Have you ever thought about how dirty cash from drugs gets cleaned? A money launderer once said restaurants are good for hiding money. These cash companies aid in the cleanup of illicit funds.
Restaurants, shops, and gambling places deal with lots of cash. It’s hard to check all the cash deals. Crooks use these types of businesses to hide where illegal cash comes from.
The article shows different methods of money laundering used by businesses. It also explains how bad owners mess with records or fake companies to help clean up drug money.
Cash Businesses Disguise Illicit Cash Flows
Drug cartels and traffickers need ways to hide the dirty cash from their illegal drug business. One method is to use cash businesses like restaurants and stores.
These businesses deal with lots of money from customers every day. It’s hard to check how much real cash the business took in.
So traffickers can use the business to blend their drug money with the regular business cash. Then it looks clean, and they can say it’s money from selling food instead of drugs.
In 2023, it was estimated that global money laundering operations moved around $1.87 trillion in illicit funds annually.
Bonus: Anti-money laundering skills are needed to scrutinize transactions and identify the warning signs that can indicate cartel cash flows are polluting your industry.
Popular Fronts – Restaurants, Stores Launder Funds
Restaurants and small stores are often the popular choice for cartel money laundering methods.
They can buy a restaurant or convenience store as a cover to clean drug money. The traffickers then lie about the real cash coming into the business.
They took in way less money than they actually did each day. This allows them to hide much of the cash from their illegal drug sales.
They can also pretend some of the drug money is from selling pizza or snacks. This strategy is hard for anti-money laundering investigators to detect.
Layer Cash through Shell Firm Transactions
Traffickers may also use shell companies as part of their money laundering strategies. They set up a fake import or export business and use it to help lay off the cash.
They can do business between the restaurant industry and their shell firm. This allows them to disguise further where the cash truly came from and move it through different business accounts.
Law enforcement and financial institutions have difficulty tracking the real cash flows when traffickers use layers of shell companies as part of their methods for drug money laundering.
In 2023, over 40% of global criminal financial activities involved the use of shell companies.
Spreading Cash Across Firms Complicates Tracking
Instead of keeping all their drug money tied to one storefront business, cartels may further spread it across multiple cash businesses.
They can buy a coffee shop on one corner and a clothing store on another to divide up their laundering.
When investigators try tracking where the dirty cartel money ends up, it’s very hard to follow. The cash flows get blended between many small firms.
This spreading out complicates the work of anti-money laundering experts. Cartels move their drug proceeds around and make them look clean.
An estimated $1.6 trillion is laundered globally each year, with cartels often using small businesses to hide their tracks.
Gambling Through Cash Games
Another way cartels facilitate money laundering is by buying into cash-only gambling businesses like casinos.
These venues are well-suited for their money laundering strategies since cash trades hands frequently in games of chance.
Dirty cash can easily blend in. Cartels can later withdraw “winnings” that are dirty funds in clean form.
It helps traffickers distance drug money from its criminal roots. A 2023 report indicated that about 40% of U.S. casino revenue comes from cash transactions.
This significantly complicates law enforcement’s efforts to track illicit funds in these heavily cash-dealing industries favored by criminal groups.
Jewelry Stores Layer Cash from Drug Profits
High-end jewelry retailers can layer illegal cash up the chain, too. Cartels may finance new jewelry boutiques and claim the seed money came from “investors.”
The jewelry shop then buys extra inventory pieces that act as a transfer. The excess gold is given back for cash payments that launder the funds.
Criminals depend on lax tracking in luxurious asset classes by launderers working within the trade to help further obscure dirty cash sources.
A recent Financial Action Task Force report found that 23% of luxury goods retailers, including jewelry stores, have been linked to money laundering in the past five years.
Detect, Audit Transactions to Counter Laundering
Financial experts must closely detect abnormal transaction patterns. They also audit business records to fight money laundering methods.
Front organizations that falsify data and volumes are the lifeblood of cartels. This helps them disguise illegal cash gains.
The U.S. Department of Justice reported that over $2.7 billion was seized from drug trafficking organizations in 2022.
This highlights the scale of the issue. By poring over financial statements, investigators can spot attempts to blur activity details. They can stop counter-moves that create a false appearance of legitimacy.
Strong anti-laundering policies and persistent detection can help authorities effectively counter drug organizations’ money laundering activities.
To learn more actionable tips for detecting potential money laundering schemes in local businesses, visit our guides on anti-financial crime compliance.
