Eli5: Why does counterfeit money need to be “washed”?


I’ve been watching way too much Good Girls. Why does counterfeit money need to be “washed”? Why can’t you just spend it like a normal person spending normal money?

In: 0

If you spend a lot though, it might raise a few eyebrows as to where you’re getting it. Money laundering is the creation of a forged paper trail that shows it as income from somewhere.

In theory you could spend it on every day purchases like gas and groceries and such but if you go to make large purchases like cars or houses and decide to pay in all cash the seller is gonna do their research and make sure you are someone who could likely have that amount of money in cash and that’s where a person would run into issues. Washing it makes it clean in the sense that you now have a reputable source as to how you got the money. If someone just showed up to buy a house with half a million in cash it would raise some eyebrows but if that person also happens to own a restaurant business they can slowly push the money through that front and make it show up as legitimate money in terms of profits from the restaurant.

Money laundering is for criminal revenues, e.g. from selling drugs or prostitution. The money itself is normal legal cash.

It needs to be “laundered” because there is a lot of it. If you have a suitcase of cash, you will not be able to buy a house with it, or deposit it into a bank. Not without a proof of legitimate source.

So you need to get proof that money is from some legitimate source, like business profits or casino winnings.

Counterfeit money is usually used to buy one small thing at a time. I am not sure if this is called laundering. if you come into a store with a wad of cash, they will check it very carefully before accepting it.

You need to be able to get rid of large amounts quickly, and have something legitimate to show where that $ came from. Think about it this way, if you go to let’s say the local outlets. You spend thousands and buying everything you want, they will quickly uncover a connection to you and probably locate you. If you wash it, you basically negotiate let’s say $50 for every $100. A million in counterfeit money would give you half of that value but it would place the initial blame on the person/entity that is actually putting it in circulation. The money you deposit is legitimate or has now become electronic. Eventually a financial institution with recognize the problem with the counterfeit bills and you will have to run. Now you have a head start!

“Washing” money is replacing the “dirty” money that you have with money that doesn’t have any connection to any illegal actions.

Counterfeit money, like other dirty money, is connected to crime(in the case of the creation of the counterfeit money itself being a crime).

If you spend a counterfeit $100 bill and you get back a bunch of smaller bills and some change, you’ve gotten rid of the thing that would provide easy evidence of you committing a crime, and you’ve replaced it with plain old money that you can use any way money can be used.

You mean laundered I assume?

Let’s say you work minimum wage.

You go buy a house with cash

This throws up red flags all over the place. So essentially government regulations mean you have to justify this money.

Did you win the lottery? Did you inherit it? Etc.

You also don’t want to have a bunch of fake bills on you. If you have a wallet full of fake $100s or $10s and get caught it throws up more red flags. Now they check your search history or purchases. They see if you bought special printer ink or paper.

Laundering the money is the act of taking criminal money and making it legit. Usually this is done by buying a business and it claiming more in income than it actually makes.

So let’s say you are a criminal and make counterfeit money. You buy a local gym and charge $20 per member per month at the gym.

Someone quits and ends their subscription. So instead of removing them you leave them on. But you pay their subscription from your counterfeit money.

You then make up a few people and sign them up too and they pay with your counterfeit cash.

You get close friends and families to sign up. You promise to pay for them too. On paper your mom is paying you $20 a month to use your but in reality you are using your counterfeit money.

So now when this gym makes a bunch of money you can show the IRS and government/banks you made this much from these members because you own the gym and these people pay you to use it

None of the answers have been ELI5 enough for me.


Pick one:

* You just earned $100,000 in cash by selling some illegal drugs.
* You just finished printing $100,000 in fake bills that look real.

Now you have a bag full of cash. What do you do?

I know! I’ve always wanted a fast car. I’ll go buy a Corvette! So you go to the Chevy dealer and you plunk down your cash.

The dealer says … “Um, sir, we don’t deal in cash. So few people buy cars in cash. We don’t allow it. You’ll have to pay by check from a bank.”

So you go to a bank. “Here, bank, take my cash, put it into an account, and I want some checks that I can write”.

But, you see, the bank has a legal obligation to keep an eye out for big huge cash transactions.

So the bank guy says “I’m supposed to report this amount of cash to the authorities. If you got it legally, then you’re fine, but they’re going to look into how you got it”.

And now you’re screwed. If the authorities look into how you got the money, you’re going to jail.

So what can you do?

There are people who are good at turning “dirty” money into “clean” money. The ways they do that aren’t important.

**The point is,** you can’t just walk around with $100,000 in cash and buy big things. Nobody will take that kind of cash, and the bank is required by law to report it so that it can be verified as LEGAL.

“Okay, I just won’t buy a car. I’ll buy groceries and maybe pay my rent.”

Yeah, okay, that works. You could do that. Nobody at the grocery store will bother reporting you spending $300 on groceries.

But that only gets you so far. You want to take a trip? You can’t buy an airplane ticket with cash (I don’t think). You want a car? You want an apartment? Those things generally don’t work with cash.

You want to send your Aunt Mabel $2,000 so she can pay off her mortgage? How are you going to do that? You’re going to put cash in the mail?

I’d bet that many high-end jewelry stores don’t take cash. You want that shiny necklace that costs $4,000? You aren’t paying in cash.

You can see that cash only gets you so far.

The funny thing is that counterfeit money might actually have to be washed, like in a washing machine, to look more realistic