So what is money laundering?

This comes from Office Space, and I find that I’m just as clueless as the guys in that scene. I like to think I’m fairly intelligent on most subjects, but financial terminology just goes in one ear and out the other for me. I’m still not entirely sure what “soft money” means, and I have no idea what Dow Jones indicators stand for.

Like the guys in the movie, I looked it up. (I also did a search in case this topic’s been discussed to death on the boards previously, and nothing came up for the past month anyway) Dictionary sez “concealing the source of illegally gotten money.” OK, fine. But HOW is it done? Bury it in the back yard? Stash it in the back panel of your washing machine? Put it in a foreign back account and not report it as income? It’s a common news buzzword, but little is reported on how it’s done, just the assurance that it was done.

Searched Yahoo! for “money laundering FAQ” and this was the first link:

http://www.int-comp.org/doc.asp?docId=6698&CAT_ID=599

Basically - you have the money which derives from crime, drugs, whatever - and you have to “clean” it.

The other element is that you usually have to move it. So here in the Middle East, the hawala (=“trust”) system - legitimately used by hundreds of thousands, if not millions, of expat workers to send money home - gets used for black money.

As it has been explained to me by a Pakistani colleague that has used the hawala system quite legitimately, a sort of “swap” occurs. Thousands of people send their money home, with legitimate payslips etc, and get much more favourable exchange rates than they would through formal channels (banks, Western Union). Their money is somehow swapped with the dirty money - whose senders as I understand it get a less favourable rate.

The impression I get is that the white money paperwork gets used to legitimise the black money (which has no paperwork).

I don’t fully understand the intricacies of this system, and this is only one way money is laundered (and they’ve pretty much clamped down on it now). But the major advantage of hawala is that it is just so hard to trace, because there are so many millions of transactions, and it all rides on trust with no centralised database or record keeping.

http://www.interpol.int/Public/FinancialCrime/MoneyLaundering/hawala/default.asp#7 for more information.

From the U.N. Office on Drugs and Crime:

http://www.undcp.org/odccp/money_laundering_cycle.html

I should also point out that the reason people use the hawala system legitimately is because often the amounts are so small that they don’t even cover the charges a bank would impose just to transfer it. We are talking of a few hundred rupees a time - maybe just US$50-100, but that’s often more than a month’s salary for manual expat workers here.

Also, many/most of these low-paid workers are completely illiterate. They come from third world areas of Pakistan, Afghanistan and Bangladesh. They don’t have bank accounts, and nor do their families back home. So giving their money to a hawala man, and having the hawala man’s partner give the money straight to their family back home overnight (quicker than bank transfers most often) is really the only option they have available.

So they would almost certainly have no clue or awareness of moneylaundering, or of how the system they use is abused by organised crime.

Generally, what you do is you have an illegal business and a legal business. The legal business hardly gets you any profit at all, but it’s the sort of thing which could potentially net a profit. The illegal business, of course, is highly profitable (else why would you even be in it?). The problem is that if you only had the illegal business, then the police, IRS, and other varieties of G-men would catch on that all that money you’ve got is coming from somewhere, and eventually find your illegal business. So you run the legit business on the side, and then, whenever profits come in from your illegal business, you say they came from your legal one.

A local motel got busted a few years back for laundering money. Basically they showed full occupancy every night when in fact very few rooms were rented. They then deposited the drug monies as hotel income. I don’t think the people got busted on drug charges but they did go down indirectly anyhow.

Businesses which do a lot of cash transactions are prime candidates for money laundering fronts. Casino’s, for instance, which is why a lot of anti-money laundering measures are aimed at them.

In the old days, people used to be able to launder money through casino’s without the cooperation of the casino - walk in and buy $20K worth of chips, gamble with just enough of it to establish that you were in the place gambling, and cash out, claiming that you got lucky and won most of the money, making it legit. These days, casino’s are forced to record large chip purchases and keep better records in general - you can’t get away with it.

The comments of yabob and consolid8 are particularly on track.

There are two key points to money laundering. O

ne issue, discussed above, is that it often involves developing a plausible explanation for where, exactly, money came from. Some years ago the Wall St. Journal published a piece on how rock concerts were developing a reputation as a place where extra profits would just sort of “turn up”.

The other issue is that laundering often involves the physical exchange of cash. When cash is taken for gun running or drug dealing, etc., there is often a concern that law enforcement agents may have recorded the serial numbers on bills, or otherwise have identified it. This marked money could later be usefd as evidence–either against the parties who accepted it, or to people further on in the operation wiith whom agents did not have contact.

One method which has been employed for making physical exchanges has been swapping money with people who win foreign lotteries; they can exchange their winnings, which may be in the currency of a hyper-inflationary economy, for more stable American funds. The Americans who make this exchange can, in turn, swap out the foreign currency for other American funds promptly.

“Soft money” is a term used in the discussion of campaign funds.

Campaign reform laws typically set limits on how much money contributors can give to a candidate, there being a fear that a relatively small clique could buy an election for a candidate who would otherwise have relatively little appeal to the electorate in a country where many people get most of their information about people running for office from bumper stickers and 30 second commericals. (George W. Bush is said to have gotten abot 90% of his campaign funds in the 2000 election from just 700 individuals).

Legislators then gut the effectiveness of the campaign reform laws they pass by setting different standards for so-called “issue advertisements”. These are ads which promote a particular position on which a candidate can be distinguished, and just happen to air during a campaign; it will be noted that pro-choice and pro-life ads are much more common just before a major election.

Al Franken does an amusing spoof on this phenomenon in his book Why Not Me? There ads start running in Iowa just before the caucus denouncing ATM fees as a national menace, and just happen to speak pejoratively of every Democratic candidate in the race except him. “Soft money” is money spent on promoting a stand on an issue as a way of promoting a candidate known for his or her position on that issue.

The Dow Jones indexes are measures of the average prices shares of common stock are selling for among a small group of corporations. These corporations are thought to be representative of the overall behavior of the New York Stock Exchange, and to reflect how major events such as government policy announcements, changes in interest rates, or natural disastors generally affect the behavior of stock investors.

It is useful to have such samples of the market monitored as the market as a whole is too varied, too large and too diverse for an average to give a consistently reliable good reading of economic conditions in general. A fluke success by a paticular company, a fad, a bogus rumor, or a development in some relatively limited, obscure industry (zinc suddenly becomes cheaper, for instance, or the government decides to regulate the tanning industry), could provide a distracting and misleading effect on the average for a day.

Statisticians do something similar when they report results for 95% or 99% of a population; they are weeding out freaks and chance anomalies which cause distortions in the average. For instance, a report on the height of 99% of the people who live in a small town gives a better indication of how tall people are than a report on 100% of the people, as there may be a few dwarfs or giants who would distort the mean, giving the impression that people generally are good deal taller or shorter than they actually are.

So, in the context of the OP (specifically, with regard to Office Space), could the fellas have laundered the money successfully, since they didn’t have a legitimate, alternate business to dump the ill-gotten funds into?

Certainly, if you have a business, it’s easier, but there are other ways, like paying somebody under the table to overpay you in a commercial transaction. For instance, let’s say I have a used car which I could sell for about $4000. I slip you my illegitimate $8000 to buy it from me for $10000, and write out a bill of sale for that amount. You’re happy because you got the car for $2000, and I now have $10000 from a legitimate source instead of $8000 in unexplained funds and a $4000 car. Of course, if the price is TOO ridiculous, somebody might get suspicious, and I’ve now transferred my problem to you - where did you get the $10000 to buy the car? You only took $2000 out of the bank the day before.

If we are talking about real estate instead of cars, quite a lot can be involved. Real estate prices are so wierd that it’s hard to point to a deal and say “No way you really payed $2.5 million for that building! Nobody’s that stupid!”.

And while we’re at it, I’ve also heard the term money laundering used to describe the practice of roughing up new bills to look older. I believe I heard of this practice in relation to counterfeiting. Much like ageing your jeans or a new black belt in martial arts, you place it in some kind of drum (washing machines work Ok for this) and with some kind of abrasive. For some reason, I’m thinking poker chips were specifically mentioned.

shrug But then again, I have no sources to quote so it could be that everything I just stated has no actual basis in reality. Such is life.

Heh. When I was a little kid, and I heard the term “money laundering”, I always thought that it meant that the bad guys got their hands on some cash and stuck it inside a washing machine in order to wash off their fingerprints from the cash… LOL :slight_smile:

Didn’t the term “money laundering” derive because some mafia guy (Al Capone?) used a string of launderettes to clean his dirty money - I mean as a business, not literally.

There are other ways to launder money, usually involving bribing employees at banks. For example, you can wire money from a bank in Columbia where you have deposited your drug money to a bank in New York, where a bribed employee handles your transaction and put the funds in an account with a fictitious name. Then one of your lackeys can go in with counterfeit identity to close that account. Once that’s done, you got clean money.

      • Probably not. The first problem is that they took a check and not cash. That immediately begins a paper trail.
  • What if they had taken that much cash? Probably still not. If you’re the sort of person who can literally sit on a huge pile of cash and not spend it on anything ever, then you have a pretty good chance of not getting caught. The problem is, not many people can do that, and just about anything you buy gives you away a bit more. There is some margin of error, but the IRS has averages of what everybody else spent on housing, entertainment, etc. including people much like you with the same job as you in your area, and can require you to prove that you legitimately earned the money for everything you own, or have in the bank. Money isn’t worth anything if you can’t spend it, but every bit of dirty money you spend knocks your legit income/expenses ratio more out of balance with everybody else like you.

    It has been noted that one of the big reasons Americans in Florida got out of drug running with S. America in the late-70’s/early 80’s was that the IRS greatly stepped up detailed audits in the south FL area, and guys who used to be drug runners were left with literally dozens of suitcases of 100-dollar bills that they couldn’t spend on anything without getting caught. When they ran out of storage space, some burned bills in their BBQ grills to dispose of them. They still drove beater cars, still lived in very-middle-class houses, and still had to keep their lousy day jobs.
    ~

I also believe that some of it involves real money obtained from illegal transactions while others is from fake money created off a printing press. Of course, fake money is starting to get much rarer now with added security measures on the currency.

SeanDuggan, the movie To Live and Die in L.A. demonstrates what you’re talking about. Willem DaFoe plays a counterfeiter, and the opening scenes of the movie show him printing counterfeit money and then throwing the bogus bills in a dryer with poker chips to give them a used look.

I used to work in offset printing, and when I saw that movie in the theatre, I was shouting “Omigod! He’s using a Multilith 1250 to print those bills! I use a machine just like that at work! I could do that!”

I never did, of course…

It doesn’t take much imagination or smarts to find ways to create alternate “fuzzy” income streams. Patience is the key.

Patience and heading outside the country, I suspect.