Money Laundering

Let’s talk about Money Laundering, the process of taking money and profits gained from a criminal activity and converting it to legally clean cash.

WARNING: This is NOT a How-To guide, nor an instructional document. I do not condone nor encourage any of the illegal activities described. Everything described is from research, supposition, and investigation. Plus, I’ve watched a lot of movies.

WHAT IS MONEY LAUNDERING?

Per Wikipedia money laundering is the process of converting illegally gained assets to something that at least appears legitimate.

WHY IS IT NEEDED?

Ever heard of the phrase “crime doesn’t pay”?

Well, that’s not completely true. Crime does pay, quite well sometimes. It’s just difficult to spend the money. Why? Even criminals need to pay taxes.

That might sound a little counter-intuitive, but let me explain.

Let’s say that there is a mild-mannered high school chemistry teacher, who decides to make crystal meth. Why isn’t important to this example, but let’s call him… Walter. Walter makes a lot of money from making drugs, but he has a problem. He has to explain on his taxes where the money came from.

Something that attracts the attention of Law Enforcement is when a high school teacher making $50,000 a year suddenly has half a million bucks in the bank. Even more suspicious when his tax forms only list the $50,000.

If Walter wants to keep his money from making drugs, and not go to jail, he needs to find a way to launder his money.

WHO DOES IT?

Pretty much any criminal that wants to use their money in “polite society” needs to launder their assets, at least a little. Bank robbers, drug dealers, mobsters, embezzlers, they all need to wash their cash.

WHERE CAN I LAUNDER MONEY?

Why did you just ask that question? Are you trying to get me in trouble?

Ok, I’ll talk hypotheticals in the next section.

HOW IS IT DONE?

This section is completely hypothetical. All people and events are made up. Poorly.

There and several factors that determine how one would launder money. The biggest ones are amount, frequency, location, currency, and turn-around time.

How much, how often, where, what form, and how fast.

Each of those variables can easily affect the answer. Moving $10,000 once is different than moving $1,000 a month.

The most important thing to remember with money laundering is that it has to look normal on taxes. It’s not crazy if Walter made an extra $1,000 a month, but and extra $50,000 will raise some eyebrows.

The easiest way to split this up is by frequency. How often. Is this a one-time cash windfall, or is it a steady stream?

If it’s a one time event, the biggest factor is how much needs laundered. Hundreds, thousands, hundreds of thousands, millions? Billions?

If it’s less than a set amount, which I think is $10,000, then banks and casinos don’t have to report it to the IRS. Easiest way to launder small amounts, historically, has been the casino. Walk in with a few thousand bucks in dirty money, buy some chips, play a few hands of blackjack, lose a little money, then cash out the chips for clean money.

But what if it’s more money?

Let’s say Rob robs a bank, and gets away with a million dollars. It’ll be a little obvious if he goes to the casino a few hundred times. Plus, it gets a little suspicious if someone doesn’t work at all, yet pays all of his bills?

Break it up into smaller pieces, and sit on it. Feed a few installments in over time until there’s enough saved up to purchase a revenue stream that makes it easier to launder the rest. Once there’s a front set up, slide the rest of the money in to stream over time.

There are some tax loopholes like gifts from relatives and other windfall windows that let someone keep their mom, but I’m not as familiar with those. Talk to a lawyer about that.

Now, what if there’s a revenue stream.

Let’s say Joe makes $20,000 a month, each month from running a brothel. Profit after expenses.

In this case, Joe might want to open a cash-heavy business, like a laundromat, nail salon, contractor, or take-out restaurant.

Here’s how it works…

Joe sets up a business, like general contractor. He hires a small crew, like a cousin who can keep his mouth shut and is good at fixing things. He pays his cousin to work some jobs, while Joe “cooks the books.” He adds some extra made up jobs, like a kitchen remodel for $10,000 or a bathroom repair for $5,000. He pays his share in taxes, but the rest is cleaned. As long as he doesn’t get too greedy, he should be ok.

By hiding the money with a legitimate revenue stream, and keeping it realistic in numbers, that $20,000 can easily be mixed in with the real sales.

One way to make the money trail harder to trace is the use of shell companies. A shell company is a company, often fake, that exists as a separate entity. They exist to confuse and distract, just like the shells in the shell game or the extra cards in Three Card Monte.

Let’s say Joe wants to move his money around a little bit. He already owns a construction company. Why not make some shell companies related to his contractor company? Joe would start a roofing business, a plumbing business, and a building supply business. He would then send money from one company to another. On paper, this cleans up the money a little more.

Maybe Joe wants to put some money away for a rainy day. He could do that with a bank or credit union, but if the law comes calling, they can freeze his bank accounts. In that case, Joe would buy some art, or collectible cars, property, or anything else that people put value in.

Now, let’s say Joe starts building up too much money, and he needs to move more of it. The best way to launder large sums of money is with real estate.

Why real estate? Because it has no value except what people agree to. The numbers are large, inexact, and it’s easy to hide money.

So, Joe buys a condominium in a luxury apartment building, or a couple houses. He sits on those for a couple years, then sells those at a profit. Completely clean. This could take a while, but it will get Joe’s money clean without the use of armies of accountants.

Now, let’s say Joe needs to get some of his dirty money into Euros, or Rubles, or Pounds. What then?

There are two options available.

The traditional method is to route the money using shell companies and banks in various countries like Cyprus and Panama, to move the money from one place to another until it finally arrives in a bank in the destination country.

The newest method is with cryptocurrency like BitCoin. Joe sets up a BTC transaction between himself in the United States, to convert dollars to BTC, then purchases that BTC using Rubles. Back and forth this goes, until Joe gets the money where he needs it to be.

WHAT ARE THE PENALTIES?

Each state has their own laws on this, as does the Federal government. Fines, imprisonment, and asset forfeiture are options the government can use.

WHAT ARE SOME OBVIOUS THINGS TO LOOK FOR?

If you’re looking for a path of money laundering, the first place to look are for shell companies. Several companies using the same address is an obvious place to start. Also, if they do have different addresses, but those addresses all belong to one party.

Another place to look for money laundering is in art sales, or other collectible communities. Ever wonder why someone would pay millions for an ugly painting? Because they know someone will buy it in a few years, and they’ll get their money back.

Real estate is the easiest way to launder large sums of money. I’ve said that so often my phone just auto filled that sentence. Remember those stories about some rich person buying apartments for their pets? Don’t be surprised if you find out they were laundering money.

WHO INVESTIGATES MONEY LAUNDERING?

Every state has their own financial crimes units, but at the federal level, the heavy lifting is done by the Financial Crimes Enforcement Network or FinCEN, and the IRS Criminal Investigation unit, or CI.

If they’re coming after you, expect to have some very bad days in the future.

WHAT DOES THIS HAVE TO DO WITH TRUMP AND RUSSIA?

Good question.

For awhile, I was a little confused on this as well. Then, thinking of The Producers. It’s a movie about an accountant and a broadway producer who figure out that they could make a fortune if they produced a flop. An utter disaster. An abortion on stage. So they created “Springtime for Hitler”, a love story about Adolf Hitler. This is one of the greatest movies of all time. Watch it.

Thinking of this movie made me realize something.

Donald Trump is The Producers.

His business isn’t real estate, or casinos. Not even politics. It’s money laundering.

He may very well be the world’s premier money launderer. When billionaires need their money cleaned, he’s the go-to.

Think about it for a moment. How does one lose money running casinos? Why does he have so many connections to organized crime? Why do so many of his development deals fall through? Why do so many of his buildings get foreclosed on after only a couple of years? Why do so many of his properties get sold to Russians with ties to organized crime? Why does Trump have so many LLC’s (limited liability corporations) to his name,his family, and his main company? Why didn’t he release his taxes like every other candidate?

Because Donald Trump is a criminal.

A real estate developer wants to build properties. A hotelier wants to own and run successful hotels. A casino owner wants to own and run a casino. A television producer wants to create successful television shows and movies.

Trump doesn’t do any of those. He provides cover for other criminals to move their money around, and he takes some off of the top.

Here’s how…

If there’s a few million dollars to move, he’ll provide an apartment for sale in New York or Miami. I wonder how many of his condos have humans living in them.

If there’s a few hundred million dollars to move, it’s time for a failed hotel development. Trump will announce a deal to build some spectacular hotel at some crazy, ridiculous price like $3 billion. They’ll hire architects, designers, accountants, engineers, and lawyers. They’ll put the money they’ve gathered so far into escrow, through a shell company or two, and wait a couple years as the interest in the project wanes. The deal will fall through, and all of the money, minus fees, gets returned to the investors. Laundered.

If there are billions to launder, the hotel will get made. Trump will receive a licensing fee for his name. Then, after construction, the other investor will take out a mortgage on the property for more than the building’s value. They then run out of town with the money, if the bank comes looking for it. If they don’t, they’ll swallow the loss. If they don’t want to swallow the loss, they’ll foreclose on the property and sell it off.

So, Trump failed up when he got elected. He probably wanted to go into media after the election, and keep doing his deals. Instead, he’s on the biggest stage in the world, and doing everything he can to distract and discredit those looking into him and his actions.

By the way, CI and FinCEN have been on to him for a while.

“Without Journalists, it’s just propaganda.”

– Katy Tur

Thank you, and have a good one.