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Say you have a big pile of cash you earned through illegal activity. Set up a brick-and-mortar business, say a cafe, and do the bare minimum to run it as a busi

Say you have a big pile of cash you earned through illegal activity. Set up a brick-and-mortar business, say a cafe, and do the bare minimum to run it as a business. Then you say you took a lot of cash, report your earnings to the IRS, and buy your house. It's not really rocket science.

Spooky23 6y ago
The IRS isn’t stupid. They profile and audit those types of businesses at a higher rate. The real money in is stuff like real estate, which is pretty shady even when legit and much easier to buy and sell
- philwelch 6y ago
  How does that work, though? Wouldn’t someone notice if you bought real estate and paid for it with a briefcase full of cash? Wouldn’t you still end up with a legal record of having purchased real estate with more money than you can explain from your declared, taxable income? There has to be some sort of angle for real estate to work.
  - mabbo 6y ago
    Not the person you're replying to, but I'm up the chain and interested in this topic. It's like this: I buy a house for $500,000. What a great deal. A year later, I sell it for $600,000. Hey cool, I made $100,000 profit. Of course, quietly I've handed the original seller a briefcase with $110,000 cash in it. The extra $10k was to keep his mouth shut, but in return I've converted $110,000 of dirty money into $100,000 of clean money. But maybe it's not just one house- maybe it's 10 houses. Maybe it's a huge mansion worth $5m (which I negotiated a great deal on at $4m). I'm not cleaning the full value of the asset, I'm cleaning some portion of it's value. What those other parties do with the dirty money is up to them, but it's easier to deal with smaller amounts of it, spread out, than it is to deal with one big pile of dirty money. Maybe they work construction as a general contractor and buy their supplies for jobs using cash, but get paid in clean money. Many hands make short work when it comes to cleaning money. All that said, every large purchase - homes, cars, boats, etc - leaves a trace. Financial Intel agencies get a report each time you move $10k or more. And if you move too much, too frequently, they start investigating- how come this guy bought 5 houses in 3 years, each one below market value? Sooner or later, someone under questioning by the police gives you up and then it all unravels.
mabbo 6y ago
Right, and why wouldn't financial intel agencies notice that? Every time you move more than $10,000 into or out of a bank account in a 24 hour period (presuming Canada or the US) your bank will report it to your country's financial intel agency. They notice when a cafe is pulling in far more money than it ought to. Then they hand what they have over to the IRS/CRA, FBI/RCMP, and let them investigate further. If you're moving any significant sum of money, you're on their radar. And they aren't stupid.

Spooky23 6y ago

The IRS isn’t stupid. They profile and audit those types of businesses at a higher rate. The real money in is stuff like real estate, which is pretty shady even when legit and much easier to buy and sell

philwelch 6y ago
How does that work, though? Wouldn’t someone notice if you bought real estate and paid for it with a briefcase full of cash? Wouldn’t you still end up with a legal record of having purchased real estate with more money than you can explain from your declared, taxable income? There has to be some sort of angle for real estate to work.
- mabbo 6y ago
  Not the person you're replying to, but I'm up the chain and interested in this topic. It's like this: I buy a house for $500,000. What a great deal. A year later, I sell it for $600,000. Hey cool, I made $100,000 profit. Of course, quietly I've handed the original seller a briefcase with $110,000 cash in it. The extra $10k was to keep his mouth shut, but in return I've converted $110,000 of dirty money into $100,000 of clean money. But maybe it's not just one house- maybe it's 10 houses. Maybe it's a huge mansion worth $5m (which I negotiated a great deal on at $4m). I'm not cleaning the full value of the asset, I'm cleaning some portion of it's value. What those other parties do with the dirty money is up to them, but it's easier to deal with smaller amounts of it, spread out, than it is to deal with one big pile of dirty money. Maybe they work construction as a general contractor and buy their supplies for jobs using cash, but get paid in clean money. Many hands make short work when it comes to cleaning money. All that said, every large purchase - homes, cars, boats, etc - leaves a trace. Financial Intel agencies get a report each time you move $10k or more. And if you move too much, too frequently, they start investigating- how come this guy bought 5 houses in 3 years, each one below market value? Sooner or later, someone under questioning by the police gives you up and then it all unravels.

mabbo 6y ago

Right, and why wouldn't financial intel agencies notice that? Every time you move more than $10,000 into or out of a bank account in a 24 hour period (presuming Canada or the US) your bank will report it to your country's financial intel agency. They notice when a cafe is pulling in far more money than it ought to. Then they hand what they have over to the IRS/CRA, FBI/RCMP, and let them investigate further. If you're moving any significant sum of money, you're on their radar. And they aren't stupid.