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matty_a t1_j23uogu wrote

The mattress store for money laundering is more an urban legend 0r a conspiracy than an actual fact.

There are two things that make for a good money laundering front business: high usage of cash and high but opaque profit margins. You want to be able to increase your margins to be able to run more cash through the business, but also not be obviously disjointed from a market.

That's why a laundromat is good (tough to track the inputs of cost, not a fixed market for laundromat services, cash heavy), gas stations are bad (easy to see if you are out of market, gas is a commodity), and things like art or "consulting" are the best.

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TheKingMonkey t1_j23wlff wrote

Services and perishable goods too. Basically anything where you can say you sold a lot more than you actually sold and it’s difficult for anybody to prove you didn’t. It’s why Walt had a car wash in Breaking Bad.

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Ansuz07 t1_j2452r1 wrote

Laundromats aren't actually that good anymore - the IRS is pretty smart and will look at water consumption rates to determine if you are claiming more revenue than your expenses would dictate.

The mob figured out the best businesses for money laundering a long time ago - strip clubs and casinos.

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Belzeturtle t1_j2473lg wrote

>IRS is pretty smart and will look at water consumption rates

You run the machines with no load, and consume water, no?

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Ansuz07 t1_j248jd6 wrote

You could, sure, but laundromats are pretty low-margin businesses, so running with no load is going to eat away most of the profits and limit your laundering.

You also run into the issue with comparables. If your laundromat is doing much better than nearby laundromats, that is a red flag that could get you audited. If the foot traffic to your business doesn't match the number of loads you claim you ran (the average number of loads per person will be pretty static across laundromats) then you are going to have to explain why your business is so unique.

All in all, its going to get your business scrutinized, which is the last thing you want for a money laundering front.

That is why casinos and strip clubs are the best businesses for money laundering:

  • Most people use cash (no paper trail)
  • There is no "average" spend per customer (one guy could come in and drop 10k) and foot traffic doesn't correlate well with revenue
  • The marginal cost is next to nothing
  • Comparables are hard - your casino/club may just be higher end than the neighboring ones, explaining your higher revenue.
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Belzeturtle t1_j248xbc wrote

I certainly agree that there are much better ways. I just didn't think water consumption would be the smoking gun.

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Ansuz07 t1_j2498fz wrote

It doesn't have to be a smoking gun - it just has to be odd enough to get noticed, which will prompt a deeper dive into the finances, which is the last thing you want.

The average laundromat has margins in the 25% range - if your margins are higher, that is going to draw some curiosity. If you run your machines more and your water usage is much higher than comparables, that is going to draw curiosity too.

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Mammoth-Mud-9609 t1_j23u87o wrote

Businesses dealing with a lot of cash transactions like casinos and laundromats are key for laundering money, not heard of mattress stores being used.

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BigLorry t1_j23uisk wrote

The mattress stores thing as far as I can tell is basically a meme born out of the internet wondering why every town has 4 of the same mattress store within a few blocks of each other

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MetaRift t1_j23ujk6 wrote

I assume so they can hide the money under the many mattresses.

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kmosiman t1_j23xk9x wrote

As far as I know the mattress store thing is just a conspiracy but it makes sense because the price is somewhat arbitrary.

So in theory a mattress store could buy products for $200 and sell them for $1000. This would allow them to take in a lot of profits and have a solid paper trail.

The same is true for restaurants since they could overcharge for meals and it would look legitimate.

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constantino675 t1_j242vc7 wrote

Yes, but you'd have to actually sell a mattress... your inventory is easily tracked through your supplier. If you say you sell 1000 mattresses, it would be easy to verify that.

Also, no one pays cash for a mattress.

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kmosiman t1_j24affx wrote

Which is why the mattress story is probably fake.

But the sales could be reasonable, you just need to find enough people to buy a mattress.

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teethalarm t1_j241e4i wrote

I haven't heard the one about mattress stores. The one about laundromats is plausible, but you aren't going to be able to launder much money through a laundromat. They may be an almost exclusively cash business, but it's not as much as you think.

I work at a bank, and the laundromats we work with bring in less than 1000 a week. The guy who owns the laundromat also has vending machines and a car wash that is included in the deposit. If they suddenly started bringing more than that, us bank tellers would immediately be suspicious. A mildly successful restaurant will easily bring in 1000+ a day in cash, it would be less suspicious if a restaurant was bringing in larger quantities of cash than usual, especially if they said something like their card reader is broken or they have some special that is really taking off.

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CFDietCoke t1_j245o1y wrote

I don't know about mattress stores, but laundromats are mostly cash businesses with no receipts. So you could open a laundromat, do $1500 in actual business, say you did $5000 in business, and launder $3500, and it's not simple to disprove.

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Ansuz07 t1_j24ar0h wrote

In that case it actually would be simple - the machines use X amount of water per load, so if your water bill shows you not using enough gallons of water to explain that extra $3500 in revenue, the IRS is going to want to know why.

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CFDietCoke t1_j24b24c wrote

> In that case it actually would be simple

I know it is possible, but IRS agents are not going door to door looking up utility bill records for small time laundromats.

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Ansuz07 t1_j24bc5m wrote

True, but if your laundromat is showing much higher profitability than other laundromats in your area, the IRS is going to notice that and that could flag you for an audit. If you get audited, they will look at your utility consumption and compare it to industry standards.

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CFDietCoke t1_j24bmtc wrote

No they won't. You are trying to sound clever by thinking you "figured out a loophole" that disproves my statement.

Source: Owned 2 laundromats in my life. Was audited once. Never had to provide a utility report.

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Ansuz07 t1_j24bw8o wrote

I have two IRS agents in my family. If you think they won't look at supporting documentation if they don't think the numbers make sense, you are sorely mistaken.

Edit: They blocked me so I can't respond, but yes - they will absolutely look at utility bills if they think that cost to serve doesn't line up with the revenues reported.

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