Now this is really interesting. The Grauniad talks to some drug dealers about how they use bookies’ video roulette machines to launder their earnings. The main reason to do this is that they issue receipts, which permit you to explain to the police (and also the Revenue) why you’re carrying so much cash. It’s also useful to be able to transfer money into an online betting account and therefore reduce how much float you have to carry around at risk of robbery.
“James” is especially interesting because he seems to have an impressively precise grip on his business’s KPIs and his numbers add up. First, it’s said that the cost of the laundering – i.e. the losses due to the house edge – is about 5-10%. He sells £5,500 a week in cocaine, and his gross margin is 50%. He also says that he reckons that he spends about £15,000 a year in losses/laundering costs with the bookies. That’s £288 a week. 50% of £5,500 is £2,750, so that works out to 10.4%.
The actual loss rate is much higher, because he only wagers about 40% of the cash he pays in and evidently all the net losses come out of that. The figure of 40% is deliberate, because he suspects that there is a suspicious activity alert set at that level. Other interesting details are that his wholesaler supplies him on credit, although he still needs a substantial float because this might be called in unpredictably, perhaps due to conflict between suppliers, and that he travels everywhere by bus because the police are more likely to bother him in his car.
Hilariously, the surprisingly detailed accounting is because he worked in the back-office of an investment bank before quitting to pursue a more lucrative career, or conceivably to work his way back to respectability.