There is a place that has a “Mafia Front” sign out front with a spray paint “X” over top of it and on top of that is a piece of poster board that says “Legal Things for Sale”.
I have my suspiciosions.
That’s the whole point of laundering though. You get cash in which came from whatever nefarious thing (drugs, etc.), and how can you get that into a bank for transfer overseas, investing, or whatever?
So you claim it as income for a business, or as a donation for a church, or whatever. As a business, yes, you pay taxes on it - but then it’s right there “in the system” and you can use it however.
Bumping this thread: Someone on another board just told a story about needing some kind of kitchen item, so she went to a newly opened kitchen and restaurant supply store in her neighborhood. The store was poorly lit with little merchandise, and the woman behind the counter was not exactly friendly.
When 3 men came out from behind a curtain and glared at her, she turned around and walked out.
Not long afterwards, it was busted because it was really a bookie joint.
Most criminals, even ones who participate in organized or semi-organized criminal activity are not that smart. The smart criminal is very rare. Most likely they open a pizza place because they like pizza or they like the concept of owning a restaurant. I’d be willing to be some portion of these front businesses start out with the expectation they will actually run it decently well. Very quickly, the criminals who aren’t particularly bright and have no experience running a legitimate business, find out it’s actually really fucking hard to run a successful restaurant of any kind. So very quickly the quality drops off and they stop wanting to deal with all the headaches. So then you have them barely keeping the business stopped and pretty quickly it’s a place no one ever goes into because they have no food and it persists like that for years, as long as the illegal revenue stream continues.
Now, how well these would protect you during an investigation versus some other business front is mostly irrelevant. Money laundering only survives when there is no scrutiny, when an investigation actually starts the gig is up. You don’t typically come out of that scrutiny intact, no matter how well you’ve run the front. So in that regard a sloppy pizza place is no worse when it comes to actually being investigated than anything else. It may be worse at keeping you from being scrutinized in the first place–which is the real key to making money laundering work. But again, criminals aren’t that smart.
It’s also worth noting most legitimate small business owners fail. Even smart, talented people will fail at small business, so it shouldn’t be any surprise some bookie or etc would do badly at picking and running a front operation.
Especially since its not like you can pull an SBA loan and setup billboards for your illegal card room or sports betting operation.
The hard part is not making money, its dealing with all the paperwork, licences, permits, inspections, etc. Then just as you get your pizza place/card room rolling along comes a workmens comp insurance audit and wants to see your insurance info. You did remember to get that right… The IRS isn’t the scary problem, all the stupid annoying local regulations will kill you much faster.
Could you go on about that? How does a successful front prevent being scrutinized?
Why is the gig up when scrutiny starts?
I’ve never ran a front, so I have no idea what specifics you need to do in order to minimize scrutiny. I just know the point is to have a legitimate source for an income stream and to have it without getting anyone looking at it too closely.
Once they’re actually investigating you for money laundering the gig is usually up for multiple reasons.
Most likely an active criminal investigation has already linked your business to the illegal activity in some way, so that in itself is going to make it unlikely that your laundering efforts protect you much. If the police have record or witnesses who are willing to testify that you’ve been receiving cash from drug deals in deliveries made to the back of your business you’re up the creek already regardless.
It is very difficult if not impossible to successfully create phantom revenue that complies with accepted accounting standards and is not detectable in a forensic accounting examination.
It wasn’t a money laundering investigation per se, but the reason Madoff survived SEC scrutiny is he had forged all the documents he needed to make it look like he was behaving legitimately. Additionally, the SEC investigators chose to use the documents he provided as the only source for information they could have gotten elsewhere. For example he had fake documents showing how much money he had in underlying bank accounts. If the SEC had actually looked into that with the bank, the fraud would have been uncovered immediately. Instead they just used the documents Madoff and his firm hastily forged for them, accepted them at face value, and moved on.
A recent experience…I saw a small shop near where my brother lives. it was closed at the time, but looked interesting-the guy repairs watches and sells antiques. I called him up, and asked when he was open-he sorta hemmed and hawed…turns out he lives 26 miles away! I have dropped by several times-he is always closed. one time, he had an Open"sign in the window-I knocked on the door-no answer.
I have no idea what is going on here-he has some interesting old automaton toys in the window…but he never seems to be open!
There is an insurance and tax difference between a business and a personal collection. For a number of years my mom skated a thin line selling one or two items a year so her fine arts collection was considered a business. Less insurance cost, and because they were a business purchase, the taxes were deferred. She waited until there was a serious slump in prices to ‘go out of business’ and pay the taxes on her collection.
There’s a small space in the same building as an antique mall where I have a booth that was occupied by a woman who had a shop “by appointment only”. The people who work at the mall had never seen anyone enter or leave, and it was cleared out a couple months ago. They were very happy about this, because from what they could see, that place was a fire hazard. They suspected that she was a hoarder and used this place as her “storage unit”.
Having a legitimate stream of income (especially if it’s non-traceable) is a key item. That’s getting increasingly hard to do nowadays, with so many customers paying by credit card, debit card, or check.
A business with a lot of cash customers is best for this, but even those can be checked. For example, a pizza joint – if you claim to have sold 100 pizzas for cash, then you should be able to prove that you bought enough cheese & tomato sauce to make 100 of them. That you bought over 100 cardboard boxes to package them in. That your utility bill shows enough fuel used to bake 100 pizzas. Etc. It takes a lot of work (and brains) to cover all these possibilities. (That’s why the previous example of a ‘church’ is an ideal front – very few cross checks the IRS can look at.)
Several years ago, tow truck companies here in Minneapolis fought like crazy against a law that would allow people to use credit or debit cards to pay towing charges – even though the law allowed the company to add an extra fee onto such payments. The unspoken reason for their opposition was that this would allow non-cash payments, and thus make them traceable by the IRS.
One way the whole restaurant/bar deal works as a front is that while yes it does do a lot of cash transactions that have to be backed by the purchase of product, you can have you bagmen drop off the cash and take home product without paying legitimately for it - so they take home 3 or 4 pies/entrees each drop and the proper amount of kitchen and dining room waste is tossed in the trash for the listed amount of sales.
And as to the church idea, you just have to make sure that the amount taken in the offering plate is not insanely out of proportion, you can probably get away with counting noses and figuring 20 per person for an average service - hold a wed evening, friday eve, sat morning, sunday morning and evening, and stand at the door on the way in and out to ‘greet’ newcomers and if someone other than a regular is in, don’t count him in the headcount for the 20 deposit. If you have all the congregation use little envelopes to hold the donations any cash in the plate would be from the newcomer. [my brothers church uses little envelopes. Very disconcerting to look in the plate and never see any money.]
There’s a middle eastern/mediterranean restaurant nearby that never seems to have any customers, yet somehow seems to remain open. They even recently asked the city for (and were granted) permission to expand their hours.
Yeah, something fishy is going on there, and I don’t mean the bizarre giant fish meal pictured in their menu.
There is an electronics store (No, not Radioshack) in an upscale shopping district here that never has any customers. They also have had several “Going out of business” sales but never went under. I went in there a couple days ago to see what they had. It was a random selection of old electronic crap. There were lots of loose motherboards stacked up on the floor. I don’t think there was anything made in the past 5 years in the software section, and most of what was in it was children’s games for MS/DOS. They advertise $99 computers but everything in the store that isn’t ancient or probably broken costs far more then it would anywhere else.
I have always wondered about this. Why does a front operation have to be a retail store? Seems to me that would be a lot more work than just an office.
Why not just lease space out in some office park somewhere, set up a business providing unspecified technical services, and give it a vague but respectable name that doesn’t actually boil down to meaning anything? That way, you could hire a couple of hackers to just do whatever all day as cover, and your minions could keep the invoices going out and the cash coming in.
I wondered the same thing earlier in this thread. Doing that would keep people from wandering in and wanting to buy stuff. Also, if it’s a restaurant they would have regular health department inspections.
Retail is easier to create phony records for. Just bang random numbers into a cash register until you get the figure you want. Hey, that’s how much money we brought in today!
It also provides a better cover for strange people to come and go all day long, and for people to carry out packages, and for people to unload stuff. That sort of thing would be a lot more difficult to explain in and out of a ‘services’ office.
Some of those shops have female employees or freelancers who’ll assist the customer for an extra fee.
Because customers paying invoices in cash is very unusual.
To have a stream of physical cash deposits not raise suspicion the business needs to be doing a lot of small transactions with anonymous customers. A one man shop doing geek squad-like services or after school tutoring could probably claim a couple of cash customers with a straight face, but I doubt one could launder enough to be worthwhile. Retail just seems to be the last place people legitmately use cash.
That empty space has been rented by the small Mexican restaurant next door, and is being renovated for use by this restaurant as a party room. 
Down the road from these businesses was, emphasize WAS, a pizza place in a very strange location - the main thing being that there was no parking for about half a block in any direction. That pizza place was busted today because it was really a front for selling drugs by the father and son who owned it. The feedback regarding the actual quality of the food varied widely; apparently, the deep dish pizza was great but anything else was awful. This county puts people’s court records online, and the father has a criminal record as long as your arm.