How do money laundering fronts stay open ?


Typically they will just lie about sales right, so couldnt tax authorities just monitor the number of people going in and out of businesses where they can track easily sales from the outside?(for example barber shop) Then they could just shut down the operation easily by proving fraud? I might be stupid here but it doesn’t make sense to me

In: 4

Well the idea is to not get caught – to not be such a flagrantly obvious front business that the IRS immediately flags you and sends an investigator.

Front businesses aren’t necessarily a fake company, they can be profitable ventures on their own merits as well. Mob-owned bars, clubs, casinos, restaurants, they’re making money fine legally too and just reporting double that for laundering purposes.

They’re not reporting 1000 times the expected profit from an ice cream parlor in Alaska, that’s too obvious.

That can happen, but the authorities would only do so if they had a reason to suspect something in the first place. They don’t audit every new business. That would take a lot of time and money for very little reward.

As long as the business doesn’t seem suspicious, they aren’t going to get that sort of scrutiny.

Successful money laundering just isn’t interesting enough to manually be monitored, and by all automatic methods it appears normal.

For a laundromat or barbershop, this would mean that all the automatic monitoring (tax returns) look like they are normal. They are within reasonable measurements of what is expected of the area, and the launderers just don’t launder enough to exceed that amount enough to be suspicious. And then, if they ever do get manually monitored, either have a plan in place to detect that and be ‘normal’ for that time period, or they just get caught and written about in the news.

But much like the most famous spy is probably the least effective at not getting caught, the successful money laundering will be things that are unlikely to be thought of and thus unlikely to be suspicious enough to get that manual monitoring.

Why would the authorities monitor every cash based shops? It’s a lot of shops…

The vast majority of them being completely legit.

Once they start being suspicious about a place, sure, but unless you’re living in a police state, it’s gonna take a while. The laundering is usually done in a way that doesn’t make it immediately obvious.

Also, money laundry fronts rarely remain open for too long once the authorities start getting suspicious. And even then, a couple of years is usually the maximum before the shop changes in some fashion (change of ownership on paper, closes and reopen as a new shop, etc.) The point is to shield. Current operations from the previous ones (it might have been a laundering front before, but that one closed or changed ownership and is clean now).

Even if under suspicion, the surveillance will be probably stop after of few months of no activity and one or two changes of ownership.

Sure, if law enforcement *suspected* that a business was a money laundering front there may be ways for them to prove that the revenue the business takes in doesn’t match what they report.

But not looking suspicious is the whole point of these businesses. It’s not obvious to authorities how much money a laundromat or restaurant “should” make. So they just see a business that does lots of cash transactions going to a bank and depositing cash, reporting their deposits accurately on tax forms, and paying taxes on it. It looks like a legit business owner following the law.

Also the law enforcement that can most easily see businesses financial documents would be tax authorities, and they mostly care about taxes being collected not where the money came from. For privacy reasons, a local police department or even the FBI cannot randomly look through every business’s accounts to find out who makes “too much” money.

So again, it is totally possible to prove and prosecute money laundering fronts when they are somehow found out, but not that easy to figure which businesses are sketchy to do further investigation.