Quora Answer: Does Accrual Accounting Make Money Laundering Easy?

The following is my answer to a Quora question: “Does accrual accounting make laundering money easy?”

Accrual accounting is the recording of revenue and expenses upon occurrence, as opposed to when funds, including cash, changes hands.  It can be manipulated to do layering and placement of illicit funds, but that does not make it any better or worse than any other form of accounting with regards money laundering.

The real trick in money laundering is not in the accounting, but in creating a reason for the funds to be there.  That happens before the accounting process.  For example, it would be helpful to have a business that is cash intensive since there is no paper to back up the transactions.  In such a case, it is irrelevant which accounting method is used.

Another way would be to buy into a failing construction project in certain countries, and there are so many ways to manipulate and create transactions to layer money in.  That skyscraper might never be built before the main contractor declares bankruptcy, and the sub-contractors already sucked in all that illicit funds with paperwork placing them there.