How to Launder Money 101
Money laundering is the process of illegally transferring money without getting caught. It takes two forms:
1. Turning illegally obtained money into money that appears legally obtained.
This is your typical drug dealer with suitcases full of cash. As long as it is in cash, it can be stolen or seized by the authorities. It can't be deposited in the bank, and the IRS will be upset that they didn't get their cut. Just ask Al Capone.
If you stuff a million dollars in your mattress you probably won't sleep very well.
2. Legally possessed money transferred illegally to someone else.
Let's say you want to bribe your congressman, but you don't want to end up sharing a cell at ClubFed with him. Or let's say you are a naughty governor and you want to pay off your $4000 hr. hooker, without triggering any reporting requirements. You need a type 2 laundering.
In either type of laundering, there are all kinds of alarms that can be set off, and the problem of paper trails. To avoid alarms, you must either stay below mandatory reporting thresholds, or use transfers that aren't monitored. Paper trails aren't a problem if you don't get audited, but if you do get audited and they know what to look for, you're screwed.
Transfers that aren't monitored include off-shore accounts, real and personal property.
Real estate is amazingly easy to transfer. In California all you need is a deed, a notary and a recording fee. The county recorder keeps records but there are no reporting triggers. If you have a crooked notary you can have all kinds of fun moving property around, until you sell it and "realize" the appreciation.
I have personally seen a chain of title that transferred the same piece of property four times in one year, between the same four people, and at the end of the year it was sold for twice it's purchase price.
I thought up another money laundering scheme that actually was used (I had nothing to do with it, they thought it up themselves) by some East Coast mobsters.
Open an art gallery, and hang up a bunch of homemade art with high prices on it. Anonymous buyers come in and purchase the art with cash, the sales are recorded, taxes are paid and the money is clean. The mobsters got caught because they were lazy and kept reselling the same art over and over, some art critic types noticed and dropped a dime on them.
Car dealerships, equiptment rentals, and "consulting" provide numerous opportunities for cleansing your cash. So do casinos if you keep the amounts low and go frequently.
As for off-shore fun, you'll need a foreign banker you can trust. Crooked bankers are the best at money laundering, but they expect a big cut.
But let say you are a drug dealer with a million in ill-gotten gains, you want to retire, and you have a legitimate source of income. A few years ago you could take a vacation to the Cayman Islands with your money, leave it in a bank there and come home with a VISA card with a limit equal to your deposit, minus a fee.
Just use the card like any credit card, and don't worry about paying the bill, there won't be one, at least not until you use up the deposit. If you're careful, you can hide lots of purchases that way without anyone being the wiser.
As for politicians, there are several ways we know of to launder bribes. Jack Abramoff hosted poker games between politicians and lobbyists, and the lobbyists always lost. Then there is the "book deal." A corrupt politician writes a crappy book, which becomes an instant bestseller due to mass purchases by PAC's and gazillionaires.
The internet provides an interesting opportunity with numerous small donations to election campaigns, using fake names and staying below the reporting thresholds.
With the collusion of a banking institution (offshore?) the money could be transferred from lots of accounts opened just for that purpose.
The real challenge would be the source of the funds, but an off-shore bank or credit card company would solve that. Because the people don't exist, no one complains about bogus charges on their account. The safeguards are in place to catch theft, not money laundering.
It would be especially easy if government regulators weren't paying attention, or were paid to look the other way. Someone with the right skills and computer program could do most of it from one location, if they were on the inside.
That would avoid the awkwardness of "bundling" where lobbyists' and corporate execs' families and employees are each reimbursed (wink, wink) for making the correct donations.
Always remember the most important rule: Don't attract attention!