A lottery is one of the few plausible ways that a person could suddenly come into a large sum of money without it looking suspicious. And since lottery tickets are sold to anonymous buyers for cash, there’s very little way to doublecheck the supposed source of the lottery’s revenue. So has anyone ever tried to use a lottery basically as a money laundering scheme? Say, a large amount of drug money is recorded as supposedly having come from selling lottery tickets, and the “random” number drawn is arranged to pay out bribes, payments for hits, etc. Perhaps not in the US where I presume that oversight on lotteries is stringent to prevent such shenanigans, but maybe in more corrput places?
better off claiming winnings in vegas. Lottery payouts of any scale are reported to the IRS (IIRC over $600)
You could pretty much report the illegal cash as just “earnings”. The point behind money laundering is two-fold: to hide the source, and to not pay taxes.
One could certainly report “gambling winnings” on line 23 (iirc) of the 1040. But it’d be taxable.
One common way to launder cash is to report it as “cash sales” from a front business. Up to a point, this can work.
Pretty much, the ways of detecting Money laundering are many layered and complex. No amateur is going to come up with a way to do it, and if a pro does come up with a subtle new loophole, it is usually filled within a year or often less.
So are large gambling payouts in Vegas.
I think most replies here have been based on the idea that it’s the player who wants to launder money - buy lottery tickets, then claim that your sudden wealth comes from hitting the big prize. I understand the OP’s question, however, to refer to a situation where it’s the operator of the lottery who wants to launder money: He’d claim the monies to be laundered as revenue from the sale of lottery tickets.
I doubt such a scheme would work - the sale of lottery tickets leaves way too many traces. For instance, the individual retailers selling the tickets have to keep records about the number of tickets sold, for the purposes of their settlement with the lottery operator. You would need to have too many people privy to the scheme for that to work.
Most lotteries are run or licensed by the state and have to keep track of all the pesky details. You can’t say “I won $40,000 in the powerball” without accompanying documentation being easy to track.
Could you just buy lotto tickets? Given that the average payout is pretty low - return of what, $1 per $100 spent unless you hit the one in millions jackpot? What’s the point? IIRC I read about a lottery in Mass. where you just pick 3 numbers. That might be worthwhile, but still the return is not high, is it?
Then there’s the logistics of buying 1,000 lottery tickets regularly without leaving apaper trail of how much you spent, not to mention the authorities wondering why you consistent pick the correct 3.
I’ll go with DrDeth - if you can dream it up in a few minutes, some smart guy at IRS or FBI has been paid to spend his career dreaming up the same thing and determine all the loopholes to plug.
That’s why pizza places, vending machines, and anywhere that collects large quantities of cash in small transactions are popular fronts for laundering. OTOH, each of those leaves a trail too - did the business at the basic level have enough inputs to justify the revenue? A simple undercover or stakeout for a month will tell you if a pizza place sells as much volume as it reports, even if it buys enough materials and just throws it away.
Hes not talking about buying lottery tickets.
He is talking about selling them.
“Yep, I sold 20000 of these here tickets at a doller a piece, that where the 20 grand came from. Who bought them? Well, we dont take their names see, they just keep the ticket if they want to claim the prize…”
I imagine its lottery regulations that are a barrier to using this scheme, rather than tax issues.
Won’t work.
The state keeps track of how many lottery tickets you have sold. If you say you sold 20,000 tickets, you’d need to have that many tickets in inventory, and the state is going to ask for its cut. You’d be giving most of the $20,000 to the state.
They would also get very suspicious if your store is selling far more numbers than other stores of the same size. The lottery is a prime target for scams, so they would be sending investigators around.
Hmmm… of course in Canada, running a private lottery is heavily regulated and a generally only for charity fund-raising by serious, established charities. I assume most states that allow private lotteries have similar restrictions. First, such enterprises are strictly watched to avoid infiltration by criminal elements; secondly, most lotteries have a real purpose - such as “buy a CAT-scanner for Podunk General Hospital”. “Buy a Beemer for Buckety” would probably not get one lottery license, let alone an annual one. Even bingos are regulated, and most gambling licenses require a payout in the order of 80% of revenue. (And when I lived in a small town, the Bingos even had to report names of winners since they tended to be welfare single mothers and winnings would be deducted from welfare).
A more useful technique would be to bribe an Indian chief to let you use his casino instead. Of course, I’m sure the feds are watching for that and probably have reporting requirements 10 ways from Sunday too.
Ontario lotteries has investigated after it was revealed (by news media) that a statistically impossible number of ticket vendors were winning big prizes. They were likely scanning the ticket and telling the owner it was not a winner, then keeping it.
So even for minor wins like a few thousand, you have to report the name and address of the winner(s).
Recall that the McDonalds Monopoly Game scammers (employees of the firm running the contest) got caught by the simple problem that the friends they used to claim the big prizes were not as neatly scattered across the country as statistics said they should be. That set off the investigation.
The trouble with money laundering is the sheer volume of the problem. You have to hide income of a decent amount. To live like a modest mobster, let’s say you need to launder $500,000 a year. If it’s going to include supporting lackeys and hangers on, frequent business trips to Columbia, and so on - millions. Moving that much into the legit system is probably the biggest logistical nightmare of the whole business, and the weak point the feds probably like to exploit.
Another issue I mentioned in the OP was using a lottery as a clandestine payout system. Let’s say that “Knuckles” Valucchi, who supposedly works as a part-time handyman, needs to explain how he came into $75,000 dollars last year- coincidentally, three days after state’s witness “Benny the Weasel” had a tragic accident. It would be convenient if Knuckles could claim he won a lottery.
In the movie “A Taxing Woman,” someone who drew the winning lottery ticket offered it to a gangster for something like 125% of the face value in cash. The gangster would be able to pay him with dirty money and turn around and claim the prize, which would be reported to the IRS but would then be clean money. I imagine this would work, if someone who won a lottery happened to know and trust a gangster who needed to launder money.
I don’t think this is accurate. One of the main reasons, as I understand it, for money laundering is to convert illicit money into legitimate money. Part of the price one pays for doing this is paying taxes, but the value received in return for paying taxes is that you have money that can be used for legitimate investments. It also provides cover for people who have lavish lifestyles with no actual source of legal income.
There was an episode of NCIS a while back (season 1 or 2, as it had Kate in it), where a suspect was clearly rolling in it. She claimed to have won the lottery, and produced a copy of the newspaper article as confirmation. On checking, however, it was determined that she had won $20,000, not the two million she claimed. The rest of the cash was from the illegal scheme that the was being investigated.
Yes, as I said “to hide the source,” but you see, they would like to also not pay taxes on it, so they can spend all of it. Trust me, I have professional accredation in this subject. Most money launderers are also tax cheats. They do try to convert it into “money that can be used for legitimate investments” but you see, few investment firms, etc look at the source of the funds. The crook wants to take the drug money and spend it without reporting it at all.
Well, Whitey Bulger did have a one-sixth share in a $14.3 million ticketback in 1991, when his brother was the state Senate President. I’m pretty sure everyone found the whole thing rather fishy, but nothing was ever proven.
It seems to me that it’s more likely the State would use lotteries to clandestinely reward its agents. They’d never ‘win’ the jackpot, of course, but the public doesn’t pay attention to those who win the second and third level prizes, which are still substantial.
This would not work on any level.
Let’s say you’re a criminal who has a bunch of money from your crimes that you want to make look like legitimate income.
If you claim you won a lottery, you won’t get far. Lottery winnings are paid out by the government. They’re going to know they didn’t pay you any money.
If you claim you sold lottery tickets, they’re going to have records of that also. Stores get lottery tickets from the government. You can’t claim to have sold them unless the government supplied you with them. Even if you go to the trouble of actually buying lottery tickets, you’re back where you started. The government is now going to be asking where you got the money to buy the tickets you sold.
Using the lottery to pay out other criminals also isn’t going to work. How are you going to predict what will win? And if you try to fake it, you’re back to the government knowing you’re lying because they’ll know they’re not sending you any payoff checks.
Offhand, I think trying to launder money through the lottery is probably the worst possible way to do it. It means the government doesn’t even have to bother conducting an investigation to know you’re lying.
You talk about government records and all that, but I dont think anyone was suggesting selling actual state lottery tickets. I assume the OP means buying a couple of (thousand) books of raffle tickets such as these, Hughes Print, ripping the stubs out, and saying that you sold a bunch of them around the neighbourhood.
What possible record would the government have of that?
At nearly all the sub-Pro level sports games I go to, there will be people wandering throughout the bleachers selling 50/50 tickets to benefit whatever - a school, a Girl Scout troup, the Human Fund, and so on. Prize winner’s number called at halftime, or second period intermission. People like supporting PS 126’s field trip to the museum, sure, but mostly they just want the cash. If someone does what bucketybuck says, buys a bunch of books and then says yeah, there never was a PS 126, I did the 50:50 raffles but kept the remaining money all for me (even though they’re lying about ever selling tickets and are actually money laundering), what’s the penalty?
Or if someone happened to know a gangster, and was cajoled into putting a little payment into some “protection”.