In the struggle against money laundering, understanding key tactics like structuring and smurfing is decisive. These procedures entail the dissolution of substantial sums of illegal gains into smaller, less noticeable proceedings to evade identification. In 2023, Haiti was recognized as the country with the increased risk of money laundering and finance terrorism in Latin America, with an index score of 8.25. Nicaragua followed with a score of 6.42, indicating significant vulnerabilities. In contrast, Uruguay had the lowest risk in the region, with a score of 4.08. These stats accentuate the importance of comprehension and confront these tactics to intensify financial crime prevention efforts.
What is Structuring?
Structuring involves the intentional breakdown of a significant amount of finances into little financial conductions to escape the defined AML Laws and counter-terrorist financing requirements. It is considered prohibited even when it is legally obtained but has been moved with unlawful intentions. By following structuring tactics, potential fraudsters conduct small financial conductions purposely under the defined limits. They utilize diverse financial accounts to keep financial transactions under the finder and escape from suspicious activity reports (SAR).
Potential Examples of Structuring
Structuring involves different examples, and some of the potential ones are given below in detail for better comprehension:
- A bank customer is making multiple deposits just below $10,000 over several days.
- A gambling customer splitting their casino winnings into two transactions that, combined, would exceed $10,000.
Criminals may use structuring to conceal the origin of their funds. In certain instances, individuals use structuring to evade taxes. This often happens when influential figures or officials receive bribes or kickbacks. To avoid taxes on these illicit gains, they may deposit smaller amounts into multiple accounts to bypass regulatory detection.
What is Smurfing?
Smurfing is a type of structuring that involves using illegally acquired funds and employing lower-level financial criminals called ‘smurfs.’ The term ‘smurf’ likely originated from illegal drug operations and refers to a junior money launderer or courier.
Criminals use smurfs to transfer illicit funds into the formal financial system. Smurfing occurs in three stages: placement, layering, and integration, similar to the stages of money laundering. These stages cover the movement of money, from international smuggling to converting it into legitimate assets like goods or property.
Potential Examples of Smurfing
- A group of Smurfs deposits $10,000 in illegal funds into several bank accounts over a week, breaking the amount into smaller transactions to avoid detection.
- Cuckoo smurfing: In this scheme, an organized crime group collaborates with a corrupt remittance provider. The provider receives legitimate payment instructions from a customer, but illegal funds are substituted for the original payment. Often, the customer is unaware of the illegal activity, though some may knowingly ignore the involvement of illicit money.
Contrasting between Structuring and Smurfing – A Comprehensive Overview
Both smurfing and structuring procedures are considered unlicensed and against the law, but the most prominent difference between both is that the earlier one is more complicated and includes more criminals. A simple synopsis of the difference between structuring and smurfing is given below in tabular form for better comprehension:
| Factors Name | Structuring | Smurfing |
| Cross-Border Movement of Physical Cash | × | ✔ |
| Geographical Movement of Funds Through Digital Transactions | × | ✔ |
| Illegal | ✔ | ✔ |
| Utilizing Smurfs in Money Laundering Schemes | × | ✔ |
| Illicit Acquisition of Funds | × | ✔ |
| Concealment of Source of Funds | × | ✔ |
Compliance with AML Laws: Tackling Structuring and Smurfing
In the US, the Bank Secrecy Act mandates reporting for transactions exceeding $10,000, including those in foreign currencies. Canada, Ireland, Australia, and Sweden have corresponding reported limits.
If a financial institution identifies possible structuring, it must register a Suspicious Activity Report (SAR). In the UK, the authority informs corporations to nominate an allocated captain to receive reports of suspicious activity from the workforce. Teams should be trained on best practices for identifying and managing smurfing and structuring in anti-money laundering (AML) efforts.
Final Interpretations
The potential tactics of structuring and smurfing can be mitigated through the integration of AML and CTF in the system. Anti-money laundering software with updated algorithms can assist firms in identifying illegalities in real-time through customer screening and transaction scrutinization.
The reputations of potential organizations can be harmed by unobserved structuring and smurfing, so it is important for anti-money laundering experts to comprehend the most ordinary ways fraudsters utilize and stay informed of structuring directions. When AML teams detect potential signs of structuring, they must be prepared to conduct enhanced due diligence (EDD) on the customer.
