How to Launder Money

By Philip Brewer on 1 September 2007 (Updated 8 June 2011) 144 comments

Money laundering is not a simple concept. It's two simple concepts, because there are two different — in fact, nearly completely opposite — activities that are called money laundering. Here's how to do both of them. (See also: How to Make Moonshine)

Classic Money Laundering

The classic money launderer was someone who had illicit income — drug dealer, jewel thief, con man — and worried that he'd get the Al Capone treatment and be convicted of tax evasion even if the government couldn't pin any of the underlying criminal activity on him.

If the illicit income is small — and especially if you also have a straight job that you do pay taxes on, there's no need to do any money laundering. For example, suppose you work in some cube farm that pays most of what you need to live on, but you also turn the occasional trick to bring in a hundred dollars a week. You probably don't need to launder that money. Cut down on the amount of cash you take from your paycheck and use the money from hooking to make up the difference. As long as you still take some cash from your paycheck, the government would have a hard time proving that your cash expenses exceed what you're taking from legitimate sources.

But suppose that illicit income is a bit larger. Once you've got more than a few hundred dollars a week — more than can be conveniently hidden in your ordinary cash expenses — you've got a problem. As soon as you do anything with the money — spend or invest it — it might well come to the attention of the tax man.

The solution — classic money laundering — is to create a business to ostensibly earn that money. Any business that brings in a good deal of cash will do. You run the business as usual during the day. Then, after closing, you feed in your day's illicit receipts, pretending that they'd been received by the business. In due course the business pays its taxes and all the tax man can see is that you're running an unusually profitable business.

Now, the tax man may well take an interest in such a profitable business, so it's best if it'd be hard to prove that you couldn't be doing the business you're paying taxes on. A bar, for example, wouldn't be the best choice, because you wouldn't have ordered enough booze to pour all the drinks your books will say you've sold. Coin operated laundries and car washes are classics, because the only way to prove that you hadn't actually done all that business would be to have an undercover agent surveil your place for weeks, counting every coin inserted by every customer. (Although agents have been known to subpoena the water bill and try to make the case that way.)

Modern Money Laundering

The other thing sometimes called money laundering is when you have some big lump of cash that you'd rather not have people find out about. Sometimes it's an effort to keep the money from the tax man (literally the opposite of classic money laundering), other times the goal is to keep it from coming to the attention of someone else who might feel like they have some claim to the money — an ex-spouse, a creditor, the guy who owns the land where you found the bag of gold coins in the culvert.

In this kind of money laundering, the point is to make the money disappear. This is the sort of money laundering where you might make use of foreign banks, shell companies, and so on.

There are two parts to these strategies. First, you need to make the money disappear. Second, you need to make it reappear in some gradual fashion that doesn't bring it to the attention of whoever you're trying to hide it from.

Disappearing the money

The easiest way to disappear the money, especially if it's already cash (as opposed to, let's say, silver bullion or a winning lottery ticket) is to just stash it in a safety deposit box. You miss out on any investment income, but it's safe and you know where to find it.

If you really want to be able to invest the money, get it overseas. If it's an amount that you can just carry with you, buy a vacation package to the Cayman Islands or visit your family roots in Europe and take a little side trip to Switzerland or Austria or Liechtenstein.

There are plenty of fancy, complex ways to get the money overseas, that mostly require an accomplice. The most basic is an invoice scam. Establish a business that imports or exports something. Meet with your customer or supplier and arrange with him to either over-pay or under-bill, and then to have your counterpart deposit (most of) the excess into your foreign bank account. An ongoing scheme is good, because the guy knows that the lucrative cash flow will stop if you find out the money isn't getting deposited as it should, but you can also work this as a one-shot deal if your counterpart can be trusted.

Banks used to help their good customers get money discretely overseas, but nowadays there are a bunch of laws against such things, and bankers are particularly averse to going to jail for their customers. Expect them to refused to get involved and to rat you out.

Reappearing the money

Now we're basically back into classic money laundering territory.

If you stashed a duffel bag full of cash it in a safety deposit box (or under your bed), all you need to do is pull out a few bills now and then when you're heading out for a night on the town. You can raise your standard of living modestly. Alternatively, you could increase the amount that's going into your 401(k) and then use the cash to keep your standard of living about the same — gradually turning the hidden money into above-board money.

If you've got the money overseas somewhere, bring it back in some way that makes it legit. The easiest would be to create an overseas company that then hires you to do something. You do whatever it is and send an invoice whenever you want some cash. You can also reverse the invoice scam that let you get the money overseas in the first place — now you under-pay (or over-bill), while making up the difference out of your foreign bank account. A third option is a fake loan where you "borrow" the money and then simply fail to pay the money back.

Instant disappear-reappear cycles

If you can't wait to reappear the money gradually, and the amount involved isn't too big, you can always use a simple casino scam. Go to a casino and buy some chips. Do a little low-risk gambling. (For example, bet each chip, one at a time, on red. Do that 20 or 30 times and you'll have about the same amount you started with.) Get a few more chips and repeat. Play a few different games (blackjack, craps, slots). Ideally, go to several different casinos and repeat the whole process there. Eventually, cash in all your chips and go home with a story about how you won a bunch of money at roulette. Pay taxes on your winnings.

Laws Involved

There are lots of laws against money laundering as a general category and against specific techniques used in money laundering.

If your income is already illegal, breaking one more law may not expose you to much additional risk, but it might, and it might give the government a case that they can prove, rather than one they can't.

You're required to report cash or other bearer instruments (travelers checks, for example, but not gold coins or checks payable to a specific individual) that you carry into or out of the US. Similarly, banks are required to report large transactions (and to keep records of smaller ones).

If you have a foreign bank account, you're required to report it on your taxes each year. Also, if your foreign investments make any income, you're required to pay taxes on it each year (not just when you bring the money back).

Every time you don't declare the income, don't pay the tax due, lie on a form, or fail to file a required form, you're committing a crime.

All these money laundering crimes have large fines and long prison sentences. I recommend against them. I also recommend against expecting anyone else to be willing to commit these crimes for you — expect that any accomplices are really either Federal agents, or else will call Federal agents at the first opportunity.

Tagged: Life Hacks, money
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Julie Rains's picture

I am curious as to your inspiration for this post. A work associate, neighbor, family member, or just general observation?

Guest's picture
Guest

got 15k sittin infront of me at the age of 17 now i no what to do with it hha

Philip Brewer's picture

I've been reading personal finance books, with an eye toward writing reviews here. A few too many long, complicated descriptions about how to comply with US tax laws and something just snapped in my brain.

I feel much better now.

Also, I was confused for a long time by the two different things called money laundering.  I did finally come to understand--that there were two different things--and wanted to share that insight in particular.

Guest's picture
Guest

i was always curious about Cayman banks. There is no deposit insurance. Is a Cayman Island bank owned by universally known large international bank (for example Deustchebank) savings account as safe as if the savings account was opened in Germany. In other words can a tax haven bank be safe as its parent.

Thanks Ralph Hixson

Guest's picture
Ben

The short answer to your question is "no". The Cayman banks owned by non-Cayman parents (like Deustchebank) are not covered by the banks' home country deposit insurance.

However, it's important to recall what deposit insurance is for, at least historically. While banks can, in principle, go bankrupt, this is extremely rare. Any bank in a country with reasonably strong regulation will not be allowed to get close to bankruptcy. Cayman has good bank regulation. They also have a smart central bank.

The trouble banks may face in the US, Cayman, or elsewhere is insolvency. Bank depositors in checking and savings accounts can pull their money out daily and most other deposits (CDs, etc.) are fairly short-term in nature. Banks traditionally used the money from these deposits to make long term loans and then held the loans on their books. The loans produced interest that could be used to pay depositors if they wanted their money back. But if too many people wanted their money at once, the bank had no way to come up with cash to meet all the redemptions. "Bank panics" often ensued, as depositors at other banks became scared and demanded their money back as well.

Countries put deposit insurance in place to make people comfortable that if their bank had no cash, the government would step in. Since the US put this insurance in place, there has been little that even came close to a bank panic.

The need for deposit insurance has been called into question in the last decade. Big banks don't keep most of their loans anymore. Instead they sell them in packages to investors. While smaller banks often keep some or all of their loans, they would be easy to sell in a pinch.

But that doesn't mean the sale could be done instantaneously. What could be done instantaneously is a loan from the central bank's discount window (this is the US Federal Reserve's term; the Cayman central bank calls it something different but the concept is the same). The loans would then be sold in an orderly fashion and the loan from the central bank would be repaid. The bank would no doubt be scared and perhaps even closed by its regulator, but there would be no effect on depositors.

My firm has several Cayman-based hedge funds with bank accounts in Cayman at the Bank of Butterfield. They are exceptionally well run, much more so than any US bank I've ever dealt with. The Cayman Island Monetary Authority (the rough equivalent of our Federal Reserve plus the various other state and federal bank regulators) is very professional as well.

Guest's picture
Jeremy

My girlfriend is a stripper.
She never gave the club her real name, because she is in college to become a lawyer and doesn't want that info on her background check when she tries to get hired. How can she claim this money besides going through the club in the USA? Can she put down that shes an "independant contrator"? If so how do you prove you earned the money? They dont give out receipts for how many lap dances you give! Or could she just take a waitress job 1 day a week and say she makes $500-700/week in tips? Any other possibilites? We want the money taxed & legal so she can invest it.

Philip Brewer's picture

The IRS will let you pay taxes on your income without proving how you got it. (When you need proof is when you receive money that isn't income (refunds, rebates, gifts, etc.). If you say it's income and pay taxes on it, the IRS won't put up a fuss.

With the proviso that I'm not an attorney or accountant, I think your girlfriend will need to file a schedule C, for business income. On a schedule C you need to include a code for the category of your business, but they're broad categories--there'll be one for "performers" that will include dancers.

Guest's picture
Helen

I've always wondered what 'money laundering' meant in movies... now it finally makes sense! Thanks!

Guest's picture
Guest

Are you serious?? Go read a book and learn something instead of watching movies all the time if your too dumb to understand whats going on.

Guest's picture
Guest

i think you should stick to "legal" advice

Philip Brewer's picture

I hope no one would read this post as advocating laundering money, as opposed to educating people about what it is.

Guest's picture
LAgirlatheart

A friend and I are doing some research for a fictional story we're writing. This came in handy. Thank you very much!

Guest's picture
Guest

If i didn't need the money for a while, i'd just create a foundation that accepted anonymous donations buy/build a huge house for the said foundation, and then upon retirement have the foundation give the house to you as being a highly placed member of the foundation.

Guest's picture
Guest

You will probably find that a trust or charity will be unable to give you that property, as it would not be in the benefit of the charity. You also need to be careful as trusts are highly scrutinised.

Guest's picture
Guest

The point is to be able to say where you got the money to start that foundation without going to jail. If you just pop up with a random foundation you will be investigated and nine times out of ten charged with tax evasion(i.e. the Al Capone treatment).

Guest's picture
Mark

A bank and a credit union have both educated me on money laundering, and if anything it looks a lot easier now than it did before I got in the industry. That being said, I don't have any money to launder so the information is totally useless.

Guest's picture
Guest

Hi Mark,
Did you say a Bank trained you in Money laundering.
then kindly tell me how you do it,because we might just decide to hire you.We are a consortium of discrete Gentlemen from Nigeria willing to recruit your expertise if you can describe in detail what you can do with $100 million or more

Regards

E.C.O.A

Guest's picture
Guest

You mentioned having an undercover watching a car wash for weeks. I actually helped it setting something like this up.

The PD had a hidden camera in an empty transformer (hung for them by the power company) watching a restaurant. It watched how many customers came in all day. It was wireless and sent its video back to an LP about 1 mile away. Inside the tranformer were several large 12v batteries that powered the camera and transmitter for about 1 month. Later, they figured out how to get the power company to run power into it from the line thereby eliminating the batteries and time limit.

Someone watched the recorded video in 4x speed and counted the people coming in. With this, they were able to build an average and then knew what the restaurant was claiming was true or not.

Guest's picture
Lurker

Other good businesses to launder are movie theaters and restaurants. I read a really interesting short story that talked about this called Bee Dancer of Nokota. It is available on the net.

Guest's picture
Vera

... says you offer "Financial advice that is easy to understand and easy to apply." Who would guess this includes detailed advice about money-laundering?

Philip Brewer's picture

There are ways to apply knowlege of money laundering that don't involve actually doing it. If your boss (or your employee) were using the business to launder money, you might save yourself all kinds of trouble if you understood what was going on.

Not to mention just understanding what's going on in books and movies where money laundering is part of the action.

Guest's picture

I think it is good to educate. Has anyone gotten those email scams about owning a foreign business, they send you a check for a large amount, you cash it, send them most of it and keep a bit for yourself. Every time I've seen those, I wonder, what illegal activity are they doing in order to use me for money laundering. So knowing what money laundering is (which for some reason I knew particulars about the first case, and I'm not sure why that is... scary!) like Philip said, can keep you safe from those wanting to use you to launder money, or those who might be laundering money from you.

Guest's picture
Annon201

Re: Little Earth

Those aren't examples of money laundering, they are flat out scams.

What happens with those is, the person, either with an awesome job deal or wants to buy your goods at $x above what you stated (usually consumer electronics). They send you a cashiers cheque to get cashed, you cash it, and then immidiatally withdraw the money and send it to them. Now, because its a cashiers cheque, the money should be avaiable straight away, unfortunatally, the cheque is fake, and it will take about 7-10 days for the banks to realise this. By this time, you would have given the money to the scammers, and the bank will want that money back, and they will want it back from you.

In the case where they are willingly overcharged for the goods, it works the same way, but you also send the item to them, as well as some of the 'difference' back, again, its money that doesn't exist, and the banks will want it back off of you once they find out its fake.

Guest's picture
Guest

I truly wish this was wider known knowledge. This exact situation happened to me a year or so ago and I'm only now fully realizing what I avoided by taking too long to bring the check to the bank. I did not know what money laundering was and how it could affect me or even that someone asking for a check back for an excess balance after a purchase was suspicious. Scary, scary, scary...

Guest's picture
Guest

These people aren't laundering money, they are trying to scam you out of your own. They take advantage of flaws in the banking system, where International transactions take additional time to clear. As a "courtesy", your bank will normally credit your account for the check, before it has settled with the foreign bank. Once you see these funds "hit your account" you will send the counterparty a domestic check which he will then cash immediately. Shortly after, your bank learns that the original check was bad, and withdraws that money back from your account. (They have every legal right to do so.) The check you sent has been cashed, and the account that it was cashed in is now closed, and you are flat out of luck. Good luck tracking down the scammer at this point.

Guest's picture
Graduate of the College of Nigeria

They are not laundering money, they are stealing money by tricking you into thinking that the check from princess mumbatwe is real and that you are really going to make some money, problem is your check is real and by the time you or the bank figures out whats going on they already have your money and you have to explain to the bank why you just cashed a fake check. I saw a great scam where someone sent them a fake macbook in return for their fake western union money orders, somehow they were able to get someone to film the guy picking up the package too... hilarious... I think it was called p-p-p-powerbook or something?

Guest's picture
Guest

lol, those emails have nothing to do with money laundering, and are simply a scam, the nigerian 419 scam

the only money stuff going on there is them taking your money and putting it into their bank account lol

Guest's picture
Phil

This is great! I love the casino advice. I don't advocate cheating the tax man, but if you are writing a fiction book and need some plausible mob type stories, then this works out. Thanks for the good read. :)

Guest's picture
Stomper

Car washes, laundromats and gambling trips are small scale. For big-time money laundering, you want to OWN the casino (talk about a business that processes a lot of cash . . .).

The story (whether true or not) is that casinos were originally built in Las Vegas so mobsters could launder very large amounts of money (see: the Warren Beatty movie, "Bugsy"). Then, in the late 60's, Howard Hughes began buying Las Vegas casinos as a legitimate investment, and his accountants had to figure out a reliable cash accounting system. Before that, it seems, no one was particularly interested in keeping track of precisely how much money the casinos brought in. Now you know why that might have been true.

Guest's picture
Stomper

By the way, there are a number of professions in which it is necessary to recognize money-laundering. Bankers, attorneys, private investigators, title companies, and law enforcement agencies all need to be familiar with money laundering techniques. This article is a useful primer, particularly the way you itemize money laundering as meaning two different things. Kudos.

Guest's picture
Guest

The problem I see with laundering money is that you first have to somehow make any to begin with. Heh.

Guest's picture
Guest

To begin with, there's a ton of articles on the internet that explain ways people sell counterfeit items and make astronomically huge amounts of money. Let's say, selling counterfeit art???

Guest's picture
Michael Stone

YANAL, and it shows. Yes, there are "lots of laws" that prohibit money laundering, but you didn't cite them, nor did you address topics such as CTRs, SARs, structuring, the dollar amount that is reportable to Customs on entering or leaving the country (it's $10,000), the criminal penalties associated with violation of the money laundering statutes, or how much it's going to cost for a lawyer to defend a federal money laundering charge. What's next? How to deal drugs? Burglarize a home?

Guest's picture
Guest

what do you mean structuring? can you further explain this concept?

Guest's picture
eastside dion

bag the **** off and chill out. be still and learn somthing .

Guest's picture
eric

There are no banks in the Cayman (or most of the Caribbean) that you can entrust your money with that would ever accept any cash deposit unless you can show legal source of funds, and in Switzerland it can not be more then 20 kusd.

Guest's picture
Guest

I'd differ. anyway, why'd you want to go overseas when we have DE, NV & FL right here?

Guest's picture
mind

spam that wants you to receive a check, cash it, and send back the cash has nothing to do with money laundering (besides the fact that the resulting proceeds from the scammer probably need to be laundered)

these scams take advantage of the 'hardness' of different types of money. if i met you on the street, and wrote you a check for $100, would you give me $80 cash, and be on your merry way? you may think you're making $20. but then you would go to the bank and find out that the check was bad. i, meanwhile, would be spending the cash you gave me while cackling.

these scams work on the same principle. when they send you the original check, you deposit it, and it appears to have cleared. but really it's just a matter of time until the deposit is reversed (when it finally gets to the issuing bank). this process takes a bit of time, regardless of what you actually see. meanwhile, you've sent your check out, they've sucked the money from the account, and gotten it into a 'hard form' - withdrawn it from the bank or whatever.

in a perfect world these things shouldn't happen, but the identity based banking system is incredibly entrenched and believes that its fraudulent behavior (acting as if the money is free and clear, but it is not) is acceptable. i don't know if you'd be able to argue your case in front of a judge (or if the banking industry has bought laws and judgments that allow them to continue this fraud). but in any case, it'd be a huge hassle, and you're not going to get something for nothing.

Guest's picture
Big Boy

...just live large overseas and never come back...except for visits...then stay in posh hotels and pay cash while you are here...

the irs gets the lion's share of tax revenue from the cubicle farm slave 'little people' anyway...they're not worried about your high rolling, greedy little mobster ass.

Guest's picture
Guest

I believe they have effectively closed the casino route. When you win at a casino and cash out, they not only give you your money but a W-2G. A copy of the W-2G is sent to the IRS just like regular W-2's. The IRS knows how much you win, where you won it and when you took possesion of your winnings. I saw one last year while doing someone's taxes.

Guest's picture
Rafael

Hi,

I just want to tell you how big drug lords launder their money here in Central America. Many of them do not have visas to travel to the US, so they prefer to have their money in local banks. This presents two problems:

1)How to bring back all that cash from the US? (Remember, to these guys one million dollars is chump change... and they mostly deal in 5-20 dollar bills)

2)How are you going to explain to the bank your one million dollar deposit... in small bills? There are laws that limit the amount of cash you can deposit daily to $500.

Well, the first problem is easily solved with the use of "mules", people who bring back money taped to their body for a small percentage. Many poor (or lazy) teenagers do this, and travel weekly to Miami to pick up the money. Some are caught, but many more make it.

Now, the second problem. How to deposit your cash in a bank? Some of them do many of the things you talked about (investing, real estate, open up a business etc.) But others do it this way:

1) Talk to people with established businesses.
2) Offer to "exchange" checks from their (legitimate) bank accounts for cash... plus 20% profit.
3) Take the checks to the bank and...
4) Voila!

So, the "legitimate" guys get 20% profit for "nothing" (they have to figure out what to do with all their cash... most of them reinvest it on their businesses).

Other crooks offer to buy you cars with a "discount". You tell them what kind of car you want (usually luxury cars), they go out and buy it for you from corrupt dealerships (at full price), and then sell them to you at 10-20% discount... but you have to pay them with a check. If they have any problems with your check... you know what will happen.

The point I am trying to make is that many of the biggest stores or real estate developments you see in Latin America, are funded by money laundering. The problem this arises is that we (the legitimate businesspeople) are not able to compete with them on an even level. How can you compete with "free" money?

This is just another unnoticed effect of money laundering.

Damn! Now I'm depressed.

Guest's picture
Guest

this is a problem of fighting the war on drugs...the money laundering is a predictable and unavoidable affect fo fighting a ridiculous war on drugs...and this is another example of how the war on drugs destroys the fabric of society. much worse than the drugs themselves....want to know another way to spend the cash money? give it to politicians and high ranking officials...the "donations" help in many ways.

Guest's picture
David

hi i was wondering if you could help me become a money mule =D thanks

Guest's picture
xmido

i never really know what money laundring was about. thx for the post.

Guest's picture
You missed one

You missed the one business that is almost always a front for money laundering: Strip Clubs

Since the patrons pay in cash as "tips" to the dancers, there's a lot of cash money coming in of varying amounts. Surveillance is useless as well as subpoenaing the water bill.

Guest's picture
Guest

Great article. Take pleasure in knowing at least one person who read this learned something new. I had no idea what Money Laundering actually meant before this other than it was something very illegal. Thanks!

Guest's picture
Guest

You mention briefly about declaring your income and taxes, etc.. if you're itching for an article, why not write about the biggest 'tax' scam carried out by the US Government?

http://www.w3f.com/patriots/c-or-f.html

...while you're at it, you may want to write about another scam, remember the gold confiscation of 1933 ? as if 'stealing' part of your wages wasn't enough , now they made it law for you to 'give up' your personal stash of gold.

http://www.blanchardonline.com/beru/confiscation_1933.php

http://www.gold-eagle.com/editorials_04/willis112804.html

Talk about 'real' issues, make your readers aware.

- not alone -

Guest's picture
Guest

What do you mean *legitimate* reasons? I consider survival to be just as legitimate a reason to discuss this topic than any reason bankers, lawyers, and the rest of them may have. Just because you choose not to surrender your life and wealth to the (by the way) criminal US government does not make money laundering immoral in any way.

Guest's picture
Guest

The casino trick is very old. I wouldn't suggest any one to try it as the banks are well aware of it!

Guest's picture
Guest

Most casinos in the US are required to report winnings so
they have you fill out a form. Easiest way would be to
declare the money as gambling wins from private games
(e.g poker). You pay taxes but you can raise your standard
of living very fast (triple or more your monthly earnings).

Guest's picture
Who Me?

One of the best laundering schemes was supported by good ol' UPS. In the old days people could ship a package C.O.D. for up to $5000. The UPS driver would collect the cash at the other end and then UPS would deposit it in their bank account and issue a good-as-gold, cash it anywhere, check to the shipper. This went on for many years until the dorks at UPS (FedEx, Airborne, etc.) finally figured out they were aiding numerous criminals.

Guest's picture
giania

That was amazingly informative. Thank you. I'd always wondered about the facts of the subject since you can't really trust crime movies to have studied the ins and outs of financial law.

A lot of the feedback is really interesting as well! Thanks to all the contributors for the great resources.

Guest's picture
Ben

While much of the article would have been accurate a few years ago, the part about getting money into a foreign or offshore bank no longer fits.

Perhaps the biggest misconception about illegal money is that it goes to "foreign" or "offshore" locations and magically disappears. As someone who does a lot of (legal) business outside of the US, I have been amazed at how much the movement of money has changed since 9/11.

Not long ago, someone could walk into a bank nearly anywhere in the world -- including the US -- and open a bank account, often without showing an ID and certainly without having to providing any verification beyond a (easily forged) driver’s license.

My firm recently opened a new bank account in the Cayman Islands. We have dealt with the bank before and are licensed in various ways in Cayman. The process took almost four months, as is typical these days in Cayman and much of the world.

You can't open an account in the US without ID anymore, but you can go online and open an eTrade or other online brokerage account without anyone verifying anything. The party providing you the illegal gains (the one bribing you, etc.) can then simply wire the money there.

Forming companies outside the US is now maddeningly hard as well. But US companies can be formed in an hour on www.bizfilings.net and many other websites. While this quick service is good for business, it makes the US probably the easiest place to launder money in the developed world.

The irony of all of this is that the US has pushed incredibly hard to force the rest of the world to act to protect the financial system against money laundering, whose proceeds are said to often finance terrorism and certainly to lower tax revenues. But the US has cleaned up little at home. In the process, the US financial system has become the biggest (potential) haven for money laundering and other illicit financial activities.

My associates in the Cayman Islands consistently joke about how their islands are thought of as a center of international crime. Yet with 40,000 citizens, only 1,000 of whom operate the entire financial machinery and all know each other, it was very easy to root out the bad apples. We have bushels of these bad apples and more are certain to be headed here soon.

Guest's picture
Guest

Personally I have more trouble drying my money as after I have put it through the washing machine it gets rather wet.

Guest's picture
Guest

Hi, is it possible to bring cash (above the $10,000 limit where it is required to be declared) into the U.S. from a foreign country? I am an American citizen, always have been, and I only want to be able to keep MY money that I earned (absolutely legally) when I take it back home without handing half of it over to the (unbelievably and shamelessly crooked) IRS.

Philip Brewer's picture

As long as you follow the reporting requirements, it's legal to carry unlimited amounts of cash across the border.

Sadly, the courts have ruled that mere possession of large amounts of cash, though, makes it reasonable to suspect that it might be drug money--which makes it liable for seizure. If that happens, you'd need to be able to prove that it had been earned legitimately in order to get it back--and the proof has to be pretty good indeed.

Guest's picture
zo

What if u have an honest cash business but don't want to pay full taxes on it, say only on 50% of the take yet don't want to have to hide all of it. Can you but land or real estate with cashiers checks or money orders and then feel some security against inflation?

And as far as deposits, are u saying that as long as my daily deposits are under $3,000 then I can put my money into savings and or checking accounts and watch it grow or transfer it to stocks and bonds without having to worry about the irs looking into it?

Philip Brewer's picture

Skimming cash off a small business is very common. I've been in more than one shop where the owner would run the register himself in the late evening and just leave the cash drawer open, figuring the total and making change in his head. I don't know, but I assume that they're not planning to declare any of those transactions for tax purposes.

Rather than trying to invest that cash, I think it would be best to invest the other cash--the part that you are paying taxes on. The cash that gets skimmed should just go into your pocket to be spent on your daily needs. Of course, you still need to take enough of the declared cash out of the business to support your lifestyle, but the cash you skim can provide a nice little boost to your standard of living without coming to the attention of the tax man.

An important downside to this is that it makes your business look like it's doing less well than it is. That's all well and good when it's the tax man who's looking, but it sucks if the guy who's looking is someone you'd like to sell your business to, or get a loan from. Resist the temptation to keep track of how much you're skimming and definitely refrain from telling someone (such as a potential buyer) how much money you're skimming. Pretending to be a buyer is a favorite tactic of the tax man. If you want to sell the business, just stop skimming cash. Over the next month or two, your business will show a nice uptrend in its business, which should make it more attractive to potential buyers.

I don't know where the $3,000 figure came from. I think taking any of the cash that you skim and putting it into the banking system (i.e. doing anything except just spending it on the necessities of life) is asking for trouble. Of course that limits the amount that you can skim.

Perhaps better to just pay your taxes. Saves no end of trouble in the long run.

rstlne's picture
rstlne

You're not required to report gold coins carried out of the country? Wow. Good thing drug overlords aren't using those yet (or at least I don't think they are) or they'd buy up all the gold coins and gold would quickly become too expensive for me to accumulate.

Guest's picture
J$tyle$

whether laundering money or not, coin operated laundromats are a very profitable business... i plan on opening one up in the near future. this article was very informative and educational. for those who spoke negatively about it, people make their own decisions, and are there for responsible for their actions. whats the difference between an episode of CSI? just because they show you what not to do in a murder, does that mean you should commit one, because you think you can get away with it? everybody knows when they're doing something wrong, for those who choose to use this article for the wrong reasons, im sure they're aware of the consequences. for everyone else hopefully this article can help prevent you of becoming a victim of such circumstances, and being taken advantage of in an illegitimate fashion.

Guest's picture
f-elmayss

whether laundering money or not, everybody has the choice to do good or bad things

Guest's picture
Guest

you're girlfriend's a stripper?
good luck, dude

Guest's picture

Now this post has got me thinking. There is plenty more about money laundering than what this article has in it. Thanks for sharing this though.

Guest's picture
Shannon

I can't believe I'm the first one to bring up 'Office Space' here... I, too, learned a lot from this post and appreciated. I'm glad to not be like the poor dudes who had to try to look up money laundering in the dictionary. :)

I also had to chuckle at the fellow who accused another commenter of being too dumb to go read about these things... then used the wrong "your/you're" homophone. Ah, blissful ironies.

Guest's picture
Guest

Theres also: Give a friend/trusted associate 50,000, which he 'found' in a gutter. Hand into the police, no one claims it and 1/2/3 months later (depending on the country's laws) its all yours (minus tax of course). Works well in country's where the police force is not corrupt.

Guest's picture
Guest

Lots of dirty money gets passed around between used "Classic Car" private transactions and also used car auctions. Just deposit the cash amount in the bank and then get cashiers checks. Declare a set amount to the auction house via a bank letter. Of course it is up to the bank to accept large sums of cash (only up to $9999 needs not be reported to the IRS). Only $10,000 or more deposit in US Banks are reported. So in essence, you could deposit $9,999 every day. But then again, unless you are Forest Gump, both you and the bank will take quick note on such actions. I highly recommend this for drug dealers. Works very well. Just deposit ONLY $9,999 per day (works even better if you get really stoned first. That makes bank officials blind to you and they never see it coming.) Trust me, it works very well. Give it a try.

Guest's picture
Guest

A good friend of mine does that. In fact she has been able to make an extra $1,000 by JUST detailing certain cars. Of course she knows good deals when she sees them (some sellers don't really know what they have). She makes about 60k per year buying and selling used cars. Once you have a relationship "verbal friendship" with a bank employee, it is very easy to get routine bank letters for car auctions. Once title is passed and registered it is money in the bank. How cool is that?

Guest's picture

I always thought that the common practice for people to launder money (if they have a lot to launder) is to open up a second hand car salesroom

Guest's picture
Guest

Selling Antiques and paintings could be a good way of laundering money, as you could easily manipulate the sales price and purchase in cash.

Guest's picture
Guest

Now we know the ways to launder. What's a lucrative way we can make money easy without laundering? Hell i'm too flampoyant to be doing illegal activities. The police would invstigate me just because...i don't need that.

Guest's picture
Guest

I found 50 cashier's checks made payable to and from my husband which he had under lock and key. the cashier's checks were dated 1982 thru 1986 and total $400,000. I knew we had $200,000 in CD's but apparently he cashed those in without my knowledge and had an additional $200,000 I wasn't aware of. I am filing for divorce. Apparently our marriage was a lie from the get go. I found small CD's scattered in several banks, some with his SSN and some with my children's (minors). Neither one of us had a dime when we married in 1977.
I am now certain he must have been involved in money laundering and tried to conceal the $$ not only from me, but the IRS. Any words of wisdom on how to confront him would be appreciated.
He is going to tell me that I don't know what I'm talking about. I have the original cashier's checks under lock and key outside of my home now.
thanks for your help.

Guest's picture
Guest

You could open up a real estate agency and make a lot of 'fake' transactions to clean up the money.

Guest's picture
Guest

Perhaps Ebay? You can get pictures of valuable items that exist in lots of places and "sell" them on Ebay (like expensive Leica cameras which can come to a few thousand $$$ easily). With a different account (opened and only used from a different machine, preferably in a different part of the country - try using proxys), you bid for the item and make a massive bid that beats everyone else. Then, you print out the Ebay winning page and receipt for your records and deposit the money in the bank saying that the buyer "collected in person and paid in cash".

Remember to post realistic communication between the buyer and your seller account ("Hey dude, I'll be in your area next Monday to pick up the item. Check okay?" "No, cash only with personal pickup" "ok dude, I'll be there with cash")

Of course, the buyer account doesn't have a reliable address. If the account is busted, open a new one.

Guest's picture

I think of Office Space right off the bat when I hear about money laundering. I've always wondered how to do it, not that I would ever need to.

I've been told though that if your non taxed income (like if you're a babysitter who gets paid under the table rather than through a company that would take out any taxes) is under $5,000 you don't really need to report it. I wonder if that's true ...

Philip Brewer's picture

If your total income is under some threshold (currently $8,749 if you're single, double that for married filing jointly), you don't need to file a return at all.  If your total income is over the threshold, you're supposed to report all your income, including small cash payments.

Anyone who pays you more than $600 a year is supposed to report it.  If they don't, it's easy enough to hide the money simply by spending it (that is, by not depositing it into your bank account).  Of course, that only works if the amount is small compared to the part of your income that you do report.  It's also leaves you vulnerable to the guy deciding to rat you out.

Guest's picture
Andorra

There's a Yahoo Group on money laundering called "belastingparadijzen & bankgeheim".

The schemes and international corporate structures used in money laundering operations are in some cases much like the schemes used by companies in legitimate tax planning.
Big international companies use shell corporations from Caribbean tax havens (OFC's) all the time. Remember Enron?

Guest's picture
Guest

invest the money in hookers

Guest's picture
Guest

Advice please. When one rents a safe deposit box at a bank isn't your social security number recorded when renting the box? Wouldn't the feds have access to these records? Unless I'm wrong, I think that safe deposit boxes are not a very safe way of hiding case. Please prove me wrong. I await your comments.

Guest's picture
screenwriter

Hi, I'm a screenwriter working on a new movie, and I was wondering if anybody could tell me if it is possible to launder money through a Five-Star hotel?

How could one go about this? And would it be a feasible thing to do?

Guest's picture
Guest

Screenwriter,

To launder through a 5 star hotel is possible. You build it new, fill it up with new furniture and start renting the rooms out to clients. Except here's the catch: Your guests are fake. The hotel stays empty for 2-5 years. Nothing gets damaged or worn out, but you have customers you are constantly invoicing. So the hotel looks very profitable. And at the end of the cycle you legitimately sell the complex to the buyer for a good price as the hotel was always full (on paper).

Philip Brewer's picture

The key for money laundering is lots of cash transactions--then you can run in your illicit cash and there's no way to prove it's not legitimate earnings from the business. For that purpose, a hotel isn't perfect--too much of what they get paid comes in the form of credit card payments, which leave a paper trail.

Having said that, though, I expect there's all kinds of money laundering going on around the edges at an expensive hotel, by people like the maids, the bellhops, and the concierge.  They get lots of tips, so they can easily run an illegal cash business on the side and then declare the illegal income as legitimate tips. Other businesses at the same location--the upscale shops, the parking lot, the restaurants--can all do the same to varying degrees, depending on just how much of their legitimate business is in cash.

Guest's picture
Guest

as most people will recognize..its actually difficult just to make any taxable income!

good informative article

Guest's picture
Money

Having worked at a bank one see's all types of activities related to money laundering.

The best one's are setting up dummy firms and then sending invoices to get paid for services provided.

Also the donations to churches overseas that dont exist.

Now with money being easy to track one way or another the IRS will get you.

Guest's picture

Are you legally aloud to write a post about how to launder money?

Philip Brewer's picture

We still have freedom of speech in the United States.

Guest's picture

As a matter of fact, the US is a haven for European money launderers.
The USA are the only country where it is possible to incorporate a shell corporation (Delaware, Nevada) without the identity of the owner being registered.
finance groups yahoo belastingparadijzen/

Guest's picture
Guest

Philip nice work mate!1 I see a lot of people actually don't read before they write, but otherwise there has been a great response from the majority of your readers. Can anyone put me onto a real big launderer? i would love to do a private interview.

PS I am from South Africa so someone around here would be great!!

my email diamondcor at yahoo dot com

Guest's picture

Seen that movie mad money? this post reminds me of that.

Philip Brewer's picture

Yep.  They used just those sorts of simple schemes to explain away their ill-gotten gains.  But then they foolishly didn't pay taxes on it, which is sort of the whole point--it's what turns illicite money into legit money.

Guest's picture
CCC

These work...

Construction Companies:

Painting
Landscaping
Cement

Small Marketing Co.

Advertising Co.

Clean money EZ

Guest's picture
jobie

If I were to state that I know how to laundry money "LEGALLY", without risk, would someone be interested?

Philip Brewer's picture

I wouldn't want to speak for my readers, but I'd have to say that I'd be pretty leery of random strangers off the internet offering to do anything with my money--especially if they put the word "legally" in all caps and in quote marks.

Guest's picture
jobie

I agree the offer appears dubious on the surface, however the offer is coupled with 100% real estate collateral to where the average moderately intelligent person could verify. This offer is to get ball rolling until people in need realize this offer is legitimate.
A minimum of $500,000.00, until the interested party determines this is legal and safe.

Jobie

Guest's picture
Chris

Let's do it.

Guest's picture
Guest

if a business were to accept a cash sum from an individual - how would the business make the money legit?
as previous posts have suggested gifts often need explainning?
Could it be presented as a loan?

Philip Brewer's picture

The way businesses make money legit is by selling something (or providing some service).

The whole key to the laundering is that you sell something that could plausible be worth all the money that's coming in.  Then, when you feed in extra cash, you just pretend that you have more customers (or bigger-spending customers) than you really do.

The actual mechanics vary from business to business. If you have a coin-operated laundry, just put the extra cash in with what you get out of the change machines at the end of the day.  If your business has a cash register, just run in a few extra sales any time there's no one waiting at the register.  (You could do it after closing, but modern cash registers probably time-stamp every transaction.)

It becomes tricky, of course, if the amount of money is large compared to your ordinary cash flow, or if your business sells something that's easily tracked (where the IRS could prove that you only bought 10,000 bricks, so how could you have sold 60,000?).  That's why some businesses are better for laundering than others.

Guest's picture
Guest

one person want to translate me amount over my dreams wath i have to do ? to save the money or to go in police ?

Guest's picture
Guest

yeah but what if you would acquire a few million dollars cash, and your country's currency is not in dollars - how would you provide a service or "work this money in" to your cash business? How would you utilise this money at all?

Philip Brewer's picture

Millions of dollars would be a lot to launder--it could turn into a full-time job (which wouldn't be so bad, as you'd be earning millions of dollars).

You'd need to find something that you could sell for dollars--maybe a tourist business of some sort, that catered foreigners?  Then, you just feed in your illicit dollars along with the ones earned legitimately.

To launder millions, though, you'd probably have to expand--but, since your business would be so "profitable" (on the back of those fake sales), it'd be easy to explain why you're expanding and easy to fund the expansion.  The bigger the business gets, the more money you can launder.

Guest's picture
Guest

I checked the website MoneyLaundering.com and it says "Subscribe today for only $1,245.00":

http://www.moneylaundering.com/products/mlpinfo.aspx

$1,245??? Sorry, "ONLY" $1,245...

This site is a front for money laundering, right?

I noticed at the bottom of the pages it has links for "Money Laundering Techniques", "Money Laundering Training" (huh?) and "Ways to Launder Money", but you can only access that information after you first pay your $1,245.

My question is, if they have a lot of paid subscribers, what are they doing with all that money? I have a feeling they might have a pretty good idea of where to put it all.