[ben509]

The point of laundering money is to hide the origin of the money, and the way to do that is to exchange it for clean money.

You can launder money with a business: you pay vendors and employees with the dirty money. But then your receipts are the clean money.

That means you need real customers giving you money. So you do need to run an actual business.

(There are other ways to launder money, usually that involve spreading it around between various accounts so it becomes hard to track. But those don't require anything as elaborate as actually hiring employees, just a fake storefront so you can get a merchant account and some paperwork done.)

[marcinzm]

I always assumed the point of laundering money is that dirty money becomes clean once the government has a legitimate source for it. There is after all nothing technically different between clean and dirty money, it's the same bills.

So a business that is cash based claims $5 million in income from sales to customers. The business pays taxes on that $5 million. That $5 million in fact came from selling illegal drugs for cash. However, to the government the money is now clean as it originates from a legitimate source. The owner of the business can then send the profit to whatever place he wants with no worry. No real customers are needed.

edit: More specifically, a drug dealer cannot just deposit $5 million in cash into Wells Fargo without police intervention, a cash based business can.

[ufmace]

I presume it's about making the income appear to be plausible to a tax inspector.

If you actually sell illegal drugs as a business, but claim to have a pizza place on your tax returns, the government might inspect you someday. If they find that you don't have any big pizza ovens, routine large orders for ingredients, staff of delivery drivers, piles of receipts from customers, etc, then they'll probably get suspicious very fast.

If you do make and deliver at least some pizzas on a appropriate scale, then things get a lot harder. They'd have to run down all of your customers and ask them if they ordered and received pizza, check if the dough order receipts are real and match the expected volume, are the delivery drivers real and how much work do they do, etc. Much more work to run down, and who has time for that? You could probably get away with it, for a while at least, as long as you didn't screw something else up.

[atombender]

Using the money to "pay vendors and employees" does not hide the source of the money. Laundering typically involves inflating reported income so that you can slip the dirty money into your income stream. If you run a pizza business, you sell one pizza for $10, but in your receipts you claim you sold two pizzas for $20. Now you've laundered $10; it's hard for the government to prove that you didn't sell two pizzas that day, and the income will seem legit.