Money Laundering 101

hat do gas station attendants and the financiers of international terrorism have in common? They both know how to clean dirty money.

Federal financial investigators are used to tracking drug smugglers and money launderers, not terrorists. But the practices that drug dealers and white-collar criminals have used in the past to hide illicit funds give investigators a model to use in tracking terrorists' money.

Money laundering operations are often run out of legitimate businesses that deal mainly in cash and sell consumable goods, says Michael Hearns, a police officer in Coral Gables, Fla., who trains federal investigators in money laundering practices. The gas station-drug dealer model provides a basic way to understand how money laundering works. Street-level drug dealers are usually paid in small bills, says Hearns, which take up space and are hard to hide. They're also mangled and torn, having often been concealed by users in their shoes, their mouths or in their body cavities.

Dealers need a way to clean their funds, literally and figuratively. One method is to take large sums of cash to gas station attendants, who exchange small bills for larger denominations, which are kept under the cash drawer in the register and are separate from the till's official total. The station keeps a fee and can doctor its account ledgers to conceal the funds under the guise of a good day's business. The dealer now has a block of money he can transport more easily, and the gas station has hidden the store's involvement in the exchange.

Federal investigators trying to break up terrorist money laundering rings are looking for similar patterns, says Hearns. Small businesses provide the perfect hiding spot for dirty money because they can conceal their activities so easily. Many of the groups named by the Bush administration as supporters of terrorism fit the traditional profile. Charities, bakeries and honey manufacturers are among the organizations that have been raided in the United States and abroad on suspicion of funneling laundered money to terrorist organizations.