Why is money laundering necessary?
In: Economics
Because if you tell the government that you make $50k a year but you are spending upwards of $200k a year, the government is going to want to know where that extra $150k came from and why you aren’t paying taxes on it.
That is how they took down Al Capone – they couldn’t get him for organized crime, but they _could_ get him on tax evasion because his spending was _way_ beyond his reported income.
You could, of course, tell the IRS about your income from illegal sources (there is a form for this and you are legally required to do it) but – as you can imagine – criminals aren’t too keen on admitting they are criminals on government forms.
The purpose of money laundering is to take the illegal money you earn and run it through a legitimate business so it now looks like legitimately earned money. You pay your taxes and can now spend the money without the government asking questions you can’t answer.
Latest Answers