How to Launder Money

By Philip Brewer on 1 September 2007 152 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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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.

Guest's picture
Guest

How popular are those pre-paid credit cards? I have a friend in Boston who calls them a money-launderer's best friend.

I don't think their available in incrememnts of more than $100 per card, plus there's an activation fee that would take $4 to $10 off right there. Still, it's untracable and there's literally hundreds of them hanging on those shelves with all the other gift cards at most grocery stores.

Guest's picture
Guest

I cant beleive that the goverment hasnt figured out away to catch the crimals trying to do this to honest people. this is wrong on so many levels and hopefully when these crimals die they will burn in hell.

Guest's picture
Guest

that comment is wrong evil on so many levels

Guest's picture
robb

i'm currently looking at ways to hide money, i have been putting a few grand away into my account without any probs, i earn a decent wage and dont have debts. Dont want to go on to how the money is generated by its not drugs. i still have about 60k to get into my bank and have of way of doing it. I dont mind paying taxes on it to be honest.

Guest's picture
Guest

you should be allowed to make money any way you want to, legit or unlegit.

Guest's picture
Louie

Can one be a licensed treasure hunter?

If so, then one can just go to the Philippines, declare a gold find, get this certified in whatever way.

The treasure certificate should explain the extra wealth.

Guest's picture
steve

Instead of carrying large amounts of cash (over 10 000) from country to country and have to worry about the reporting requirements. Just wire it to yourself by western union or moneygram before you leave the country, then go pick it up once you get off the airplane.

If you wanted to bring 40 000 just wire 5 shots of 8000$ ... have 5 different friends be the sender and you be the receiver.

now you have a big pile of cash in another country. good luck.

Guest's picture
Alex Jones ?

Looks like only one reader before me had any knowledge of the appropriate context for the subject article...

- INCOME TAX IS FRAUD.
- The "Federal Reserve" is a private for-profit bank.
- Our federal government is illegitimate.

Watch "America: Freedom to Fascism"
http://video.google.com/videoplay?docid=-1656880303867390173

"The Obama Deception"
http://www.youtube.com/watch?v=eAaQNACwaLw

AND GET SOME REAL NEWS from www.infowars.com

Guest's picture
Jason

Thanks for the article... interesting information on money laundering. Also, whoever shared this article I had a great time reading it:

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

When it comes to investments gold can be a great one these days, and it is expected to go up even more in coming years with the crazy inflation that is going to take place during the Obama years.

Many people are choosing to buy gold bullion because gold, in general, is viewed as being inflation and economy proof. Even in times when the economy is faltering or declining, the price of gold remains somewhat constant; which is why it is such an appealing investment opportunity for many. In times where the economy is flourishing, the price and value of gold bullion increases and generates a substantial return for investors.

Philip Brewer's picture

In fact, gold prices are highly volitile.  For example, after soaring to $850 in 1980, the price of gold dropped dramatically, dropping by more than half by the next year, and then gradually sagging by almost half yet again.  As recently as 2001 the price was still under $300--a pretty crappy return for holding an investment for 20 years.

Directly on topic is a post I wrote back in 2007 called Gold as an investment.  I also wrote Surviving a financial panic--lessons from the past, which addresses the implications of the fact that gold isn't cash any more--it's an investment.  If you can buy it at a good price it may be a good investment, but the situation is different from that of the 18th and 19th centuries when gold was cash.

Guest's picture

This has to be perhaps the best post i've read in while. Not just the post but the comments - made me chuckle.

Guest's picture
Lucky Money

Hi friends, there ist the possibility to deposit money in a swiss bank. Swiss bank are absolutly secret for swiss people.

Simply obtain a credit from a swiss citzen and deposit the money to his bank account.

I will do this for 5-10% of the deposit amount.

Guest's picture
Guest

The article was very informative and written in an easy to read style. I also enjoyed almost all of the comments. I was especially impressed that only a very few people became negative. Thanks for the links that were shared. They have been stored in my bookmarks for future reference.

Guest's picture
Guest

Thanks a bundle, I will use some of these techniques to hide my meager fortune from the greedy and blood-stained hands(war funding) of the "tax-man."

I am glad to live in a country that still has free speech, at least while it lasts.

I think with most illegal activities, greed and over-confidence is what always gets people caught. Stay small and fly under the radar, have patience, and move cautiously and slowly.

Guest's picture
Guest

It's tough spending money, lol! Go to a used car lot and buy a decent car. Since you're offering cash, have them drop the price for you by 10%-20%. Let them know that the car is being given as a gift to a friend/family member, and that you don't need a receipt. Since you're offering cash, have them drop the price for you by 50%. Make sure you're dealing with the owner, or a manager-type. Look for the guy with eyes that look predatory. He'll get what you're talking about.

Guest's picture
Guest

I had a friend who started out on her own young and wasn't the nine to five type. She became a dominatrix and starting earning cash to pay the bills. The only problem was that she was afraid of depositing it into a bank for fear that Uncle Sam would take a good chunk of her earnings, which she needed to survive. So instead of the old hiding it under a mattress thing and having the insecurity of cash lying around in her house, she placed it in an account overseas (as you stated can be done).

It's easier than one might think and these days, it seems no one can survive off of income that is 100% legit. You gotta have fallback.

Guest's picture
Stephanie

This seems very complicated, especially the overseas part. I still think honesty is the best policy.

Guest's picture
Guest

if you were living on land that was all your own and you grew a tree that produced fruit that you could eat for food and someone told you that in order to grow tht tree that produces that fruit that you need to live you had to give a percentage of that fruit to them would you hide it so they wouldnt take it........which party is dishonest........i bully can tell you that he will punch you in the face and it will be ok as long as he is honest about it?........im a christian that lives his lfe under many pricipals one of which(the second most important one, the first being love jesus christ) is to not eat from the tree of knowledge. in the garden of eden adam and eve we not allowed to bite from the tree of knowledge so that the would not judge or see right nd wrong as god sees it.....

Guest's picture
yabba

WRONG-

If you've got notes, the higher the domination the higher the loss for you. Lets say you have €20 million in €500 bank notes, the money is located in Northern Ireland- you got it to Northern Ireland via South Africa- (Harare-Morocco-Spain-Northern Ireland) by stashing vodka bottles with notes, and refilling them up with water- re-glueing the bottles, they now look like normal vodka bottles with pretty designs on the sides, and if customs open'em a clear liquid will flow out. Alternatively you could stash the notes in computer cpu units, sofas, the list is endless.

The easiest way to change this money into credit would be to to buy shares in a mining company in Zimbabwe such as CAMEC. They would naturally want some money in exchange for 1) exchanging all those notes into shares and laundering it 2) making files in the companies accounts which claims you are a legitimate shareholder of the business and made the money in Zimbabwe in lucrative mining deals. Once this is all done, you should end up with €14 million worth of shares in CAMEC. It should be noted big companies are better at laundering notes than any individual could ever be.

Give it a few years, enjoy your shares. tell their associates in the British Virigin Islands you want your shares back- in the form of credit(money). And there you go. There is a few flaws, one you'd have to live in Zimbabwe for a number of years (no bad thing if you're rich, chill out with boys and drink whiskey whilst driving your Toyota Land Cruiser at 100MPH down some country lane) You will be wanted by Interpol (you'd be seen as funding Robert Mugabe)- but you'll make friends and associates which will make these problems disappear.
GOOD LUCK

Guest's picture
Guest

hello,

have you some informations about how to launder counterfeinting's money ?
I am a french student and i am finalising a dissertation on "counterfeiting and money laundering" as part of a master degree...
thank you

Guest's picture
Guest

Very good article to present the basics.
There are also some other ways for big amounts.

Guest's picture
AnotherGuest

For myself and many others in sex industry, whether full-time or moonlighting on top of a conventional career, it IS a relevant issue. Most smart sex workers I know pay their taxes but do worry about legitimacy of income they show, especially in case of an audit.

It's nice to see this recognized.

Guest's picture
Gary

I enjoyed reading this article but I want to know If this can be done. I don't even want to get into the legal issues of it all. I prefer to stick with internet traffic income.
http://the-traffic-secrets-101.blogspot.com/

Guest's picture
abi ross

Honesty is most definately always the best policy. I got caught out about 12 years ago when I knew something wasn't quite right and I didn't report it. The result was that I also got prosecuted for not reporting it when I knew something was wrong. I have learnt my lesson the hard way...

Guest's picture
Guest

a very good way to launder large amounts of money is to start a business selling art... because of the nature of art pieces can go for vasts amounts of money... just keep a few nice pieces in your home so if the irs comes searching you can prove your art business... followed up with some fake receipts and your good to go... you could "sell" $500,000 worth of art with just 5 or 6 paintings

Guest's picture
Frank

I am planning to open a reference account so my clients can make their deposits there... this reference account to be routed to different offshore ones, but my question is:

In your experience, is it better to have multiple offshore accounts, rather than just a couple of them?

Guest's picture
Silverage

Is it the way of giving some collateral delivery contract and quote it under strategic project capitalisaton model

Guest's picture
Guest

I got an e-mail from this lady in south africa saying that she has inherited a large amount of money and wants the government of south africa not to take it away from her and so she wants to wire millions of dollars into my account in the United States and her banker is supposed to be getting in contact with me. I told her go right ahead and wire transfer the money into my account since it only have a 50 cents balance it is in dire need of a deposit. sounds to me she is trying to money launder from south africa or take money out of my account one

Philip Brewer's picture

There are laws that require that banks (and other financial intermediaries) report large cash transactions to the Federal government, in order to create a paper trail that makes it easier to detect money laundering.

The laws provide loopholes. Small cash transactions don't need to be reported. Certain large transactions don't need to be reported either, if the intermediary understands where the money comes from and can confirm that it's part of a legitimate cash transaction. (Otherwise they'd be filing daily reports on many businesses that did a lot of cash business.)

As with any loophole, criminals try to take advantage of it. For example, when the reporting threshold was $10,000, criminals would divide their money up into multiple separate $9900 deposits--structuring the transaction to avoid the reporting requirement.

Later amendments to the law prohibited that activity as well. It's now a federal crime to "structure" your transactions so as to avoid the reporting requirements in place to detect money laundering.

Guest's picture
Anon Accountant

After reading through all the responses it is clear that few of them are educated responses. I am not claiming to know all the ins and outs of the lucrative industry of laundering but I can sense bs when I see it.

Offshore accounts are made possible because of Bank Secrecy Acts. These allow for transfers from offshore accounts to other legitimate accounts. I could not tell you how difficult it is to set up an offshore account, however if I were to guess I would say this is the most difficult part of the offshore theory.

The fact is that as long as there are banks hiding individuals personal information large amounts of laundering will always be possible.

I want to thank whoever posted about the Latin Money Laundering. This in my opinion, was the most rational scheme I've heard of that didn't include hundreds of steps and numerous accounts.

Guest's picture

I am no expert myself about money laundering. All I know is that the rich somehow find crazy loopholes to launder their money and all the rest of us work 9-5. I read a book not to long ago of an expert in the fiend about how do those guys actually do that.... he actually shows you things and break them down into steps. 

defiantly cool stuff ! 

check it out if you're interested http://www.themoneyfesto.com

 

Guest's picture
Guest

This article gave me a boner.

Guest's picture
Guest

I believe hawala system is one of the most effective ways to conceal your illicit income.

Philip Brewer's picture

I've actually written an article about hawala (and other payment mechanisms that share some of its traits). It's an effective way to discreetly move money, but it's not a complete solution to laundering illicit income, because you still have to do something with the money once you've moved it.

Guest's picture
Guest

Well, I believe hawala has its effects to circumvent some first-step obstacles. Of course, you have to do something with this money from hawala, I agree, but it actually all depends on what amount of money needs to circumvent the threshold.

Guest's picture
Tomas

Hm... May be http://dontpaytax.biz/ ?

Guest's picture
Rani

i want to work as a money luandry i like to gain money please assit

Guest's picture
Guest

Income tax itself is criminal so I figure if you aren't scamming any individual or other business, more power to ya!

Guest's picture
Guest CASSANDRA

ok so if a company in another country ask's you to help them by recieving payments from in the u.s cashing them and sending them to the company is that laundering?

Philip Brewer's picture

It's probably not money laundering, but it's pretty stupid—those things are always scams.

There are two versions:

  • Sometimes the checks are bad. They'll bounce after a few days and the bank will take the money back, meaning that you're screwed.
  • Other times the checks are good, but the company that you're "receiving" them for is bad. Legit customers will send legit checks, but then the company ships bogus merchandise (stolen, fake, substandard—or nothing at all). When the customers file criminal complaints, you're on the hook as a representative of the company. At best you have to give the money back. At worst, you could be charged as an accessory or even a conspirator.

Whether it's money laundering or not, I'd definitely stay away from any such scheme.

Guest's picture
Guest

Here's a business I thought would be great for laundering. You go through the legal motions of becoming a PI (Private Investigator); license, permit, office, everything. Then, you go to banks in the area, explain that your business is strictly cash. Why? You specialize in investigating potential hostile corporate take-overs. You're hired and paid by large companies (A) to investigate various "hostile" companies, (B). These companies (A) pay you in cash to avoid a paper trail. It's not shown on their books. Your rate is $2500 per day. You make fake invoices leaving the names of all companies involved blank, for "security reasons." Deposit no more than $10,000 per week for about 5 weeks. Take a trip. Come back and do the same thing. If anyone asks, tell them you're not allowed to talk about the impending investigation. Stay in one town doing this for about 6 months. Then move to another town. Your average cash "input" will be about $150,000 to $200,000 per six month period. Also, always pay in cash, the results of your diligent detective work. Any comments?

Guest's picture
Guest

Inherrited some money that was hidden in a safe, can I pay some debt off with it
without questions asked?

Guest's picture
Miss Invisible

Thanks for the explanation. Now I finally understand how people like Lil Wayne "make" their money, and where all of the "profits" on Wall St are coming from.

Guest's picture
Guest

I was researching this because of the number of grossly overpriced things I see on Amazon and Ebay ....for the life of me I could not understand why there are so many of these stupid looking listings ...do people REALLY expect complete idiots to come along and pay $99 for a $5 item that is common as grass? Even if a person was wicked enough to hope some half blind or blind drunk person might actually buy the item, it is hard to believe it would happen often enough to make the effort even worth while?? Then a light bulb came on ....MAYBE this is a very common money laundering scheme?? But right out in public view?? Is law enforcement and IRS really THAT lame to allow all of this happening right under their noses?? It would explain why some of these ebay listers with grossly overpriced items have ALL their sales listed as totally private...thoughts??

Guest's picture
Guest

I always wondered the same thing!

Guest's picture
Guest

Thanks for posting this. I feel like I went to school tonight after reading the article along with all of the informative comments. :) Very interesting topic.

Guest's picture
The Artist

Wouldn't the best way to launder money is to sell art. Not art forgery or something like that, but sell your own art. You don't necessarily have to be all that talented either, there's all that crap abstract art with swirls, lines, dots and just random splashes of paint on a canvas anyway and thoughts "fantastic" works of art are going for millions. Who says you can't take an artist dump on canvas and someone didn't buy it from you with straight up cash. All you have to do is make a little fake name for yourself. Go buy some old ugly paintings from like Goodwill or Salvation Army for like 5 dollars, remove the frames paint over the canvases with your abstract bullcrap, take photos of them for proof, then "sell" them to a mysterious buyer who supposedly bought them with cash . Make am online footprint with a twitter and Facebook page for your professional trade, LinkedIn account about how your this amazing professional artist and make a quick website with your portfolio of all the over priced paintings you supposedly sold. This is one of the truly only products you can do this with because know one can tell you how much one of your art pieces is, you make the price no matter how much it cost to make it. Beauty and price is in the eye of the beholder. The cool thing about this business is it's not uncommon for people all over the world buying artwork privately. It's impossible to prove foul play,

Guest's picture
Guest

So how and who do I contact if I have a suspicion about a person laundering money in my name who has my SSN because I was stupid enough to believe they would be opening an account for me that pays interest but that never happened and I'm afraid of what they really needed my SSN for

Guest's picture
BAIGMASMODS

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