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
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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