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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Money laundering is the process of taking money that’s “illegal” or illegally gotten, and washing it or “laundering” it into clean money by moving it through a business.
If you robbed a bank for a million dollars, and you suddenly started spending like a millionaire, it wouldn’t be hard to put two and two together. So you can’t spend dirty money.
So how do you actually benefit from your profitable crimes? You have to clean the money. You have to come up with legitimate reasons for you to be making money. And then you have to put some of the dirty money into it. So that way no one can tell what’s legitimate money and what’s not.
Cash businesses are important for that, because credit cards can be tracked. They leave a paper trail. So if you don’t accept cash, you’d have no way to clean your money. Or if 99% of your customers pay with card, but then your business took in an amount of cash that exactly lines up with a recent heist, that’s no good either.
So you want to own a business that’s primarily cash. In america at least, bars are super popular for this.
So here’s how it works, you *actually* operate the bar. Customers come in, you give them alcohol, they give you money. But a couple times a day you take $100 of dirty money, put it in the register, pour a couple glasses of whiskey down the drain (or give it to customers or employees “on the house”), and write a receipt that shows that someone came in and bought a few drinks of expensive whiskey and paid cash.
Now since you’re actually running a business, you have costs, you lose *some* money this way. But the markups on alcohol in bars is massive, typically in the 5x range. What this means is you’re losing $0.20 for every $1 you clean. So if you stole $1,000,000 by cleaning it this way you could have a “clean” $800,000.
But of course, now you have a profitable business, so the government wants their cut in taxes. Depending on the type of business you’ll pay between 14% and 27% in tax on your profits, so, worst case scenario, cleaning this way, you’ll keep $0.59 of every $1.00. And best of all, it’s now all clean. You can use that wealth. You can put it in the bank. Because you have a paper trail showing that it isn’t stolen money, it’s money from your pretty successful small business.
Other businesses can be good too, Laundromats are another one, they’re even higher margin at something like 10x (cost of electricity in your area will effect this alot), but they tend to be smaller transactions, so while you’ll keep more of your ill gotten gains, it will take longer to clean it. Car washes were famously used in Breaking Bad. But any business that uses cash can be used.
EDIT: I just explained money laundering, the specific thing with candy shops that you mentioned is apparently a tax evasion thing. Misunderstood the question.
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