Meyer Lansky, the Founding Father of Money Laundering
During the 1930′s in the United States, many laundromats were owned by the gangsters in the Mafia. They made large sums of money, cash, participating in illegal practices such as boot-legging, prostitution, gambling and extortion, and they needed a way to make the money appear “clean”, to appear to have been made legitimately. They needed to separate their cash from the crimes that they were committing. Hence the term, money laundering. Their laundromats were just one of many businesses that were legitimate. In this way they were able to account the earnings gained from illicit means, claiming their monies came from the business. One great factor about laundromats, is that they are cash based businesses. There is yet to be a washer or a dryer equipped with an ATM or credit card machine. This was a giant opportunity for these gangsters, such as Al Capone, who owned many such businesses. It was Al Capone’s finances that had him convicted and sent to prison in 1931, not the other crimes, but for tax evasion.
One of the myths behind this American gangster, is that Capone’s conviction is what prompted the activity known today as laundering money. Transactions take place which literally clean the money made during a crime, launder it. So in the end it looks to have been made through legal acquisition. The deals and transfers obscure the source. Capone had not been taking care of this previous to his conviction, and this sent the gangsters to researching ways that the same conviction did not happen to them. It was such an obvious way to get caught.
An accountant was hired by the mob, Meyer Lansky. He found that unless he could come up with a way to hide his assets, he would soon face the same fate as Capone. Within one year, he discovered Swiss banks and the benefits of hiding his money in them. He became well versed in the practice of hiding money and is known to this day as one of the most influential and successful launderers in history. By utilizing the facilities offered by the banks of Switzerland, he created the very first technique, loan back. His ill gotten gains were disguised as loans. He later declared them as revenue, and on top of it all, received a ‘legal’ tax deduction. The term is a relatively current one, first written in newspapers in the U.S. in regards to the 1973 Watergate scandal. Now it is a global concern, one that is being fought every day, in all countries of the world.
Related posts:
Tags: Al Capone's finances, Founding Father, Meyer Lansky, Money Laundering, Watergate scandal