Quora Answer: How is Money Laundered through Cash Businesses?

The following is my answer to a Quora question: “How is money laundered through cash businesses?”

Money is laundered through cash business because there is less of a paper trail to follow.  There are many ways to manipulate the ledger from under-declaring sales, to over declaring expenses, with the difference moved elsewhere.

For example, you could have a fruit business.  Fruits are bought in bulk, but sold in packages of individual fruits.  Since the weight of the consignment does not tell us the numbers of individual fruits, we have a wide margin to play around with.  You could make it a cash only business, and have two sets of books.  One set is the actual profit, and the other is the one you show for business declarations.  This system allows you to integrate the earnings from other, illegal businesses, and create a legitimate reason for the money to be in your accounts.

Gangs use similar methods with a variety of such cash businesses, from selling seafood, to running food stalls, to restaurants.  Bars, lounges, and night spots are especially useful because you can also claim a large amount of cash as tips, layering even more black money into the economy.

The best cash business for money laundering, however, is casinos.  Casinos allow you to integrate millions per night.  Using chips, they also provide a means to move funds across jurisdictions since the chips from one casino may be cashed at another casino run by the same group, making it an internal ledger to ledger transfer of funds, bypassing compliance.