[ma2rten]

How does real money laundering work? Do you think that the other comments about electronics being sold for money laundering are also off mark? Also how realistic was breaking bad, where they brought a carwash and put it in some fake receipts.

[drzaiusapelord]

Not a criminal, but someone interested in this kind of thing. From what I've read and heard, cash-based businesses are best because its really hard to prove otherwise. The IRS is going to see a car wash doing $1m a year in sales and that'll be it. It can't access any other records to prove otherwise because you're a mostly, if not all, cash business. You become your own customer and funnel your money into the company. You would easily survive an audit here.

So any cash-based business is good. Restaurants, car washes, pawn shops, bars/clubs, etc. These types of businesses can make thousands per day gross and are relatively easy to run with low capital down. That's going to be far superior than shipping hundreds of overpriced hard drives per week via e-commerce and hoping to god no one traces back all these credit cards back to you or your pals.

[jon-wood]

With something like a bar can't the IRS demand to see receipts for the drinks you've bought, and realise you've sold $100,000 worth of whiskey, but only actually bought a few bottles?

[drzaiusapelord]

Probably. If you want to be audit proof you can keep your inventory sane. The nice part about these businesses is that they're all high margin. Your wholesaler cost for whiskey may have only been $1,000 that month and arguably you could have made $50,000 in whiskey sales considering the cost per shot at a upscale or even non-dive club.

You can learn the basics of accounting and laundering over a weekend if you had to and learn just enough to avoid being flagged by the IRS. Hell, some accountants specialize in these kinds of things.

I also think that you need to accept some level of risk here and that you'll be dealing with audits periodically. Auditing isn't some scary process, more than likely you'll be dinged for more taxes and not be put in jail. You'll come out ahead, especially when you consider outsourcing laundering is very expensive, something like 50-70% and depending on how it comes back to you, that money is also taxable, so another 25% lost on what's left. Running your own business means you only lose that 25% and some overhead.

[inversionOf]

The other comment about electronics is completely off the mark as well -- people often see financial transactions that don't seem to make logical sense (whether pricing bots that recursively keep pricing off of each other, as in the linked story, or prices that seem too good to be true, which more likely are gray market or arbitrage) and immediately explain it as money laundering. But consider the electronics sales, where the premise is that people are selling electronics that they apparently bought from Amazon using gift cards under the market just to launder cash.

There is an enormous financial black hole that is just as vulnerable to inspection as simply depositing $1,000,000 in cash in your account. The whole point of money laundering is not only to legitimize the output, it's to make the sources untraceable and arguably viable as well.

The components of a transaction, particularly for the sales of goods, cannot simply appear out of nowhere, or they've done absolutely nothing in the way of money laundering. The people who will ever care about this (the ones who money laundering is constructed to fool) aren't so naive, and if you're selling 100,000 hard drives to justify your income, they're going to ask where you got the hard drives, and demand a financial trail.

Cash businesses that have little variable costs outside of manpower (such as carwashes, laundrymats, even some small restaurants, or selling small crafts on Etsy) are absolutely lucrative tools for money laundering, and can only really get caught if put under heavy scrutiny (e.g. car wash with 10 cars over the week claims revenue of $100,000). As are casinos, and Vegas was built on money laundering -- there are few checks on how much you spend, so whether you spent $1,000,000 in unexplained cash to leave with $950,000 in legitimate winnings, or $10 in legitimate cash to leave with $950,000 in legitimate winnings, it's almost impossible to prove.

There are many, many financial vehicles that are used for money laundering, including life insurance. Selling hard drives on Amazon is not one of them.