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.

See full story here.

Money laundering risks facing Indian casinos

Interesting article from a former agent for the IRS Criminal Investigation Division who worked as an undercover agent in money laundering investigations. He notes that the large amount of cash involved in casino operations makes them vulnerable to exploitation by criminals for money laundering and other fraudulent purposes, and that because Indian casinos, like banks, are defined as financial institutions, they need to comply with money laudering laws and regulations or face liability.

Some requirements the author recommends Indian casinos should follow include:

  • Establish internal procedures and controls which assist in identifying money laundering
  • Designation of a compliance officer
  • Establishment of an ongoing employee-training program
  • An independent audit function to test the program.

See here for the full article featuring the author's guidance and recommendations (e.g., “red flags” or identifiers of possible money laundering transactions that casinos need to be on the look out for).