Important Facts about Smurfing in Money-Laundering

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Do you know that money launderers have devised mind-boggling techniques and methods to process illegal monies by deceiving the financial systems? 

Smurfing is one of the techniques widely used to break large chunks of money into small transactions. Several criminal organisations and individuals have been using this technique secretly. Therefore, it is essential to understand Smurfing, its financial structuring, and its use in money-laundering. Especially, suppose you are an expatriate, say, a Pakistani living and working abroad. In that case, you must know about these unlawful methods to remain safe when you send money to Pakistan from abroad. Let’s get into detail better to understand the whole concept of Smurfing in Money Laundering.

 

Smurfing

Smurfing refers to breaking down large transactions into smaller transactions to avoid regulatory requirements. Smurfing is a money-laundering technique that often involves structuring these small amounts into scattered accounts. It is to avoid any detection or action.

Smurfing in the banking system is a crime. It can lead you to jail. It often includes offshore bank deposits. Smurfing is a bit complicated for understanding. For example, a person wanted to split his holdings into four deposits because he owns three stores throughout the city. Also, he wanted to have an account near the stores- That’s not illegal. It is when a person smurf accounts to avoid bank reporting or detection. Then it becomes unlawful.

Often Structuring is confused with Smurfs. Structuring has nothing to do with Smurfs. Structuring is an act of altering financial transactions whereas, Smurfing uses runners to perform multiple financial transactions to avoid reporting requirements.

 

Steps involved in Smurfing

Step 1

Illegal money is deposited into several bank accounts. The amount placed is below the threshold level for reporting suspicious transactions. For example, if the threshold is 9 lac, the amount deposited will be 8 lac. Such activity is called ‘’ Smurfing’’.

Step 2

The money is transferred from multiple accounts to an offshore bank account.

Step 3

A loan agreement is signed between the holder of the account and the offshore bank account.

Step 4

Once the money is received, one can spend the money to purchase assets or invest in some business.

 

Facts about Smurfing in Money Laundering 

  • Smurfing follows three basic steps- placing, layering and integration
  • Among many placement strategies, Smurfing is highly practised  
  • Foreign exchanges are widely used
  • Criminals use fake information to open accounts
  • Every year, an estimated $800 billion (2-5% of global GDP ) is laundered.
  • It poses a threat to national security and the global economy
  • It jeopardises financial institution’s profitability
  • It is highly notable for the diversity of participants, forms and setting
  • Criminal enterprises employ Smurfs (agents) to make transactions
  • The word ‘’smurfing’’ is derived from the image of a comic book Character, the Smurfs
  • Gregory Baldwin is said to have generated the term in the year the 1980s
  • A suspicious Activity Report (SAR) is required by Law to avoid such deposits
  • Different countries have different limits on money, such as Australia with the single transaction of $10,000, while Germany with €15,000

 

Cuckoo Smurfing Technique

Criminals often use the Cuckoo Smurfing technique for money laundering. It’s a tool to hide transactions. It is simpler than other techniques. In this, the money is stolen or laundered from the government. 

The money is then split into small transactions. It’s a way of avoiding illegal taxes. Though Cuckoo doesn’t directly involve money laundering, these techniques facilitate money laundering activities. Expatriates who make international money transfers, such as Pakistanis, send money to Pakistan from Uk and other foreign countries must remain aware of these techniques to be safe and secure.

In this technique, primarily internal employees of the banks are involved. They keep accounts of criminals that seem ordinary. Many complex transactions occur to avoid the source of the money. The whole process is a secret, while the sources are shown as legitimate. In order to prevent such problems that can probably lead you to get involved in money laundering, you must find out the best way to send money online internationally that offers completely authorised and secure money transfers.

 

Origin of Cuckoo Smurfing

Cuckoo Smurfing for money laundering is of European Origin. It is named in a way because crime is associated with the activities of Cuckoo. Australian criminals are also known as Cuckoo Smurfing. It is widely conducted in Australia by crime unions. They use existing reporting to avoid detection.

 

Avoidance of Smurfing

Smurfing to assist money laundering can be prevented using measures such as Know Your Customer (KYC), Customer Due Diligence (CDD), Anti-Monetary Laundering Transaction Monitoring (AMLTM), transaction screening, Know Your Business (KYB), etc.

To avoid being involved in Smurfing, make sure to send money using reputable and authorised firms. ACE Money Transfer is one of the leading remittance service providers contributing to secure payments by following the rules and regulations to control money laundering. Customers’ safety is the utmost priority with the highest security protocols at ACE.

 

Takeaway

Money Launderers rely on smurfing as it’s easier to get away from being caught. It is one of the most common placement techniques. However, it can backfire if financial institutions attentively notice the patterns in deposits. Since structuring itself is a criminal activity; therefore, it must be avoided to save the reputation of both bank and customer.