The money we got paid went into a government account for use with the operation. If anyone asked the bank about the account, they would say it was just another commercial account opened by a legit business. It's called backstopping -- we had phones that would trace back to a fake business, computers with clean IP addresses, even untraceable fake license plates and driver's licenses. Being an undercover government agent is like using Game Genie on all the difficult parts of criminal life.
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The boys in the lab are still trying to figure out the infinite lives code, though.
So what about the "Do these drugs to prove you're not a cop!" thing you see in every drug movie from Traffic to Training Day? Believe it or not, the government is pretty understanding of this -- if you have to smoke crack to avoid blowing your cover, they're probably not going to fire you the second the operation is over. But honestly, you'd be surprised at how many people in the drug trade don't actually use drugs -- it's the fastest way to put yourself out of business. Likewise for the much more dramatic "Prove you're evil by killing this innocent person!" scene (it's so common in film that it has its own page on TV Tropes) -- it's kind of a flawed litmus test, since most real criminals also wouldn't happily commit first-degree murder just to earn someone's respect.
This is why, if our targets start to smell bacon on us, they don't immediately reach for an Uzi and trigger a spectacular action sequence. Their first response to finding out we're undercover agents is to clam up. "Sir, are you implying that you were going to transport illegal drugs for me!? There must be some mistake! I must now return to the orphanage where I routinely volunteer my time!"
"It's rock candy. For the children."