What is money laundering?
In: Economics
I sell you $18K worth of drugs. Suddenly I have a lot of money I didn’t have before. The government is going to want to know where that money came from (and get their cut in taxes). I don’t want them to know where that money came from, because if they did, I’d be in jail. I can’t even do much with that money, because if I did, I risk raising suspicion.
So I set up a business. Preferably one in a field that deals with a lot of cash, like a restaurant. Despite having only $2000 in sales for a week, I claim I made $20,000 in sales. Nobody is actually sitting outside counting how many customers I actually have. Pay the tax on that, and then take the profit. Now I have a sum of money that is “clean” – it’s been taxed and the government thinks it came from a legit source. Sure, it’s less than the amount of “dirty” money, but you can do more with clean money than with dirty money.
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