How to Prove a Business is Laundering Money
According to Professor Joseph Carcello, the Ernst and Young Professor of Accounting at the University of Tennessee and director of UT's Corporate Governance Center, criminals resort to money laundering instead of simply putting money in the bank because federal laws require banks to report large cash deposits. Many criminals have also concluded it is to their advantage to get illegal money into a legitimate business and to pay tax on that illegal money so they won't be caught for tax evasion.
How do forensic accountants detect money laundering? An investigator could compare the revenue generated by a bar suspected of money laundering with the revenue of a similar bar in the same city. "Let's say the normal revenue is $10 million - I'm making these numbers up - and another $10 million in elicit money is put into the bar. Now it looks like the bar is making $20 million. That would be significantly out of whack with what the normal revenue is for a similar bar," Carcello said. Investigators also might look at the number of employees working at a restaurant suspected of laundering money. If the restaurant doubles its income but doesn't add workers, it could be a sign of criminal income passing through the restaurant, Carcello said.
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