. This is what money laundering is for - convert this into seeming legal income in a bank account. If you can dream up a way, so has the IRS. Most methods are hard to do on a regular basis and will attract attention, and/or require an army of dupes and possibly a compliant financial institution, because somewhere you have to deposit thousands of dollars a month into a bank. This might work if you're the Mexican cartel and can threaten low-level employees, but even then, any institution south of the US border consistently moving large sums of US dollar bills is going to attract the attention of two federal governments. At that point, they don't have to prove money laundering - they just follow and seize all suspicious money - freeze bank accounts - until a proper accounting can be done by the involved parties.

If you remember the series Weeds, they ran a bakery as a front for a while. However, it would have suffered from the same problem as the linked article - there was nowhere near enough customer traffic to justify the income. And of course, Hollywood thrillers notwithstanding, it's very rare that the police do not eventually learn the people behind even a medium level drug distribution - everyone talks, they just need evidence to get them. Once they have a target, they start digging and "where's the money?" is the first question. Fortunately, in a comedy, that is an irrelevant detail.
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Old 06-27-2016, 04:41 PM
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How effective is the "I went to Vegas and won a lot at the tables" justification?
It's been an issue over here. There are Fixed Odds betting machines which can take 100 (cash) a draw, and people have been using them to launder money.
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Old 06-27-2016, 09:31 PM
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How effective is the "I went to Vegas and won a lot at the tables" justification?
I think the opposite is more effective. Owning a casino lets you claim large amounts of income from unverifiable sources.

You own a casino where your legitimate customers are paying in $1,000,000 a week. You throw in another $500,000 a week. You're not a restaurant or a bar that has to account for the inventory you used. You just claim the customers you had bet more than usual. The IRS isn't keeping track of the customers who are losing money.
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Old 06-27-2016, 01:18 AM
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I read somewhere that the Secret Service and the DEA have a program to track serial numbers of all larger bills - 50's and 100's. They monitor where they last intersected a US bank. So if suddenly, say, regular amounts of $100 bills from one city - say, Chicago or Minneapolis or Buffalo - start appearing in shipments returning from a specific bank in Mexico, that will give them a starting point. Since a lot of businesses tend to deposit their receipts nightly, bills - especially larger denominations - probably circulate in and out of banks regularly. Plus, in the age of plastic, cash deposits for most businesses are probably way down.

The DEA has identified "cut off the money" as a prime means of attacking organized crime. yes, the lower-level pawns can survive on cash, pay $3,000/month rent for an apartment cash, pay your $1,000 car payment cash, pay your bar and restaurant bills cash, nothing close to $10,000 - but still, it's hard to buy a Ferrari or a big mansion with cash.
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Old 06-27-2016, 12:05 PM
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I read somewhere that the Secret Service and the DEA have a program to track serial numbers of all larger bills - 50's and 100's. They monitor where they last intersected a US bank. So if suddenly, say, regular amounts of $100 bills from one city - say, Chicago or Minneapolis or Buffalo - start appearing in shipments returning from a specific bank in Mexico, that will give them a starting point. Since a lot of businesses tend to deposit their receipts nightly, bills - especially larger denominations - probably circulate in and out of banks regularly. Plus, in the age of plastic, cash deposits for most businesses are probably way down.

The DEA has identified "cut off the money" as a prime means of attacking organized crime. yes, the lower-level pawns can survive on cash, pay $3,000/month rent for an apartment cash, pay your $1,000 car payment cash, pay your bar and restaurant bills cash, nothing close to $10,000 - but still, it's hard to buy a Ferrari or a big mansion with cash.
So, if you aim to live like this (http://cdn.traileraddict.com/content...985-poster.jpg ) 2 or 3 orders of magnitude milder, you should be fine?


If someone decides to retire once he has a pallet of cash and live on that, would he have problems? Would investing in the stock market attract attention by itself?

Is the problem for most criminals that once they have 1 pallet of cash, they want another and another and that paying rent/mortgage on a good-but-not-luxurious place and car and paying ordinary bills isn't enough for them, it has to be a villa and some sports cars?
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Old 06-27-2016, 02:09 PM
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most stock market investments, you buy stock through a broker. Rarely are brokers paid in cash - that would attract attention. They hold the stock for you, issue the necessary forms for income tax purposes (losses, capital gains, etc.) So there are two problems right there - attracting attention by paying in cash, or wandering into a bank to pay top up your account to pay your broker; and explaining to the IRS where you got the cash to invest in the first place. The faster your trickle in that pallet of money, the harder it is to hide it. If you have 50 bank accounts - well, IIRC you need your social Security number to open them, so that too might attract the attention of the IRS.

it may be a comedy, but Brewsters is the opposite of money laundering. The guy has a legit source of cash so the one problem he does not have to worry about is the IRS.

The problem still is - how do you afford a lifestyle without attracting the attention of the IRS? If you buy a Ferrari for cash, the dealer will tell their bank who gave them the cash when they deposit it, and it will be reported. Buy a car on credit and make time payments? Why would they give you credit if you have no visible income?
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Old 06-27-2016, 03:24 PM
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There was an old Burt Reynolds movie where he played a professional burglar. He had two methods of cleaning his money, both of which seem reasonable- first, he makes and sells scrap metal art from a roadside stand- which is perfect, because he can keep minimal records and who's to say what someone paid or even who bought it? Second, he visits the track, ignores his losses and declares his winnings as gambling income.

Also, there was an NPR story several years ago about an FBI agent who went undercover posing as a money launderer. He recounts being contacted by a drug dealer who wanted to launder a million dollars. The problem was that the money was in one dollar bills, and filling most of his basement. He said he told the man to kill himself, because that money couldn't be spent and couldn't be cleaned.
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Old 06-27-2016, 04:09 PM
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The problem still is - how do you afford a lifestyle without attracting the attention of the IRS? If you buy a Ferrari for cash, the dealer will tell their bank who gave them the cash when they deposit it, and it will be reported. Buy a car on credit and make time payments? Why would they give you credit if you have no visible income?
It's funny, when I was working there in CA, there was one cute little car that sold for just under $10K. It was really popular among all the Dealers as they could buy it with cash.
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Old 06-27-2016, 04:12 PM
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The main problem, of course, is that as soon as you start feeding cash to the banks in any large quantity, they will file a report. The banks (and bank managers) are paranoid about being accused of complicity in money laundering; so better to file a report and let the Treasury decide if you're worth investigating. After all, it costs the bank nothing. Unless you have a very plausible source for your income that will assuage the bank manager, you will be flagged.

Selling art might pass as a valid form of income. However, how many people pay, say, $250 cash for a chunk of art, instead cheque or credit card? How many pieces do you have to sell to make a comfortable living? Does that level of income pass the smell test? If the feds get suspicious, then can stake out the stand and see what the business really is like.
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Old 06-30-2016, 02:33 PM
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The main problem, of course, is that as soon as you start feeding cash to the banks in any large quantity, they will file a report. The banks (and bank managers) are paranoid about being accused of complicity in money laundering; so better to file a report and let the Treasury decide if you're worth investigating. After all, it costs the bank nothing. Unless you have a very plausible source for your income that will assuage the bank manager, you will be flagged.
Nope. The paranoia about complicity means the bank files a report, regardless of what they think or even know. There's no bigger nightmare than getting dragged into a case because a manager or employee didn't report something because nice old Mr. D'Agostino was a good customer or you passed by their shop and saw how busy they were so didn't think anything of it. "Report everything and let the Feds sort it out" is the mantra. Failing to report a SARs-worthy transaction is one of the quickest routes to termination.
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Old 06-30-2016, 02:36 PM
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Nope. The paranoia about complicity means the bank files a report, regardless of what they think or even know. There's no bigger nightmare than getting dragged into a case because a manager or employee didn't report something because nice old Mr. D'Agostino was a good customer or you passed by their shop and saw how busy they were so didn't think anything of it. "Report everything and let the Feds sort it out" is the mantra. Failing to report a SARs-worthy transaction is one of the quickest routes to termination.
Yep. "CYA SARs" are a big problem, brought on by inexperienced regulators.
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Old 06-27-2016, 04:20 PM
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If you're the Mexican cartel, you have no problem laundering money. You can run entire chains of fictitious enterprises and generate all the car repair or bakery or Pizza or fast food businesses you want; there will be no shortage of peons to fill the ranks of the fake businesses, or to be the managers. The money will roll in; and you pay the help at south-of-the-border wages.

The problem is, what do you do if you are a solo freelancer or a small-time operator, and are situated in a medium-sized US town?
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Old 06-27-2016, 05:24 PM
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It seems to me that, in order to successfully slip the ill-gotten cash into your legitimate profits in a convincing manner, your legitimate profits would have to dwarf your illegitimate profits, so why bother with the illegal stuff? If you can run a business that's successful enough to hide the cash from selling drugs or whatever, then why take the chance of also selling drugs?

If you can't run a successful enough legitimate business then you can't launder the money. If you can, then you don't have to launder any money. What am I missing? Do people sell drugs, run bookmaking operations, or whatever, simply to increase their bar profits 10% or 20%?

Last edited by davidm; 06-27-2016 at 05:24 PM.
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Old 06-27-2016, 05:51 PM
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It seems to me that, in order to successfully slip the ill-gotten cash into your legitimate profits in a convincing manner, your legitimate profits would have to dwarf your illegitimate profits, so why bother with the illegal stuff? If you can run a business that's successful enough to hide the cash from selling drugs or whatever, then why take the chance of also selling drugs?
Nah, in real life money laundering enterprises are pretty-much always deriving the vast majority of their revenue from illicit activities. The goal is to do it in such a way that the revenues reported from such a business are not orders of magnitude out of line for what a legitimate business of that sort might earn.

But any such enterprise will become obvious with just a little scrutiny. You just can't justify fake transactions, even with perfect paperwork, if the cops stake out your place and say you had three customers in two weeks.

So the idea is to fly under the radar as much as possible.
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