How Does Smurfing Facilitate Money Laundering and Evade Detection?
Paying attention is unavoidable when large amounts of money are being sent simultaneously in the form of financial transactions. As the nature of anti money laundering legislation varies in several countries, the quantity and volume of financial transactions that surpass a specific threshold must be reported to law enforcement as possibly suspicious.
Criminals who try to launder money illegally don’t want to get the spotlight from the law enforcement agencies in order to stay low profile. They generally try to split up significant money transfers into smaller transactions that won’t result in mandated AML reports and threshold alerts.
What is Smurfing in terms of Money Laundering?
Smurfing process can be further explained as a popular money laundering technique in which substantial amounts of illegal funds are divided into smaller transactions with the intention to avoid being noticed by regulatory bodies and law enforcing financial institutions. Criminals try to get around anti-money laundering (AML) procedures like Suspicious Activity Reports (SARs) by keeping these transactions below reporting thresholds which are usually $10,000 because every country has different jurisdictions.
It is interesting to know that multiple people that “smurfs,” frequently participate in this procedure and deposit or move the dispersed sums around different accounts or institutions that completely makes it challenging to track down the money trail.
Financial institutions are supposed to combat this by putting in place Know Your Customer (KYC) procedures and increased surveillance, which are intended to identify and report abnormal behavior patterns even when individual transactions seem harmless.
Why do we actually call it smurfing?
Have you ever thought about where the word Smurfing originated from? There is a cartoon character “The Smurfs,” a group of little blue elves with identical appearances who are supposed to be the origin of the term “smurfing.”
They usually divide larger undertakings into smaller, more doable assignments for each tribe member. Specifically, “smurfing” refers to the act of sending large amounts of money in smaller denominations with the intention of hiding the fact that the money was gained unlawfully or illegally.
Explain the difference Between Smurfing and Structuring?
Structuring (The Foundation of Evasion)
It is quite necessary to divide large amounts of money into smaller transactions in order to prevent going over the regulatory reporting limits. Such a method is frequently employed to get around regulations which require financial institutions to submit reports, such as Currency Transaction Reports (CTRs) for transactions that are totaling more than $10,000.
Structuring primarily aims to impede the ability of the authorities to identify illegal financial activity by manipulating transaction quantities to remain below the reporting requirements.
Smurfing (Adding Layers of Complexity)
By utilizing several individuals, the smurfing process transcends structure, or “smurfs,” tend to carry out these smaller transactions. These smurfs complicate the money trail even further simply through depositing or transferring money between different accounts or financial institutions.
In addition to scattering the transactions, this strategy usually makes it far more difficult for law authorities and financial institutions to track down the source of the money. The process of smurfing increases the level of difficulty of anti-money laundering (AML) activities by emphasizing the use of intermediaries to further complicate the movement of illegal funds, whereas structuring concentrates on the magnitude of the transaction.
How Smurfing Actually Works?
Financial transactions must meet a regulation value requirement in the country it is being operated such as it’s typically $10,000 USD in the USA. In order to hide the illegal source of funds, smurfing aims to get around the legal requirement that financial institutions report any suspicious transaction which exceeds the threshold in value as potentially suspicious.
Techniques Employed in Smurfing
Using Accomplice Accounts:
In fact, each of these accounts may be held by other scammers and then use smurfing to move the money to one or more central accounts in order to avoid the regulatory investigation.
A common smurfing strategy is to move illegal funds into a foreign nation with lax banking laws as this allows criminals to make small profits from a variety of businesses which include stock markets, cryptocurrency trading, foreign exchange, and gambling.
Layering with Smurfing:
Furthermore, people can use assets like cryptocurrency bitcoin, foreign currencies, or expensive real estate to move real money back to their original accounts by following the procedure. They might repeat the same cycle to avoid raising suspicions or being compelled by law.
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