# How is money laundering detected and proven? **URL:** \ **Category:** Factual Questions\ **Created:** [June 24, 2016, 12:56am UTC](https://boards.straightdope.com/t/how-is-money-laundering-detected-and-proven/758194 "2016-06-24T00:56:13Z")\ **Posts on this page:** 20\ **Page:** 4
**Author:** ![md2000](https://avatars.discourse-cdn.com/v4/letter/m/73ab20/32.png) [@md2000](https://boards.straightdope.com/u/md2000)\ **Post date:** [June 27, 2016, 9:12pm UTC](https://boards.straightdope.com/t/how-is-money-laundering-detected-and-proven/758194/61 "2016-06-27T21:12:16Z")
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. ---
**Author:** ![md2000](https://avatars.discourse-cdn.com/v4/letter/m/73ab20/32.png) [@md2000](https://boards.straightdope.com/u/md2000)\ **Post date:** [June 27, 2016, 9:20pm UTC](https://boards.straightdope.com/t/how-is-money-laundering-detected-and-proven/758194/62 "2016-06-27T21:20:21Z")
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? ---
**Author:** ![Quartz](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/quartz/32/267_2.png) [@Quartz](https://boards.straightdope.com/u/Quartz)\ **Post date:** [June 27, 2016, 9:41pm UTC](https://boards.straightdope.com/t/how-is-money-laundering-detected-and-proven/758194/63 "2016-06-27T21:41:57Z")
> [@MichaelEmouse](#): > > 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. ---
**Author:** ![davidm](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/davidm/32/225_2.png) [@davidm](https://boards.straightdope.com/u/davidm)\ **Post date:** [June 27, 2016, 10:24pm UTC](https://boards.straightdope.com/t/how-is-money-laundering-detected-and-proven/758194/64 "2016-06-27T22:24:02Z")
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%? ---
**Author:** ![friedo](https://avatars.discourse-cdn.com/v4/letter/f/8edcca/32.png) [@friedo](https://boards.straightdope.com/u/friedo)\ **Post date:** [June 27, 2016, 10:51pm UTC](https://boards.straightdope.com/t/how-is-money-laundering-detected-and-proven/758194/65 "2016-06-27T22:51:39Z")
> [@davidm](#): > > 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. ---
**Author:** ![Alley\_Dweller](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/alley_dweller/32/430_2.png) [@Alley\_Dweller](https://boards.straightdope.com/u/Alley_Dweller)\ **Post date:** [June 27, 2016, 11:16pm UTC](https://boards.straightdope.com/t/how-is-money-laundering-detected-and-proven/758194/66 "2016-06-27T23:16:21Z")
> [@davidm](#): > > 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%? A bar that takes in, say, $1000 a night might just barely cover overhead expenses (rent, utilities, salaries, licenses, furniture). Once all the overhead is covered, any extra money only needs to cover variable costs to make a profit. So, if all a bar takes in is $1000 a night, it might just break even. If it takes in $2000 a night, it might make an $800 profit. ---
**Author:** ![davidm](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/davidm/32/225_2.png) [@davidm](https://boards.straightdope.com/u/davidm)\ **Post date:** [June 28, 2016, 12:22am UTC](https://boards.straightdope.com/t/how-is-money-laundering-detected-and-proven/758194/67 "2016-06-28T00:22:53Z")
Okay. So they have to inflate their profits quite a bit, which is how they can end up being caught. You really have to stay way under the radar and attract no attention at all. Either that or pay off the locals, which I suspect is one way they get away with it. ---
**Author:** ![JerrySTL](https://avatars.discourse-cdn.com/v4/letter/j/e274bd/32.png) [@JerrySTL](https://boards.straightdope.com/u/JerrySTL)\ **Post date:** [June 28, 2016, 12:33am UTC](https://boards.straightdope.com/t/how-is-money-laundering-detected-and-proven/758194/68 "2016-06-28T00:33:00Z")
Back in the early 1970s I worked at a drive-in theater where money was laundered. A company bought the place and started paying more for the food and candy. I thought that was strange. Then one winter night I had sold about 50 tickets. Later that night I noticed that the manager marked down 105 tickets sold. WTF? I figured him the type to mark down 40 and take a cut for himself. He swore me to silence and told me about the money laundering. Said that I could get killed if I blabbed. Then the higher prices for the candy and food started to make sense. That company was also part of the scheme. ---
**Author:** ![drachillix](https://avatars.discourse-cdn.com/v4/letter/d/48db29/32.png) [@drachillix](https://boards.straightdope.com/u/drachillix)\ **Post date:** [June 28, 2016, 1:30am UTC](https://boards.straightdope.com/t/how-is-money-laundering-detected-and-proven/758194/69 "2016-06-28T01:30:08Z")
Like many criminal enterprises, the lazy and stupid go quickly. I know of several ways to clean some fairly large amounts of money that from an IRS standpoint are almost impossible to track, and easily explain away large volumes of small bills. It would also be a solid 50 hour a week job to scrub 10-20k a week gross. I discussed it with my mom (who has worked in IRS criminal investigations) according to her there is no reason to believe that my methods would trip anything on their radar. It might not survive a full blown 6 month stakeout, but it would take massive investigative resources to pin down and bust. ---
**Author:** ![drachillix](https://avatars.discourse-cdn.com/v4/letter/d/48db29/32.png) [@drachillix](https://boards.straightdope.com/u/drachillix)\ **Post date:** [June 28, 2016, 1:44am UTC](https://boards.straightdope.com/t/how-is-money-laundering-detected-and-proven/758194/70 "2016-06-28T01:44:32Z")
> [@davidm](#): > > 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%? Even a very small businesses like mine can have $12-$15k a month. If with a little bookeeping magic i could put another $2-$3k a month in my pocket? While having a few extra subcontractors and or a fake employee. ---
**Author:** ![astro](https://avatars.discourse-cdn.com/v4/letter/a/9dc877/32.png) [@astro](https://boards.straightdope.com/u/astro)\ **Post date:** [June 28, 2016, 2:17am UTC](https://boards.straightdope.com/t/how-is-money-laundering-detected-and-proven/758194/71 "2016-06-28T02:17:51Z")
The IRS has extensive and accurate financial profiles about the way most legitimately run businesses (of all kinds) operate. They will tolerate some horsing around when dealing with cash business like convenience stores etc. but there are limits and if you get greedy and step over the line they will pounce. As others have noted it’s very difficult to throw a lot of cash around even in bite sized chunks without eventually getting noticed. A part of this is just common sense. Why is person X always paying bill Y in person in messy cash bills that most people pay with less hassle with checks, credit cards or automatic bill pay from their bank accounts? If you have people doing things that are counter-intuitive or illogical it eventually gets noticed. If you have businesses that usually generate $5000 a week in sales doing 25000 a week it gets noticed. You might ask “How would anyone know?” In many cash businesses an experienced owner can look at the sales of an individual item (say convenience store and gallons of milk sold) and tell you with 95% accuracy what the net profit of the store should be. Things follow logical patterns. It’s not a mystery. The IRS also has this info. People are hiding cash income all the time the IRS is basically in the position of deciding where it wants to focus for the greatest return. They value their time just like you value yours. ---
**Author:** ![bubba001](https://avatars.discourse-cdn.com/v4/letter/b/f17d59/32.png) [@bubba001](https://boards.straightdope.com/u/bubba001)\ **Post date:** [June 28, 2016, 2:19am UTC](https://boards.straightdope.com/t/how-is-money-laundering-detected-and-proven/758194/72 "2016-06-28T02:19:20Z")
Small scale, but a guy I grew up with paid the owner of a bar $1600 per week, in cash. He got a check for $800, and business cards that said he was the manager. As far as I know, he never got caught. He died 30 years later, broke, on disability. ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [June 28, 2016, 2:20am UTC](https://boards.straightdope.com/t/how-is-money-laundering-detected-and-proven/758194/73 "2016-06-28T02:20:46Z")
> [@drachillix](#): > > Like many criminal enterprises, the lazy and stupid go quickly. I know of several ways to clean some fairly large amounts of money that from an IRS standpoint are almost impossible to track, and easily explain away large volumes of small bills. It would also be a solid 50 hour a week job to scrub 10-20k a week gross. > > I discussed it with my mom (who has worked in IRS criminal investigations) according to her there is no reason to believe that my methods would trip anything on their radar. It might not survive a full blown 6 month stakeout, but it would take massive investigative resources to pin down and bust. Maybe, depends on how you spent it. Hookers and blow- until you got arrested, very hard to spot. But cars and real property? It’s easy to do a Source & App or a Cash T and show a shortcoming on that much gross income. $1000 a week and they’d likely never spot you. 20K? That’s $240K a year. Now if your gross was $1MM, it’d be not that hard to hide. However, criminals are lazy and Easy Money runs thru your fingers like water. You would never limit yourself to what was hard to spot. You’d figure (Hey I got away with it this far, so double that would work… and double _that_… and so forth. ---
**Author:** ![astro](https://avatars.discourse-cdn.com/v4/letter/a/9dc877/32.png) [@astro](https://boards.straightdope.com/u/astro)\ **Post date:** [June 28, 2016, 2:25am UTC](https://boards.straightdope.com/t/how-is-money-laundering-detected-and-proven/758194/74 "2016-06-28T02:25:47Z")
> [@drachillix](#): > > Like many criminal enterprises, the lazy and stupid go quickly. I know of several ways to clean some fairly large amounts of money that from an IRS standpoint are almost impossible to track, and easily explain away large volumes of small bills. It would also be a solid 50 hour a week job to scrub 10-20k a week gross. > > I discussed it with my mom (who has worked in IRS criminal investigations) according to her there is no reason to believe that my methods would trip anything on their radar. It might not survive a full blown 6 month stakeout, but it would take massive investigative resources to pin down and bust. As long as you don’t get noticed this is possible but a lot of tax criminals who are being low key are turned by business competitors who know their numbers or procedures aren’t right, and just want them out of the way. There are lots of people ready to tattle on you if you are competing for clients with other legit business. You pay for all your goods in cash the delivery guy will probably mention this to your competition just in conversation. Then he thinks about it decides it’s hinky and eventually you’re screwed. ---
**Author:** ![Little\_Nemo](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/little_nemo/32/3120_2.png) [@Little\_Nemo](https://boards.straightdope.com/u/Little_Nemo)\ **Post date:** [June 28, 2016, 2:31am UTC](https://boards.straightdope.com/t/how-is-money-laundering-detected-and-proven/758194/75 "2016-06-28T02:31:59Z")
> [@MichaelEmouse](#): > > 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. ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [June 28, 2016, 2:34am UTC](https://boards.straightdope.com/t/how-is-money-laundering-detected-and-proven/758194/76 "2016-06-28T02:34:05Z")
> [@astro](#): > > As long as you don’t get noticed this is possible but a lot of tax criminals who are being low key are turned by business competitors who know their numbers or procedures aren’t right, and just want them out of the way. There are lots of people ready to tattle on you if you are competing for clients with other legit business. You pay for all your goods in cash the delivery guy will probably mention this to your competition just in conversation. Then he thinks about it decides it’s hinky and eventually you’re screwed. Or your ex-wife or ex-GF. Or your confederate who needs a deal, _badly._ ---
**Author:** ![md2000](https://avatars.discourse-cdn.com/v4/letter/m/73ab20/32.png) [@md2000](https://boards.straightdope.com/u/md2000)\ **Post date:** [June 28, 2016, 4:41am UTC](https://boards.straightdope.com/t/how-is-money-laundering-detected-and-proven/758194/77 "2016-06-28T04:41:57Z")
Lets distinguish between a contractor or some such businessman skimming some cash off the top or doing jobs under the table. This is just tax evasion. Money laundering is when you acquire a wad of cash pretty much illegally and need to make it look like real income. A good tax evader will of course leave enough legitimate income to account for the basics or fake business expenses. A person with an illegal cash income - say, drug dealer, chop shop operator, etc. - needs to find a way to _make_ the income look legit. As has been beaten to death already - you can trickle cash into a legitimate enterprise and inflate the receipt, provided you don’t overdo it - and as long as the feds are not interested in deeply scrutinizing you. Unless your business is international jewel thief and you only do one job a year, you would either be working overtime doing both your criminal and front jobs, or would have to involve someone else (or several someones) to run the front for you - and they also want to be paid to accept some risk, thus significantly increasing your cost. the only thing that might save you or postpone the inevitable is priorities - that the IRS is probably more interested in guys with $50M overseas than some guy who appears to be laundering $150,000 - unless you make it real easy for them. ---
**Author:** ![zimaane](https://avatars.discourse-cdn.com/v4/letter/z/a3d4f5/32.png) [@zimaane](https://boards.straightdope.com/u/zimaane)\ **Post date:** [June 28, 2016, 4:02pm UTC](https://boards.straightdope.com/t/how-is-money-laundering-detected-and-proven/758194/78 "2016-06-28T16:02:34Z")
A few years ago, I rented a house from an older couple, who liked to be paid with a cashier’s check. So, once a month I went to my bank to get the check, and the bank made it very difficult. I had to sign repeatedly, show multiple IDs, et cetera. I guess they were suspicious (although of course it was 100 percent legit) ---
**Author:** ![CBEscapee](https://avatars.discourse-cdn.com/v4/letter/c/b19c9b/32.png) [@CBEscapee](https://boards.straightdope.com/u/CBEscapee)\ **Post date:** [June 29, 2016, 2:09am UTC](https://boards.straightdope.com/t/how-is-money-laundering-detected-and-proven/758194/79 "2016-06-29T02:09:04Z")
> [@DrDeth](#): > > And many of your bank employees are either in the pay of the cartels or will do anything they demand due to fear of finding the families heads in a bag. > > Same with your Judges, Elected Officials and LEOs. > > And, can we really blame them for the later? That’s pretty scary. > > [People vs politicians: Who can tackle Mexico's corruption? - BBC News](http://www.bbc.com/news/world-latin-america-35865948) > _Transparency International’s most recent corruption perceptions index lists Mexico, at 95th, as the most crooked of all countries in the OECD club of industrialised nations._ > > [Latin America](http://www.huffingtonpost.com/news/mexico-corruption/) > [Mexico's Efforts to Tackle Police Corruption Keep Failing](https://news.vice.com/article/mexicos-efforts-to-tackle-police-corruption-are-failing) Try again. Do you think these people are acting out of fear of the cartels? Or just greed? [How a big US bank laundered billions from Mexico's murderous drug gangs | Drugs trade | The Guardian](https://www.theguardian.com/world/2011/apr/03/us-bank-mexico-drug-gangs) > **[Banks Launder Billions of Illegal Cartel Money While Snubbing Legal Marijuana...](https://www.huffpost.com/entry/banks-cartel-money-laundering_b_4619464)** > > The hypocrisy of the role that banks play in the drug trade is particularly disgraceful when considering the recent system of marijuana regulation that was introduced in Colorado. [https://www.bloomberg.com/view/articles/2013-03-31/money-laundering-banks-still-get-a-pass-from-u-s-](https://www.bloomberg.com/view/articles/2013-03-31/money-laundering-banks-still-get-a-pass-from-u-s-) ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [June 29, 2016, 3:25am UTC](https://boards.straightdope.com/t/how-is-money-laundering-detected-and-proven/758194/80 "2016-06-29T03:25:00Z")
> [@CBEscapee](#): > > Try again. Do you think these people are acting out of fear of the cartels? Or just greed? Try again for _what_? You are trying to deny Mexico is deeply corrupt? [Previous page](https://boards.straightdope.com/t/how-is-money-laundering-detected-and-proven/758194.md?page=3) [Next page](https://boards.straightdope.com/t/how-is-money-laundering-detected-and-proven/758194.md?page=5)