4 ms·

I don't understand how money laundering works in the anecdote at the beginning. I guess you can launder some money that way, but how efficient is it?

jayceedenton 4y ago
The business records a high number of sales (or high value sales) and hence dirty money can be used as clean incoming money. The high staff numbers indicate either a) staff can accumulate and no-one is really bothered because the normal economics don't apply, or b) more staff implies a bigger business (to anyone looking at the books), which means more money can be laundered without raising suspicion. Efficiency just depends on how much cash you can imply this coffee shop makes, so more staff is a good thing.
- empiricus 4y ago
  I imagine this way you can launder on the order of 10-100k dollars/month? With 30-40% payed for taxes and employees?
- qzw 4y ago
  Some number of the staff may also be from the “questionable” side of the business. They don’t have to do any actual restaurant work but will get some clean income as part of their total compensation. So the laundering happens at more than one level and could be more efficient overall than at first glance.
- BoardsOfCanada 4y ago
  There is something I don't understand: If you pretend do have a lot of customers (to feed illegal income into pretend purchases), why not also pretend to have a lot of employees? At least they don't need to be present, since this seems to be what make people suspicious.
  - bluehatbrit 4y ago
    I'm just guessing, but if someone does decide to investigate your business I assume they'll start by checking the people in it. If they find you've faked employment records then the gig will be up pretty quickly. Employing people keeps the facade up in the same way as actually serving food and drinks. I suppose if your "other" side of the business has people working for it, then it's not going to change the financials much to have them on the books of the restaurant.
  - auggierose 4y ago
    Because employees have easily checkable social security numbers.
  - bombcar 4y ago
    You also hire family members of your “ real employees “ so that they have legitimate income also.
ozim 4y ago
So talking about incentives. Efficient money laundering will get you caught. Incentive is not to get caught and not having all the money seized.
- mellavora 4y ago
  Nice. I love how you stress the long-term compound efficiency goal ("don't get caught") vs the short term efficiency goal ("pay as little as possible"). Which also comes back to early comments about "treat your employees well", which incurs a higher up-front cost to generate a massive long-term payout. Also see comment on ML efficiency rates, yes, 30-40% hit to get the money clean is a lot better than no money plus jail. One of the reason black market goods are expensive is because the costs of doing business are so high. You pay 40% or higher money laundering "tax" to avoid paying tax.
  - 988747 4y ago
    Does this "30-40% hit" includes taxes already? Because that's the whole point of ML, right? Pretending that money came from legal sources means paying income taxes on them. Your last sentence is confusing in that regard.
    - mellavora 4y ago
      That 30-40% is pulled from an earlier comment on the thread. I'm not actually a professional money launderer, nor do I rely on their services, so I cannot give factual current rates. But to clarify, I meant the 30-40% as a total cost, i.e. I put in 100 dirty dollars and take out 60 clean. You are correct that an income tax would then apply. If instead I kept the 100 as cash, I could spend the 100, and not pay any income tax. Staying all cash probably works at the 100 level. Becomes dicey at the 100K level.

jayceedenton 4y ago

The business records a high number of sales (or high value sales) and hence dirty money can be used as clean incoming money. The high staff numbers indicate either a) staff can accumulate and no-one is really bothered because the normal economics don't apply, or b) more staff implies a bigger business (to anyone looking at the books), which means more money can be laundered without raising suspicion. Efficiency just depends on how much cash you can imply this coffee shop makes, so more staff is a good thing.

empiricus 4y ago
I imagine this way you can launder on the order of 10-100k dollars/month? With 30-40% payed for taxes and employees?
qzw 4y ago
Some number of the staff may also be from the “questionable” side of the business. They don’t have to do any actual restaurant work but will get some clean income as part of their total compensation. So the laundering happens at more than one level and could be more efficient overall than at first glance.
BoardsOfCanada 4y ago
There is something I don't understand: If you pretend do have a lot of customers (to feed illegal income into pretend purchases), why not also pretend to have a lot of employees? At least they don't need to be present, since this seems to be what make people suspicious.
- bluehatbrit 4y ago
  I'm just guessing, but if someone does decide to investigate your business I assume they'll start by checking the people in it. If they find you've faked employment records then the gig will be up pretty quickly. Employing people keeps the facade up in the same way as actually serving food and drinks. I suppose if your "other" side of the business has people working for it, then it's not going to change the financials much to have them on the books of the restaurant.
- auggierose 4y ago
  Because employees have easily checkable social security numbers.
- bombcar 4y ago
  You also hire family members of your “ real employees “ so that they have legitimate income also.

ozim 4y ago

So talking about incentives. Efficient money laundering will get you caught. Incentive is not to get caught and not having all the money seized.

mellavora 4y ago
Nice. I love how you stress the long-term compound efficiency goal ("don't get caught") vs the short term efficiency goal ("pay as little as possible"). Which also comes back to early comments about "treat your employees well", which incurs a higher up-front cost to generate a massive long-term payout. Also see comment on ML efficiency rates, yes, 30-40% hit to get the money clean is a lot better than no money plus jail. One of the reason black market goods are expensive is because the costs of doing business are so high. You pay 40% or higher money laundering "tax" to avoid paying tax.
- 988747 4y ago
  Does this "30-40% hit" includes taxes already? Because that's the whole point of ML, right? Pretending that money came from legal sources means paying income taxes on them. Your last sentence is confusing in that regard.
  - mellavora 4y ago
    That 30-40% is pulled from an earlier comment on the thread. I'm not actually a professional money launderer, nor do I rely on their services, so I cannot give factual current rates. But to clarify, I meant the 30-40% as a total cost, i.e. I put in 100 dirty dollars and take out 60 clean. You are correct that an income tax would then apply. If instead I kept the 100 as cash, I could spend the 100, and not pay any income tax. Staying all cash probably works at the 100 level. Becomes dicey at the 100K level.