
How Do Criminals Launder Money Through a Restaurant? - nkurz
http://www.eater.com/2016/9/1/12533030/money-laundering-restaurant
======
Synaesthesia
The big cartels launder money straight to the banks. Drugs are a huge
business, 10% of global GDP by some estimates. The banks are all involved,
they have to be. HSBC got caught laundering $670 billion.
[http://www.bloomberg.com/news/articles/2013-07-02/hsbc-
judge...](http://www.bloomberg.com/news/articles/2013-07-02/hsbc-judge-
approves-1-9b-drug-money-laundering-accord)

~~~
imaginenore
HSBC got caught, and nobody went to prison. The fine was just $1.9 billion.

Our prosecutors are a f __*ing joke.

~~~
rhizome
There's a saying that crime is defined as the behavior of the losers in the
class war. HSBC is not a member of that group.

~~~
allendoerfer
True, still I think - at least where I live, crimes of said losers are
sometimes not punished hard enough compared to crimes "winners" commit. If you
want to spend 5 years in a German prison, you can either steal money from your
company [0] or literally kill a guy (if you did not intend to do so) [1]. The
first one is a danger to the system, the second one probably had a difficult
childhood. Still I think life should be valued much, much higher than money.
The US might have the opposite problem.

[0] [https://www.gesetze-im-
internet.de/englisch_stgb/englisch_st...](https://www.gesetze-im-
internet.de/englisch_stgb/englisch_stgb.html#p2242)

[1] [https://www.gesetze-im-
internet.de/englisch_stgb/englisch_st...](https://www.gesetze-im-
internet.de/englisch_stgb/englisch_stgb.html#p1806)

~~~
imaginenore
I disagree about the money. Money is basically a measurement for human labor.
Money is human life time. We should sentence people proportionally to how much
they steal, which should really cut down multimillion dollar thefts.

For example in California grand theft (misdemeanor) is 1 year max in county
jail (not even a prison), and 4 additional years if you stole more than $3.2
million. So in the very worst case you get 5 years.

How long does it take you to make $3.2M? For the average US person with the
median income of $37,679 before taxes it will take 85 years, not counting the
taxes.

~~~
allendoerfer
I think crimes like this should definitely be punished with hefty fines and
some years in prison, so even the super rich care about them.

But it is just money. Money is not lifetime. Money is just a number central
banks can control. You can insure yourself against losing it. It cannot even
be lost, it is just somewhere else. The criminal can repay it. Time working
for money is not lost. Time being dead, because you got murdered, is lost.
Your mother or your children will not cry, because somebody took some money
from you.

I would even go further: Yeah, making $3,2M will take me a while, but I guess
I would prefer to have to regain $3,2M than to cope with psychological or
physiological damages of a really violent crime. If I were to lose $3,2M, it
would partially be my fault, because clearly my business was lacking some
control mechanisms. If two guys come after you from behind, there is really
nothing you could have done.

Edit: This is another submission currently at the frontpage:
[https://news.ycombinator.com/item?id=12421687](https://news.ycombinator.com/item?id=12421687)

~~~
Trill-I-Am
An NPR story on an explosion at an apartment building in Silver Spring talked
about how many of the immigrants living there kept their life savings in cash,
which was destroyed. Money can be lost.

[http://www.npr.org/2016/08/28/491699553/silver-spring-
explos...](http://www.npr.org/2016/08/28/491699553/silver-spring-explosion-
highlights-tenous-immigrant-journey-of-upward-mobility)

~~~
allendoerfer
I think for most people in the developed world, it is much easier to prevent
that than losing your life. Also the money in a sense is somewhere else now,
since there is less of it, everyone else's money is now worth very slightly
more.

Still a good example.

------
mschuster91
There are other ways these days, at least in Germany with the massive
explosion of sport betting offices.

So, the guy who wants to launder some money gives e.g. 1000 € to a low-level
dude. This dude then goes to the betting office and places all day long 10 or
20 combo bets with 3 spares (i.e. 7 / 17 of the bets have to be won in order
to win the total bet), and every sub-bet has a ratio of 1.01-1.10 profit
(which means you're unlikely to lose, but you still have to know some basics,
and you absolutely must distribute risk by betting small-ish amounts)... the
dude gets to keep any winnings, and if he can provide the receipts, doesn't
even have to cover losses to the launderer.

Another common method is to use gambling machines for small amounts. This
again only works in Germany because our machines do not play with instant real
money, but "points" \- 1 point = 1 cent, and you can only transfer 20ct every
5 seconds, and only 80€ per hour. Needless to say, it sucks for the machine
operator because a non-player is occupying the machine without generating
losses (= income for the machine operator).

Source: worked for a long time in a pub/gambling hall located directly next to
a betting office. Seriously, I've seen some weird stuff.

As for the question "how do the launderers find people?": easy, in the hood I
worked the Bulgarians had quite a "monopoly", it were usually those who didn't
find odd-jobs for the day that ended up with sitting around in betting
offices, and for "how does a launderer prevent dudes running off?", well, you
can imagine there's a load of violence and human trafficking involved,
including threatening relatives back home, and outright selling of women into
prostitution. It's sickening.

------
legitster
I've heard those little coin operated candy dispensers are often a front for
some low level money laundering. They almost never actually make money
otherwise. But it's really easy to buy an existing franchise with x number of
dispensers for a few thousand dollars, enough to maybe conceal 5 or 6 figures
of ill gotten gains.

~~~
Spooky23
All of that kind of stuff is full of shenanigans.

My grandfather used to get the shakedown from mafia affiliated jukebox and
cigarette concession guys in his bars in the 60s and 70s.

------
mtkd
I don't see how it is viable to launder through a restaurant

Some simple peer benchmarking of %cash vs %credit card transactions or looking
at spend on produce vs revenue would likely show suspect operations quickly -
I was talking to an auditor recently about similar benchmarking they do as
standard but can't remember the context

~~~
codesterling
Cash only businesses. Family, friends all eat there for free, like grandma's
kitchen used to be. They gotta eat anyway, and it fills out a restaurant. The
busier, the more you pad. Give options of top shelf scotches, etc... A guy is
celebrating and wants table service, you provide that. Strip clubs, etc...
Easy easy ways to either hide what's coming in, or pad what's coming in. Food
trucks are brilliant for this, though stretching the definition of restaurant.

~~~
rdtsc
> Food trucks are brilliant for this,

Yes, that would be pretty good. In the right kind of city. Buy a fleet of used
food trucks. Pay someone to stick some labels on them. Find what local food
trucks pay for produce and maintenance. Maybe ask some friend to drive them
around town.

The only problem then is other food trucks would notice this fleet of trucks
always driving around yet never stopping to sell anything.

They could sell something really simple -- just hotdogs. And it would be
funny, other honest ones would see this plain hotdog business growing and
expanding like crazy while they sell organic Korean bbq and don't seem to
break even. So they go and expand into the plain hotdog market to capture some
of the profits and then realize how unlucky they are when nothing sells.
That's a plot of a short movie right there.

~~~
barrkel
Ice cream vans. A fleet of 100. Safe way to go.

(Not fictional.)

~~~
shalmanese
Ah yes, the Glasgow Ice Cream Wars:
[https://en.wikipedia.org/wiki/Glasgow_Ice_Cream_Wars](https://en.wikipedia.org/wiki/Glasgow_Ice_Cream_Wars)

~~~
nstj
That is truly hilarious. Adding to "new" now.

------
jlebrech
you could use an art gallery, you have normal customers walk into the shop and
also have "mysterious" purchases of the more expensive items. you could also
deliver it somewhere to store or destroy. then you buy more art from an
unknown artist and put up in the shop at high prices. if the artwork becomes
in demand you can then sell those items again legitimately (if you kept them
in storage).

~~~
cperciva
People don't usually pay for expensive works of art with bundles of $100
bills. In fact, this applies to pretty much all high-value transactions -- the
probability of a purchase being made in cash decreases as the value increases.

Restaurants work well for money laundering because they handle a large number
of small transactions -- thus they can plausibly have a high percentage of
cash transactions.

~~~
lj3
It used to work for laundromats too, until the feds started measuring water
usage. In fact, I think it would be trivial to set up on a restaurant and be
able to do fairly close calculations about how many tables a restaurant does
per night vs how many table cloths get cleaned, how much water gets used for
washing dishes, electricity, etc. It makes me wonder if this method actually
gets used anymore.

~~~
pbhjpbhj
Possibly easier to monitor electricity use? Might have a closer relationship
to production output of a restaurant too??

------
Hydraulix989
I'm Italian American, and there's definitely family rumors of distant cousins
opening pizza shops in Chicago in the early 20th century to do this for mob
activity.

Obviously, I cannot provide specific names nor attest to their veracity.

------
rdtsc
It is not just banks, just regular people in the neighborhood notice. If a
restaurant sits almost empty, has a pretty bad menu and service yet seems to
hang around for years, it just looks suspicious.

~~~
lj3
That's actually pretty common. Every community has at least one or two
businesses that don't look very busy, but the owners have managed to hang on
for 10+ years. Could they be laundering money? Sure. They could also just be
operating by the skin of their teeth. Or they could have made their money in
real estate in a past life and are milking their savings. Or they could be in
debt up to their eyeballs. Or they could have a rich uncle. I could go on...

~~~
jandrese
There's an Italian sub place down the road from me like this. The owner is the
only employee as far as I can tell. He makes delicious sandwiches but there is
never anybody in there. There's even a tiny grocery area in the front with
imported everything (at import prices) that never seems to move. I really
don't understand how this guy can keep so much expensive and perishable stock
in there with no customers.

~~~
nickpsecurity
That one has potential. It's kind of upscale which justifies extra profit.
Top-notch stuff in it for owner and family. Much can be discarded or even
donated to charity in local community to increase odds of loyalty like
reporting suspicious behavior (eg snooping cops).

------
buzzdenver
Can't anyone say that they bought BitCoin when it was $1/BTC and now they're
selling it for $600 or whatever ?

~~~
function_seven
If you're at the point where you're offering explanations as to the source of
your cash, then it's too late. You're being investigated and that's what you
want to prevent. Also, how do you sell BC for physical cash?

~~~
buzzdenver
Why do you have to sell for cash ? You're in the clear once you can explain
where your money came from, so it can go to your bank account and then you pay
taxes like a good citizen. I agree that it is ideal not to be investigated,
but I'd think if you're making lots of money illegally, then authorities
already have a decent idea of suspicion.

~~~
function_seven
Presumably you have a pile of dirty cash you need to make clean. That cash
needs to enter the banking system somehow. If you show up to the bank and say,
"I got this money from selling Bitcoin", they'll likely wonder how you
received it in that form, rather than as an ACH, wire transfer, or other non-
cash form. So the question is, how did you arrange to sell BC for physical
cash?

EDIT: Ok, I'm looking at it the wrong-way around. I guess you buy the BC
locally with the cash, then tumble it, then sell it and claim that _those_
coins were purchased back when you were a shrewd BC investor. I think the
point still stands though that this is a risky maneuver, because the cover is
a red flag in its own right, versus a restaurant that appears to be doing
normal business.

------
gist
Flip side of this are cash businesses (like restaurants) which are legitimate
and the owner isn't reporting anywhere near the cash that they are taking in.

~~~
wmf
Startup idea time: An app that connects tax-dodging restauranteurs with money-
laundering drug dealers.

------
tomjen3
That's one way, another popular way (in Denmark at least) is to buy winning
lottery tickets with dirty money and then legally cash them. Since it is not
unreasonable for a person who has very little income to buy a lottery ticket,
it won't be suspecious if they drive flash cars, etc.

Alternatively, if you need to launder money continuously, you can bet on
sports, but buy more than one ticket, so that no matter what who wins you will
have a winning ticket from which you can claim your recent money, should
anybody ask.

Disclaimer: none of the above should be taken as legal advice or used for
illegal purposes.

~~~
buzzdenver
How do you find somebody to sell you a lottery ticket that won a lot of money
? And somebody who also trusts you ? Or do you buy a ton of tickets and do
essentially the same thing as with sport betting ?

~~~
ergothus
The latter: Buy a lot of tickets (which aren't tracked transactions, so
there's no saying how much dirty money you spent), and lose N% of it to the
"house". Take your winnings (and if you buy scratch tickets, you should be
relatively statistically safe) and it's "clean".

Of course, I've read that the scratch tickets systems are often flawed, and
with some you can calculate if it's a winner by examining the serial numbers.
That means you have various ways to cheat the system to give you better odds,
but the reference I just found to that is a wired article, so take with salt.
Pretty believable though.

[http://www.wired.com/2011/01/ff_lottery/](http://www.wired.com/2011/01/ff_lottery/)
(anecdotes about laundering and odds being beaten are past the 50% mark, but
the whole article is worth a read)

~~~
buzzdenver
In most of the US states the expected value of your winnings is less than 50
cents for every dollar you spend. That's a steep price for ML.

~~~
jandrese
On the other hand, the "lost" income goes to schools and roads so it's kind of
like just paying tax on the income.

~~~
joshstrange
Ehh... I wouldn't be too sure about that [https://www.youtube.com/watch?v=9PK-
netuhHA](https://www.youtube.com/watch?v=9PK-netuhHA)

------
clueless123
A small list of cash intensive business.

Restaurants, Night Clubs, Hostels, Gym's , Casinos, Spas, Nail shop, Food
kiosks/carts/Trucks, Transportation / Buses / Taxi / Small airlines,
Construction , roofing, lawn mowing ( Anything labor intensive where you pay
labor with cash and overstate the profits)

And if you really want to launder big money... (Drum roll) Online university!
(get paid monthly by hundreds of "people" around the country for non existing
classes)

~~~
Spooky23
Online universities aren't money laundering, they steal from the government
using the student as a proxy.

------
rwmj
It would be good to get an idea of how much of this dirty money is because of
the War on Drugs vs other sources of illegality.

~~~
hannibalhorn
That sounds a little high to me - sure, I'd bet it's around 50%, but there's
plenty of other things going on, whether it be tax evasion, prostitution,
fraud, etc.

Political corruption, for example, is common in the developing world - give
your buddy the contract to build a road/dam/whatever, cut every corner
possible or just completely fail to deliver, and if properly laundered,
there's no way for the government to recover the funds.

And I don't know if anybody would go to the trouble of using a restaurant, but
"asset protection" is a thing in wealthy circles, sometimes due to involvement
in high risk businesses (porn, file sharing) or just being worried about an
impending divorce.

------
nxzero
Author did some basic research on ML & AML and has no real idea what they're
talking about.

Flip side of all cash business is tax evasion; meaning the owner does not
report all the gross revenue and the spends the cash in a way that it's not
traceable back to them.

Another reason to have access to the cash flow of an all cash business is to
launder counterfeit currency; aka someone gives you a $20 an the business
gives them back fake bills for the change.

Most interesting ML method I've heard of is book on hacking public databases
to create valid fraudulent identifies to launder cash through:
[https://www.amazon.com/Baby-Harvest-terrorist-financing-
laun...](https://www.amazon.com/Baby-Harvest-terrorist-financing-laundering-
ebook/dp/B013AZ6MKS)

~~~
unsignedqword
Hacker News - the only place on the internet where the term 'ML' refers to at
least 3 or 4 different things.

~~~
finid
Yes, when you use an acronym on a page where it's not been used and defined,
please tell us what it means. The only meaning of ML that comes to mind, mine
at least, is Machine Learning.

Is that what it means?

~~~
jandrese
I have no idea what ML could stand for when discussing an article Money
Laundering. It is a mystery.

------
Spooky23
Pretty easily. Restaurants have lots of purveyors, tips and inventory that
isn't trivially tied to sales.

Embezzlement and money laundering is pretty trivial and prevalent.

------
nstj
This article in no way describes the process behind disguising the source of
funds (ie: "money laundering").

A more appropriate title would be "Restaurant in foreign country is used for
money laundering, US officials upset".

~~~
Hydraulix989
@dang?

------
carbocation
> Has technology made money laundering through a restaurant any easier?

> _Actually, technology has made it more difficult to launder money. "Unless
> you’re using virtual currency such as Bitcoin, it isn’t easier today today
> than it was forty years ago," says Myers. "In reality, every bank has highly
> sophisticated software that can flag transactions much more easily than they
> could in prior years."_

I don't see how Bitcoin would make it easy to launder money, since it's
completely traceable and publicly auditable.

~~~
Neil44
Bitcoins can be tumbled though I think?

~~~
strictnein
Yep. Theoretically they exchange your "dirty" bitcoin for one that has never
been on the darkweb.

[https://darknetmarkets.org/bitcoin-
tumblers/](https://darknetmarkets.org/bitcoin-tumblers/)

~~~
jandrese
In practice, the people using those services are ones that are primarily on
the darkweb. So you're just exchanging your own tainted bitcoins for someone
elses tainted bitcoins.

The point is to break the chain of evidence tying you back to the darknet
transaction, which works, but still manages to look suspicious as hell.

IMHO, it's only a matter of time before someone is convicted of money
laundering for using a tumbler service.

