And how do those at the top buy those mansions and estates. I can’t imagine they’ve got a mortgage nor can I imagine then paying in heaps of cash
In: Economics
Yeah I work at the warehouse as an executive logistics consultant. No I am never at the office. No, none of the employees there know who I am. No I don’t know anything about warehouses or logistics. Yes that warehouse is owned by a guy who **allegedly** has ties to organized crime. Hey stop asking questions if you know what’s good for you mister
The mob is a pyramid. Money runs uphill, shit runs downhill. The lower guys earn and kick up to the higher guys. It’s tribute, just like in the old country.
I’m assuming they do it through companies and/or other people. Fake identities. Once you’re powerful enough you can get creative.
Washing money.
They wash their money, that’s how they do it.
They make their illegitimate money into legitimate money. Service businesses are great for that.
You know that laundry mat that’s never busy? Well somehow that owner took in a ton of business from their machines, paid taxes on it, and now it’s legitimate money. They have people who do this and make the money look good.
There’s a million other ways to launder money, but a laundry mat can be one of them.
That catering business? Well they bought a ton of product (they actually didn’t buy anything) and took care of a huge party for someone. (The party never happened) and made tons of money from it.
Money laundering.
Then they withdraw from clean bank account to pay their employees and expenses.
As for how money laundering works you can eli5 it or watch the Ozarks
They launder money. By that I mean, they purchase legitimate businesses to act as a “front.” Usually businesses that mainly operate with cash.
So let’s say I’m a successful drug dealer (Just to clarify for the record, I am NOT lol). I sell a lot of drugs and work only with cash. Let’s say I’m bringing in $10k/month with my illicit business. That money can’t go into a bank account, because the IRS is gonna shit their pants when they see it and try to figure out where it came from.
A year later though, I have $120k. Now I can purchase a “legitimate business.” So maybe I decide to open a donut shop or something. The donut shop might not be super successful, but I can start funnelling that drug money into the books at the donut shop and pretend that I now own a profitable donut shop in the city, when in reality most of the “profits” come from illegal activity. As long as you go slow and don’t get crazy with your deposits, the IRS doesn’t pay attention. So in other words if I deposit $3k a week of the drug money, I’m good. If I try to deposit $20k a week though, that’s suspicious because no donut shop is taking in $20k per week.
So that’s money laundering. Of course at this point I’m paying taxes to the IRS on my “legitimate” income, but if I’m bringing in that much money from my illegitimate business, I’m not worried about taxes. The government gets their share and they leave me alone unless I do something stupid, such as trying to deposit $20k per week from my tiny donut shop, which would make no sense financially.
Also I realize that I just rambled and didn’t actually answer the question. So how are the employees paid? They’re often paid in cash. Whatever they choose to do with that cash is on them. OR the more likely option is I put them on the payroll at my “donut shop” and give them legitimate paychecks for “working” there. Even though they don’t actually come to the shop and make donuts, they just sell drugs for me instead.
There’s a fried chicken place right up the road from me. I’m pretty sure it’s a front. I drive past it every day and it’s always open but I’ve never ever seen a car in the parking lot. No customers, no employees. It’s just there, and yet somehow it makes enough money to stay open. Obviously I’m speculating here, but I can’t fathom how a restaurant can stay open all day and not bring in a single customer unless there’s some illegitimate cash coming in.
The term you are looking for is “money laundering”, the art of turning illegally acquired money into legal-looking money that you can put in a bank account, pay taxes on, and yes, pay your mortgage with.
As a simple example, I go to school and sell my lunch instead of eating it. But my parents would get suspicious of me having extra money. So I go out babysitting and tell my parents that I’m getting paid more than I really am, and voila, they think my extra money is legitimate.
As a less simple example, I sell drugs, but I also run a popular restaurant. Wow, there’s always a lot of money in the tip jar, and when customers pay cash I sometimes forget to subtract the value of their coupons from the till. Voila, extra “income” I can report to the IRS.
Significant corruption of the local law enforcement and judicial system helps too. Bribery is a cost of business.
As they get towards the area of mansions and estates they generally don’t just go out and buy million dollar companies or grow there crappy shop to have huge incomes they need to invest into existing’s, This would be a trigger for the Govt in any country.
Lets say 1 guy has a trucking company with 5 trucks, You could go to them and say lets buy another 10 trucks, Well your going to give that guy a few million in cash, Hes going to put that thru his business as income. Now your invested in a trucking business with 15 trucks valued at 5million.. You actually own those 15 trucks, You may not even pay them up front you may just rent them it doesnt bother you about Interest.
Now you can start to launder even larger amounts of money, Smart money laundering actually has people to grow that illegitimate business. Nobody whos in the space of buying mansions and estates is in a “life of crime” they begin to shift and grow illegitimate business to be large the advantage they have is they can afford to make mistakes and challenge companies with small profit margin to go out of business.
Its the large companies to be cautious of, Even companies with a history of 50 years can have investors of a shady past, Sometimes it pops up when somebody gets murdred and the news is like “Family man, Nobody knew anything about it” and then you hear a “Was known to be friends with x,y,z” who were all people in illegimate circles.
They’ve practically paid him, Hes living a good life to be legit whilst needing to be illegimate at the same time but every so often the discussion isnt just business and it gets personal.
So mobs will generally pay people in cash, but most people who make money from the mob make the money first and then kick up the mob their cut.
So like a simple drug pyramid could work like this. You have one person who produces or imports some particular drug. They then sell what they have to say 5 people. Those five people could be buying for personal use, but more likely they are buying to resell it.
It could work like this. Guy gets 5 pounds of some drug that on the street will sell for $5,000 per pound. But it only costs him like $2000 per pound. He would then have guys under him who buy from him. If he sells it for $2,500 per pound he still makes a large profit. It would be infeasible for him to try to sell it on the street, he would probably get busted and he has a reasonable expectation that he will have another five pounds the next week. He would be making $500 per pound x 5 pounds = $2500 per week in cash.
Lets say he has 5 guys, each one buys a pound per week. He doesn’t know what they do with it, they are in a similar situation to him. They have a regular source at one price and then multiple people who will buy it at another price and they keep the difference. Like the original silk road, some drug may go through multiple hands until it ends up at its final consumer.
But that guy has a problem, he is making $2500 per week in cash. If he goes out and starts buying huge purchases, he will trigger some interest from the IRS. So he has this grand idea, a luxury barber shop. Its a real business. He went to barber school, he has a license, he got a real business loan, a location. If you go to his shop, he will cut your hair, and likely goes a really good job at it and will claim that his profession is barber, not drug dealer. On that menu, there are treatments that cost like $500 for some reason. I bet if some dude came in, and paid for that $500 they would leave feeling like a million bucks. But I also bet that it would be real easy for him to say that he does a few of those per week. It would also be real easy to say that he makes a lot of cash tips as well. He has a weekly $2500 cash that he can inject into the business, he would not put it all in the business, but he would absolutely do some. But now it looks like he is a legit and successful barber, that bank loan he got, easy as hell for him to pay off.
Breaking Bad has a famous scene where Saul Goodman explains to Jesse Pinkman how money laundering works. [https://www.youtube.com/watch?v=RhsUHDJ0BFM](https://www.youtube.com/watch?v=RhsUHDJ0BFM)
In the real world, for most people, Jesse would not own the nail salon, he would be the nail salon technician and then just inflate his books. He would not be a passive owner, he would be an actual self employed person. Granted, Jesse was making a lot of money so this would have been something he did much earlier in his career. In Walter White’s case, it was the car was. They could show that they were making more money than they were by showing several major services every day that they didn’t actually perform.
Lets say the level down. Lets say the people who work under him buying 1 pound and then turn around and sell it. They might only make $500 per week. Lets say they work at a restaurant as a server. Their goal is to show that $500 they don’t make selling drugs, but they make in tips working at the restaurant. They might have to pay their manager $100 as a fee but its $400 in cash that they can show they are making legitimately as tips. They put it on their taxes to show they are making some bigger income than they really are. They pay their boss $100 in cash to give them the best nights of the week, and to look the other way when they always manage to have an extra $400 in tips and if anyone asks, that person is the world’s best server and everyone loves them. But at this level, it may not be necessary, they would just hold on to the cash and use it for off the books purchases, they can’t declare it as an income for things like loans, but they can use it to pay for their groceries and other household expenses they can pay in cash.
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