Smurfing Vs. Structuring in Money Laundering: A Complete Guide

• July 25, 2024
• Rachna Pandya

Smurfing vs. structuring—both are methods used in the “placement” stage of money laundering, where illicit money is introduced into the financial system.

In this piece, we will examine smurfing vs. structuring, offering a detailed look at smurfing and structuring in money laundering.

Both techniques aim to evade anti-money laundering (AML) detection systems by keeping transactions below the threshold that necessitates banks to file reports, such as currency transaction reports (CTRs) or suspicious activity reports (SARs).

So, stay tuned to gain a thorough understanding of smurfing in money laundering, structuring in money laundering, and their major differences.

What is Smurfing in Money Laundering?

Smurfing, also known as “micro-structuring”, is a technique where large amounts of money are divided into smaller, less suspicious amounts and deposited into various bank accounts to avoid detection. This helps avoid triggering regulatory scrutiny and reporting requirements.

Image caption: A graphic illustrating the division of large cash sums into smaller deposits to avoid detection.

How Smurfing In Money Laundering Takes Place—the Process

• Cash divided into smaller amounts: A large amount of cash is split into smaller amounts, typically below the threshold that would require reporting.

• Small amounts deposited into various accounts: These smaller amounts are deposited into various bank accounts, often by different individuals known as “smurfs”.

• Money layered to hide its source: The money is then transferred or layered through different accounts to obscure its origin.

Smurfing—Case Studies

• Splitting large sums into smaller amounts: A criminal organization splits $200,000 into $9,000 amounts to avoid the $10,000 reporting threshold. Different people (smurfs) deposit these amounts into various bank accounts at different branches to avoid suspicion.

• Using ATMs for multiple deposits: Different individuals deposit small amounts into a single account using ATMs at various locations, all staying below the reporting limit.

• Deposits into a fake merchant’s account: Individuals posing as customers deposit small amounts into a fake merchant’s account, each under the reporting threshold.

What’s The Purpose of Smurfing in Money Laundering?

 The main goal is to avoid detection by authorities and make the money trail harder to trace.

What is Structuring in Money Laundering?

Structuring refers to the deliberate designing of financial transactions to evade reporting requirements. This can include a variety of techniques, not just small, multiple transactions like in smurfing.

Image caption: A graphic illustrating the splitting of large transactions over time and across multiple accounts to obscure origins.

How Structuring In Money Laundering Takes Place—the Process

• Large transactions split into smaller ones: Large transactions are broken into smaller ones that fall below the reporting threshold.

• Transactions spread over time and banks: These transactions are spread out over time and sometimes across multiple bank accounts or institutions.

• Deposits form a complex web to obscure origin: Deposits are made in a structured manner to create a complex web of transactions that makes it difficult to trace the origin of the funds.

Structuring—Case Studies

• Breaking down large transactions over time: A person splits a $50,000 transaction into smaller deposits of $9,500 each. These deposits are made over a week/month/year across different bank branches and at different times to avoid detection.

• Involving family members in deposits: An individual uses several family members to deposit small amounts of money into their accounts, each transaction staying below the reporting threshold.

• Using casino chips for structuring: A gambler buys casino chips with $9,500 multiple times, then cashes out at different locations to avoid the $10,000 reporting limit​​.

What’s The Purpose of Structuring in Money Laundering?

The purpose is to avoid detection by anti-money laundering systems and regulatory bodies. The covert process is challenging to trace the money back to its illegal origins.

Smurfing vs. Structuring—Similarities and Differences

Smurfing and Structuring: Anti-Money Laundering (AML) Regulations

Financial Action Task Force (FATF): The FATF sets international standards to combat money laundering and terrorist financing. FATF advises on measures like –

• customer due diligence (CDD),
• maintaining transaction records,
• and reporting suspicious activities.

Financial and AML-obligated institutions of the member nations are urged to implement robust AML frameworks to –

• identify and control suspicious patterns,
• and enforce strict reporting requirements.

US Regulations: The Bank Secrecy Act (BSA) mandates financial institutions to report suspicious transactions indicative of money laundering. This framework aims to prevent the use of structured transactions to evade AML controls.

UK Regulations: The Proceeds of Crime Act (POCA) AML framework includes CDD, transaction monitoring, and reporting suspicious activities to ensure compliance and detect illicit financial behavior.

Brazil: Brazil’s AML regulations require financial institutions to establish AML programs, report suspicious activities to COAF, and conduct rigorous CDD. It includes screening against sanctions lists and reporting transactions above BRL 50,000 within 24 hours.

EU Regulations: The 4AMLD and 5AMLD require EU member states to enforce strict reporting requirements and supervision of financial institutions, including virtual currencies and anonymous prepaid cards.

Canada: The FINTRAC requires financial institutions to report large cash transactions through CTR and STR reports. It ensures structured transactions are detected and reported.

Australia: The AML/CTF Act 2006 mandates businesses to conduct customer due diligence, maintain records, and report activities indicative of structuring.

Argentina: Argentina’s AML framework under Law No. 25,246 mandates financial institutions to report suspicious transactions like large cash dealings and cross-border transfers to the UIF.

Key Takeaways on Smurfing vs. Structuring

Smurfing in money laundering and structuring in money laundering—both are orchestrated to conceal money trials.

✔️ Smurfing relies on multiple individuals: This method leverages several people to break down large sums into smaller deposits, making detection harder.

✔️ Structuring involves patterned transactions: This method uses carefully timed and patterned transactions across various institutions to stay under the radar.

Can financial institutions handle these laundering tactics? It’s essential to upgrade AML detection and reporting systems to avoid legal troubles and protect reputations. As these methods evolve, staying alert is key. Are you ready to face these challenges?

Stay informed and committed to fighting financial crime. Follow ThePerfectMerchant for more AML updates. Connect with us for industry-specific queries on smurfing and structuring threats and solutions.

Top FAQs on Smurfing vs. Structuring

Is smurfing the same as structuring?

No, smurfing is a subset of structuring, focusing specifically on breaking down transactions and using multiple people to avoid detection.

What is the difference between layering and structuring?

Layering involves moving money through a series of transactions to obscure its origin, while structuring is specifically about avoiding detection by splitting transactions.

Why is structuring called smurfing?

Smurfing refers to the use of many small transactions, akin to the way smurfs (the tiny characters) operate in groups. Structuring can include smurfing but is broader.

What is cuckoo smurfing in AML?

Cuckoo smurfing is a type of money laundering where illicit funds are deposited into the accounts of legitimate account holders, often without their knowledge, typically to disguise the origin of the funds.

What is smurfing in KYC?

In know your customer (KYC) processes, smurfing refers to attempts to avoid identification requirements by breaking transactions into smaller parts.

Is smurfing illegal?

Yes, smurfing is illegal and considered a form of money laundering.

What is structuring in the banking world?

Structuring in banking refers to the practice of breaking down large financial transactions into smaller ones to avoid triggering reporting requirements.