People always say mattress stores are shady and used for money laundering. Not totally sure I understand exactly what money laundering is. How would this occur at a mattress store?
In: 763
Hiding the income stream to make it look legitimate or from somewhere else. Hard to do electrically. Easy to do with a cash business.
Say that you make a $1,000,000 in cash doing really shady stuff, sold drugs, sold guns, ripped off the drug cartels, robbed a bank, etc.
That’s great you have $1,000,000, but you walk into the bank and with absolutely certainty someone will ask “where is this money from?”.
“Trafficking illegal guns.” Is not a legitimate answer that will let you keep your money or freedom.
But if you walk in with $2,000ish at a time and say “I run a laundry store” or “it’s from my car wash” then you can deposit the money and spend it.
But what if someone like the government asks “what store?”
So you need to get a business to make it look like you have a reason to have a bunch of cash.
Cash businesses with low physical goods are great.
Run a restaurant and get audited? It’s easy to see that there’s no way you made $25,000 in cash but only bought $400 in food.
But a car wash has no tangible products or at least very few that can be easily disposed of. There’s also ways to do it with abstract value things. Like art, or dumb pictures of digital monkeys.
Who is to say the value of art?
“Why yes, that’s a lovely painting. So lovely that I will buy your painting for 1,000,000 in cash. Wink. Wink.” So now when you go to the bank and questions get asked you can explain it was from an art sale and the value skyrocketed for some reason. Still will raise questions and the real life version is far more complex but pretty much anything with an abstract and intangible value works.
Weirdly.
This is one of the explanations that may actually work to a 5 year old.
Imagine you’re a kid and stole $100.
If you go home and suddenly have $100 worth of candy, your dad will get out the jumper cables and punish you for being a thief.
If you say you were selling lemonade they might catch on as well. You have no lemons. You have no sugar.
So you say you were walking the neighbors dog. Or your friends at school all really liked your drawings and thought they were worth $20 each.
There’s no real evidence of dog walking to check, or to prove that someone didn’t think a drawing was worth $20.
So now when you come home with $100 of candy, your dad doesn’t discipline you with jumper cables because you have a perfectly “legitimate” explanation for how you got it.
How would this happen at a mattress store?
More speculative since they have an actual physical product that can be audited to see “there is no way they sold $100,00 in mattresses and only sold 3.”
You could inflate transaction costs but that’s riskier since it’s easy to see how much one product can cost.
Latest Answers