TRADECRAFT 101 PART SIX: MONEY LAUNDERING THROUGH CASH-INTENSIVE BUSINESSES

Most compliance officers think that they understand money laundering through businesses where it is customary to accept cash, or where cash is the preferred mode of payment, but can they truly identify such illicit activity when it is one of their bank clients that is engaging in it? We sincerely doubt it, for most money laundering that is accomplished through this traditional method is eminently successful. Only when the client is arrested for the underlying crime does his banker generally learn what the client's money launderer has really been up to with the accounts. The compliance department didn't have a clue.

For laundrymen, the act of choosing a specific cash business to move money through is an art in itself. Sometimes, it's a company in financial distress, where the beleaguered owners welcome a chance to become solvent by cooperating, even through they later may find out that the cost is more than they  expected, especially if they end up in a criminal conspiracy. It may be a company where  the owners have always had little or no respect for the law, and their eyes glaze over at the prospect of untraceable cash payments  to them, as compensation for allowing the laundryman to pad their receipts with dirty money.

My personal experience with this technique was to gain access to cash-intensive businesses that were interested and available to clean narcotics proceeds through an accounting firm that I already relied upon to solve my criminal clients' tax problems. They know who was in serious financial trouble, and susceptible to a cash bailout in exchange for laundering facilitation, and also which companies would willingly engage, and they had no issues with breaking the law, if it resulted in significant cash in their pockets.

My clients were "hired" as commission salesmen; they then had a banner year for sales, raking in serious reported income, upon which they, of course, paid all taxes due on the money. That legitimate income also served to facilitate home ownership, paid for through mortgages that they were now eminently qualified to obtain, and even credit cards and accounts which they otherwise were unable to open.

Some clients went a step further, and actually created, or bought outright, a new or existing retail business, so that they could later add a decent amount of dirty money to the receipts, and clean their narcotics profits in that manner. Some clients had long-term goals, such as eventually getting out of the drug business, which has its dangers, and turning legitimate, putting their criminal past in the rearview mirror, so to speak. Miami is full of companies whose founders financed the initial costs by laundering narcotics profits. Eventually, the origin of the clients' business recedes into the past, and their legitimate history takes over. They now have the wealth, and some actually seek elected office, or some other form of power trip.

The achilles heel of any cash-intensive business money laundering that uses retail sale of goods or services is backup. Were there a sufficient amount of goods purchased wholesale to support the reported sales? If not, how credible are the documents created to give the impression that stock in trade was acquired to sell? A good financial crime investigator will cross-reference raw materials purchased with items claimed to be sold. If it's services rather than goods, was there sufficient staff to support the hours reported, and sufficient time in the day where the services could have been provided. And are the receipts and other supporting documents sufficient? 

Comparing purchases of goods to retail sales of same is a quick way of determining whether money laundering is in progress at a cash-intensive company. That can often be determined by looking at the checks issued for payment versus the ultimate sales receipts. If purchases do not support the volume of sales, you have a major red flag, which requires further investigation. With the commission salesmen method, do background checks on the employes; are there several with criminal histories, or allegations of criminal conduct? One can identify money laundering at cash businesses by closely checking these issues.