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.
Some of my friends work there, they get less than half minimum wage, but they take it because they need under the table jobs.
I can’t explain the uk thing but as far as money laundering
Say you have someone who wants to give you money, like as a bribe or something else sketchy or illegal, instead of paying you, they put their money somewhere else, like a business that you own, the business might not do anything, or it might be a small business that isn’t profitable. They give the money to the business, and you pull the money out later, usually bit by bit.
While money laundering is technically illegal because it’s still a bribe, payment for illegal activities, or whatever they are trying to do, it’s really hard to prove, because each individual action isn’t illegal. It’s why it can kinda be an open secret, something everyone knows about but continues happening because it can’t be proven
Money laundering is like this: have a business that can claim income legally. Have illegal income. Use the business to claim the money as it’s own income.
An easy example is a corner store – lets say you own a corner store that makes $1000 a month in profits. You also sell drugs, and make 15,000 a month. You say the store made 16,000 this month and pay taxes on your drug money. Now you can spend your drug money without anyone asking where it came from, because it’s clearly income from your highly successful corner store.
“To conceal the source of money as by channeling it through an intermediary.”
That’s all I know about money laudering.
Gaming venues are used for that in parts of Australia. Walk into a pub with pokies (I believe Americans call them slots), pump in $7100 in cash, play $100, then call for your payout. These days, the payout has to be signed for, ID, etc, so there is a record of A.Capone winning big at the Town & Country. I remember emptying pokies at a bar I worked at in the late 90s, you’d find thousands of dollars in 50s, all lined up, crisp and neat
They’re not money laundering!
If you want to launder money, it needs to look legit. A dodgy company that evaporates before paying business rates and sells knock off products doesn’t look legitimate. If anyone asks where the money comes from, they’re not going to be able to give a convincing answer.
These places exist because footfall is high, profits per product are huge (because they pay very little and sell at a huge markup) and overheads are low because they vanish before paying any dues.
People think it’s money laundering because they don’t put any thought into it and think any suspicious business must be money laundering.
And why candy shops, you may ask? It used to be shops selling phone covers and other similar items that cost pennies to buy from China in bulk but retail for £10 or more BUT during COVID lockdowns the only shops allowed to open at all were food shops. Hence all the laundering operations had to find a food related product that was plausible and could be sold with a crazy mark-up.
I know it’s not about candy shops but you asked what money laundering is:
Imagine you as a kid are taking money from your dad’s wallet and over time you collect £100 but to go to the toy shop your dad must take you so he will question where the money came from so you run a lemonade stand earn £20 but you say you earned £120 so your parents won’t question where the money came from
Its only half the scam; the other half is that the back rooms are used as cheap lodgings.
Its genius.
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