In the UK it is widely ‘known’ and accepted that the sweet shops and phone shops on places like the famous Oxford Street are fronts for money laundering. Can anyone explain to me what money laundering is and what these shops are actually doing? How do people know these shops are doing it? I don’t understand.
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It isn’t generally across the whole UK, but instead mainly in central London where the shops are mainly used by tourists. The shops often sell fake or poorly made knock offs of major products, especially for things like vapes. The business is a cash business since most of the items are relatively small value, the companies behind the shops often also avoid local taxation and VAT payments and often end up being raided by the police or fraud investigators, then temporary close down and then open up again with a new company name and new directors and repeat the process.
Any shop could be used for money laundering.A legitimate business will give you a business account with a legitimate bank.
Profits, losses, estimates , rentals, stocks, employers can then be “fudged” by very clever accountants, keeping your money safe, the taxman happy and the cops out of your way.
You can do large payment, employ friends and family, and all other perks of a legit businessman.
The “oxford street candy shops” is infamous because is hard to explain as those shops can stay open doing so little business, tiny profit margins and the insane rent prices.
Basically money laundering is the answer to “where did you get all that money?”
‘Money laundering’ refers to a practice where money acquired illegally is made to appear as though it were acquired legally.
So, for example, drug dealers run a business (sometimes completely fake, sometimes real) and manipulate its records so that money they made selling illegal drugs appears to have been made as profit from the legal business.
It’s a metaphor: “dirty” money becomes “clean”.
If criminals don’t do this, they’ll accumulate lots of money that they can’t account for and law enforcement and tax agencies will start asking awkward questions. That’s actually how they caught Al Capone – not by finding clear evidence of his participation in violent crime, but by charging him with tax evasion as he tried to conceal the existence of the money he had from his criminal activities.
If a shop doesn’t attract enough profitable business to make a profit and stay open, yet it remains open, people will often suspect that it’s being run for the purposes of laundering money. Proving that a business isn’t actually doing enough business to keep from going bankrupt is hard, though, especially because many businesses have trouble when starting or operate at a very narrow profit margin.
you makes some money doing something illegal, for example selling drugs, if you try using or putting that money in the bank you’ll be in trouble because you can’t explain where the money came from. So instead you open a shop selling, for example, candy. You can then say you made the money selling candy
There may be multiple scams going on in them at any time, not just money laundering. The basic concept with money laundering is that if you somehow acquired some money but do not want to tell the authorities how you got that money you need to come up with a good excuse. Money laundering is basically coming up with an excuse for why you earn money. Cash only businesses are very good at this because the “customer” might actually be the owner paying with their illegally gotten cash.
For example a shop may buy candy and then sell it at a huge markup. Nobody wants to buy the candy at this markup but you still mark it as sold and then use the cash to fill up the till as if you sold a lot of it. On paper it looks like you made a lot of profit even if you are at a loss. Then you might for example run a “buy one get three” offer which brings your prices down to normal levels or even cheaper. When people buy candy you just put one of the three into the register and take the other two from the pile of already “sold” goods. Or possibly you register all three but then put in two of them as paid in cash, which you get from the stash of illegal cash.
In addition to variants of these you can also pay someone to give you a receipt that they sold you some cheaper candy. But in reality you buy real candy with cash. The import might help you hide the paperwork a bit better. You then sell the real candy for their full price but tell the authorities it is the cheap wares that you were selling for a huge markup.
In general these money laundering schemes are losing the owner money. Not only does it cost to own and operate these stores and even sell products at a loss but they also needs to pay taxes on this fake income. But the entire point is not to earn money but to make it look like the money you earn are legitimate so you can actually use it. The authorities will question someone without any income or savings who just bought a big house and fancy car. However if they can show that their high street candy shop is making crazy profits then everything looks to be in order.
The candy shops are specifically a business rates (the business equivalent of council tax) dodge. If a property is empty then the owner must pay the rates. If it is occupied then the tenant pays. So the owner gets in any random, cheap to set up business at close to zero rent. The business occupies the premises for say 9 months, then folds just before the rates come due. The local authority can’t collect taxes from an extinct business and so loses out, while the owner saves themself a big tax bill.
In a beach town I frequent, there is an (expensive) Russian restaurant. It has been open for approximately 25 years. In all that time, I have literally never seen anyone eating there. (I did once see a couple having vodkas at the bar.). You do the maths!
High markup, cash sale. HMRC doesn’t know if it’s a drug dealer deliberately paying over the actual price, in cash or Steve, the guy who really likes obscure poptart flavours.
I think the news was originally broken by [Private Eye](https://www.reddit.com/media?url=https%3A%2F%2Fexternal-preview.redd.it%2FnI7Pl0eLeF1y4l6ow_QARxTZ09bs8e36AMix6PzFvyM.jpg%3Fwidth%3D640%26crop%3Dsmart%26auto%3Dwebp%26s%3D6ae698e109c87b431036b93776a1aabe248b535e) following a long investigation; here’s the original article that explains who the men behind the scams are, too.
Laundering illicit cash works best with a business that is likely to make a lot of cash transactions, and sells goods that have a long shelf life (as you’re not actually selling many).
American candy, phone accessories and candles are three good examples.
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