Money Laundering in Breaking Bad
But we’re also fascinated by financial crime. It’s amazing to see the creative approaches criminals sometimes take in order to launder money. And we’re not alone: Hollywood writers have been capitalizing on this fascination for decades. IMDB even has a list of the most popular movies and TV shows featuring money laundering.
Warning! The rest of this article contains spoilers for all five seasons of Breaking Bad.
Breaking Bad is a fictional TV show about high-school chemistry teacher Walter White who, after discovering he has terminal cancer, decides to start manufacturing methamphetamine in order to leave his wife and children with a comfortable nest egg.
What starts out as genuine concern for his family slowly devolves into a twisted path of crime, power, and greed. The story is brilliantly written, and like a Greek tragedy, you see how each choice Walter makes is an opportunity to go back in the right direction or further down the road of evil. By the end of the series, he has transformed into “Heisenberg”, his drug-lord alter ego who is essentially a caricature of the worst part of his nature, one bad decision at a time.
Because of the success of his meth business, Walter finds himself facing the same problem all successful criminals face: what to do with the cash he’s accumulated so he can spend it legally. When he meets shady lawyer Saul Goodman, he finally starts considering how he’s going to launder his money.
But due to his many expenses, Walt currently has only $16,000 to launder. Saul explains that $16,000 at 75 cents on the dollar minus Saul’s fee of 17 percent will yield only $9960, but they still need to launder it. When Saul learns that Walt’s son has set up a donation site for Walt’s cancer treatment, Saul hires a computer hacker friend of his to send small donations from fake donors through computers all over the world, thereby getting the money back into Walt’s hands through legitimate means.
This is a good example of structuring (introducing illicit funds into the financial system through many small cash transactions that avoid reporting thresholds) and integration (getting the money back after it’s been laundered). However, since Walt’s wife, Skyler, handles the family finances and knows nothing about Walt’s illegal activity yet, Walt still does not have real control over the money coming in.
Saul also tries to get Walt’s business partner (and former student) Jesse to buy a nail salon. In a famous scene, Saul uses props in the salon to explain to Jesse how money laundering works. This is an ideal business for structuring because it consists of many small cash transactions. But Jesse wants nothing to do with the salon and doesn’t understand why he should pay taxes on the money.
He walks out on Saul and opts to keep his cash in a duffle bag.
Returning to Walt, who is now making much more money than can be realistically laundered through donations, Saul explains that they can say that his money came from gambling winnings. Saul can fill out fake cash transaction reports (CTRs) and W2-G forms on behalf of less-scrupulous casino managers who would love to show false losses for tax purposes. Saul instructs him to declare just enough to use as seed money to buy a laser tag business.
But Skyler, who now knows about Walt’s meth business, points out that a laser tag business makes no sense for Walt, that it would be out of character for him and would raise suspicions. Instead, she decides they should buy the car wash where Walt worked part-time for four years. It’s a business he knows and has a history with, and it’s also a good cash business that operates at a fairly high volume (Skyler counts 19 cars per hour with plenty of potential to upsell premium services). Saul doesn’t like the car wash because it doesn’t have a “Danny”. Danny is the name of the manager at the laser tag place who is trustworthy and willing to look the other way as money is being laundered through the business. He suggests the nail salon again, but Skyler feels that makes even less sense for them than laser tag. So she decides to manage the car wash herself.
Once they buy the car wash, things are going well at first. We see Skyler ringing up fake transactions and Walt bringing in piles of cash hidden inside stacks of soda pop cases. But when she learns that Walt needs to launder $274,000 every two weeks, all in $50 bills (“Who pays for a car wash with a fifty?!”), she realizes that the magnitude of the problem is far greater than the car wash can solve simply by ringing up extra transactions every day. In desperation, she hides stacks of cash in vacuum-sealed bags of clothes, which she hides in the crawl space under their house.
Eventually, Skyler rents a self-storage unit and fills it with a giant pile of cash. She shows it to Walt one day, explaining that they have more money than they can ever spend. “How much is enough? How big does this pile have to be?” she asks him. Walt suggests that they buy another car wash, which is what successful owners of a car wash would do and supports their cover story.
However, when things get out of hand, Walt fills seven barrels with the cash and buries them in the desert. Due to misjudging his new criminal allies, he ends up with only one barrel, but it still contains about nine million dollars, which is far beyond the amount he originally said he needed to make before he dies. In the end, Walt intimidates his ultra-wealthy former friends and partners of Grey Matter (a hugely successful tech company Walt co-founded but left before its subsequent success) into taking possession of the cash. He instructs them to give it to his family by claiming it’s one of their many charitable contributions to victims of drug crime. Because they are billionaires, it will be easy for them to blend the money into their assets and hide its true source.
As an experienced bookkeeper, Skyler had a good sense of what they could and could not get away with. She was always very conscious of their cover story, even taking the time to ring up the fake transactions and say aloud the same speech she would say if a real customer stood in front of her at the cash register. She urged Walt not to buy anything showy that would raise suspicions and lived in constant anxiety of being caught.
But as skilled as she was, modern anti-money laundering software like Beam looks at several factors that would flag much of this as suspicious activity. For example, it would consider the historical income of the car wash as well as the income of similar car washes in the same area. Even though she was conservative in how much she increased the sales, it’s likely the car wash would have been investigated because of the increased sales.
Skyler also missed an opportunity to launder money by paying fake suppliers. There’s never any discussion of increasing the cost of supplies in response to the greater number of sales, which would have been not only a great opportunity to launder more cash but also would support their story of increased business.
For example, Walt could create a company that, on paper, supplies chemicals to the car wash. This would make perfect sense because he’s a chemist and he’s in the car wash business. And if he wanted to avoid suspicion, he could create a series of shell companies that would hide the beneficial ownership of this company, making it look like they were paying an external supplier when in fact it would simply be a way to transfer money back to themselves through legitimate businesses.
However, just as with the greatly increased car wash sales, advanced AML software would track the beneficial ownership and trail of money and would identify that Walt and Skyler were both the payers and the (downstream) payees. Through advanced analytics, AML software like Beam would alert compliance analysts at the banks that this business is an outlier that needs investigation.
Breaking Bad takes us on a dark journey into the underworld of drugs, money laundering, and related crimes. The money laundering schemes the writers created are realistic and do a good job of illustrating placement (getting dirty money into the financial system through a legitimate business like a car wash) and structuring (adding cash through many small transactions).
It could have done more to show layering (using complex transactions to hide the money trail, such as paying inflated invoices from a shell company) and integration (getting the money back into the hands of the criminals to spend). And there were several factors that AML software would have caught. But aside from these small criticisms, it’s very effective at showing how money laundering works. If you like crime drama with brilliant writing, outstanding actors, and beautiful cinematography, and you have a high tolerance for some pretty graphic violence, definitely check out Breaking Bad.
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