The business makes up a fake customer type deal (or many) and then it just looks like a person spending money, hence is clean

Legal word of the day: Fungible - Commercially interchangeable with other property of the same kind. In other words, you put dirty money with clean money, do a few transactions (wash it) and then take out the now clean money. Usually in small amounts. Perhaps the most recent example of this was the Ilya Lichtenstein and Heather Morgan theft of billions of dollars worth of bitcoins back in the 20teens. Might also apply to the current fiasco with FTX.

Multiple cleaning.

A business receives a shit load of unexplained cash. It then proceed to "receive it" along with other legitimate customer deals. usually slightly bloating the numbers. This causes any fast looks to turn up as "yeah its legit, just bad accounting"

The business then spend or transfer the money to another laundry, and through multiple layers, the money essentially becomes untraceable.

Imagine you officially don't have a job, yet you deposit a certain amount of money to your account every week, or you buy a fancy new car every 2 months. Something's fishy about it. How do you obtain the money? Are you paying taxes on it? Internal Revenue Service (IRS) won't be happy if you are not...

So, how do you launder the money? Saul Goodman did a great job explaining that in Breaking Bad to a 5-years old Jesse Pinkman (see link below). You open a car washing business. Let's pretend an imaginary person (Mr. Invisible) comes to your business to wash his car, total is 30$. He pays for it with your "dirty" money which you are hiding somewhere. You register the transaction and issue a receipt of payment. These 30$ are now clean and you can deposit it in your bank account. You are gonna pay taxes on it, so it won't be 30$ after taxes but a lower amount, you lose a bit of money in the process. Nevertheless, now it's clean money, you have a valid reason (and a proof) for having such money on your account, which is the issued receipt and the registered transaction.

https://www.youtube.com/watch?v=ez6xH-su2xI&ab_channel=VincenzoCortino

People have answered how the actual process works, so let me answer your other question:

> how would someone be able to tell that the money wasn’t legit?

They can't, directly; cash isn't stamped with a "DRUG MONEY" mark or anything, after all. What they can tell is that you don't seem to have a reasonable explanation for how you legally acquired it.

Say I sell drugs or whatever and make millions of dollars in cash. I can use it on groceries and restaurants and the like, and I can use it to pay other people for illegal things (like more drugs to sell), but at some point I will want to use it to buy a house or a car or whatever large purchase. Buying expensive things with physical money is super weird and looks suspicious, and people will probably report me to the government if I try.

So I want to pay electronically, right? Well, how do I get my big stacks of drug money into the system? If I just take a million dollars to the bank, they'll report it to the government (they have to by law), and the government will have a lot of questions about how I got it and I won't have a good explanation. I could break it up into smaller amounts and deposit it over time in an attempt to evade detection (a process known as structuring), but banks know about structuring and I'd have to deposit it over an enormous amount of time in order to not looks suspicious.

So instead, I start up or purchase a business that operates in cash - something like a laundromat, for example. Now I have a perfectly plausible reason for depositing thousands of dollars in cash each week: that's how my "customers" pay me. This gives me a way of getting it into the banking system, and once it's in the system I can buy my house or car or boat or whatever just like any normal person. Sure, I lose some of the money in the form of taxes and whatever I have to spend actually running your business (having a front does require some actual cash outflow), but that's a small price to pay compared to having an enormous amount of money sitting in a warehouse that I can't use on anything.

Now to be fair, there's a second alternative. If I simply don't spend or deposit very much of the money, or if I use it as cash over a very, very long amount of time, nobody will have any way of figuring out I got it illegally; the problem is that what's the point of doing risky, illegal things in order to get money you can't use?

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