I’m working on a novel and am hoping to find out how drug money is “laundered”. I have only a very basic understanding of what is involved and would be grateful for any knowledge you could pass along.
I tried the search engine here but I couldn’t get anything to come up - can anybody tell me how it works? Or can you suggest some websites that discuss it? Thanks!
Even if I had a signature, I doubt I’d have room for it.
It takes a commercial laundromat, and buy your Tide by the case…
Really, although I have no personal experience, the idea is to set up an apparently legitimate business enterprise and run the to-be-laundered money through it as receipts of the bogus businesses endeavors. That way, all relevant taxes can be paid and the money distributed as income to the partners or shareholders in the enterprise. So, you’ve got a Blxxkbuster video rental franchise that operates out of a P.O. Box. Who’s gonna notice?
The basic idea is to take your cash and make it different cash. Example:
I steal $20,000 - I now have $20,000 in stolen money. I use the $20,000 to buy a car, and then sell the car for $19,500 to someone. I now have $19,500 is ‘clean’ money since it’s not cash I stole, it’s cash I got from selling a car. The main point is that the cash can’t be used as evidence now and can’t be taken if I’m arrested (though it might be taken in damages if I was convicted).
“I guess one person can make a difference, although most of the time they probably shouldn’t.”
I have to disagree with Jophiel. The usual purpose of money laundering is not to physically exchange money, it’s to create a believable origin for the money. Let’s say I sell a million dollars of heroin. How am I going to explain where the million came from? (And believe me, the IRS, DEA, and FBI will be asking.) So you give the money launderer the million, he takes a percentage off the top, and creates a paper trail to explain the rest. You now have acceptable documentation to show you earned your money by legitimate means.
The best money laundering operations are casinos. Due to the nature of their business, it’s acceptable to claim that you legally collected large sums of money from anonymous people for no return on their investment. This makes it possible to create a cover for huge amounts of otherwise inexplicable income.
You might check out the movie Scarface (the 1983 version). As I recall there were some scenes where drug dealer Tony Montana was setting up a money laundering operation with a corrupt banker. Granted, I can’t normally recommend looking for facts in an Oliver Stone script, but it may suffice for the purposes of a novel.
That’s not really accurate. Since the cash can be directly linked to the original theft, it can serve as evidence.
To actually launder money, you have to muddy up the trail so much that the chain can’t possibly be followed. The second point is to find a way to pay taxes on your income, since it’s illegal to fail to pay taxes on any income even illegally gained.
A critical initial step is to own a bank. There are all sorts of fun things a bank can do to obfuscate a money trail. A US bank won’t do, because they’re carefully audited by the government. I recommend a bank in the Bahamas, Cayman Islands, Luxemborg or other such small country with strong bank secrecy laws and weak law enforcement.
So you deposit your ill-gotten gains in your own bank, and have them cook the books, wire money back and forth (you’ll need a few shell corporations, chartered in the aforementioned countries). At this point, the money is semi-laundered.
Once you’ve muddied the money trail, you then get a different bank to loan you money using your semi-laundered ill-gotten gains originated by your own bank. You use part of the principle to make payments. The beauty of this is that since a loan isn’t income, you don’t have to pay taxes on it unless you don’t repay it.
That’s the theory at least… and please don’t ask how I know this. 
For the gritty details, contact an accountant.
He’s the sort to stand on a hilltop in a thunderstorm wearing wet copper armor, shouting ‘All Gods are Bastards!’
Casinos have the drawback that it’s such an obvious way to launder money that even the Feds have figured it out. In Nevada, for instance, the state Gambling Commission monitors casino operations very closely.
The second “drawback” that casinos are so insanely profitable that if you own a casino, you have no need of illegal money in the first place.
He’s the sort to stand on a hilltop in a thunderstorm wearing wet copper armor, shouting ‘All Gods are Bastards!’
OK, first you have to have some money to launder…where and what form is it? How did you get it? Are you hot? Having the money might focus your attention and inspire you. Getting control of the money is certainly more challenging than laundering it.
Buying expensive cars with cash like Sammy the Bull just did in Arizona ain’t too bright laundering.
(a) Is it piles of small bills from a high volume criminal enterprise like street drug sales or casino skimming? People working in jobs such as emptying parking meters or bus and subway coin boxes have managed to steal hundreds of thousands over a period of a few years. (b) Is it piles of big bills from illegal commissions, bribes? © Maybe it’s megabucks in a bank/trust/brokerage account you can access and control.
Remember the movie “A Simple Plan”? It’s not easy for some hillbilly in Sheepdip Saskatchewan to enjoy his ill-gotten three million in cash with out attracting a tax related lifestyle audit.
Starting with case (a) lots of small bills - you need legal ownership or part ownership of one or more businesses, like restaurants, bars, maybe even a casino, anything that runs with a lot of cash. Then, instead of the real revenue of say, $7,000 a month, you generate $15,000 a month, pay your taxes, and appear to get slowly rich honestly. This can be delicate and may attract attention if you get greedy. The more businesses you can spread it around the better. another trick is the use of “smurfs” to run your small bills around town all day turning them into big bills. This works particularly well in Vegas. And brings us to (b) the mountain of big bills you are wanting to launder. Now you have a problem. There is a world war against cash money laundering underway. Where in the world can you walk into a bank with millions in cash without raising a few eyebrows? I don’t think Swiss banks will take it any more. The Jersey Islands might be good. They have total bank secrecy laws and are safe and honest. You have to smuggle it out to these places, probably packed in a yacht. Smuggling must be infinitely creative. If you have connections professionals might electronically deposit 50 cents on the dollar in your Cayman Islands, Jersey Islands, Panama, wherever, bank account and take the cash off your hands.
Cash is a horror because you will be killed for it. Money has no home and if you lose track of it for a split second it is gone.
If you manage to get control of a huge sum of money in some domestic account, you can easily electronically transfer it to your foreign bank account in a good bank in some foreign country with good banking secrecy laws and you are now in the sweet position of category © having control over a secret bank account with a lot of money in it.
So you are the guy previously discussed who has turned his huge mound of cash into a tidy Jersey Islands bank account, or a retired politician with a Cayman Islands bank account full of a lifetime of kickbacks, bribes, and re-directed public funds. Or let’s say you are the owner of a private company who has been having some big international sales receipts deposited into your foreign bank account and reporting the goods on your books as stolen in transit internationally. (Whatever, I certainly don’t know how to accumulate the money to launder.) Now you want to enjoy this money. You hire some local lawyers where the money is stashed (bank secrecy laws, bank secrecy laws…I can’t say it enough), set up a local company, put the lawyers on the board of directors to manage the company, and make yourself, and maybe your trophy girlfriend if you’re stupid, the only ones who can sign for the company’s money disbursements. This company will cost you as little as $20,000 a year to run, less in some countries. Then you invest all your money into this company’s bank account. Now you can live anywhere in the world. If you want to stay in Sheepdip Saskatchewan and rebuild the family farm you arrange to have the foreign company buy the farm and hire you to manage it. It may look funny - you being paid $300,000 a year to manage a clapped out farm but, if your employer’s bank secrecy laws are adequate, and you do your paperwork and pay your taxes, nobody can prove anything except that you work for a very stupid foreigner. You can live in a six million dollar apartment in New York and pay five hundred a month rent to some stupid foreign company and get away with it. Need cash to buy the family farm for yourself? That stupid foreign company will lend you the money and you can stiff them on the loan. Hell, they’re so stupid they might lend you money a second time if you promise to try and pay back the first loan. Foreign bank secrecy laws are the key to not getting caught. Also, if the crime that gave you the laundered money cannot be identified or tied to you that certainly helps. No guarantees that you won’t attract heat, but if you have good lawyers and accountants no-one will ever prove anything.
Money laundering is a pretty wide field and you might get better responses to your post if you are more specific about the scenario you are trying to envision. I hope some lawyers and accountants post some more professional advice here. I also hope I have been some help with your literary aspirations.
You don’t purchase something with $20,000 in cash, no way. Any transaction of $10,000 or more is reported.
Yeah, laundering money in Casinos is getting tougher, but it can still be done. It would involve making opposing bets on even-money games where the house vig is low, erasing your risk. But as someone mentioned, the casino has to report all transactions over $10K. One solution is that you can go from Casino to Casino, moving amounts under 10K. But the idea is to create a paper trail, and that paper trail is going to look mighty suspicious if you show all kinds of sub-10K wins at a whole bunch of different casinos.
Before the 10K reporting came in, you could drop some huge amounts on opposing craps bets (the casino won’t allow you do place opposing bets, so you’d need an accomplice), then cash our your $500,000 or whatever it was, get a receipt, and voila, you’re just another poor guy who got lucky and hit the jackpot.
The Straight Dope neither encourages or condones the illegal practice of shielding ill-gotten gains from taxation.
Discussing means by which illegal activities may be accomplished is never a good idea on the SDMB. I am closing this thread.
Nickrz
GQ Mod for The Straight Dope