Smurfing

🔹 Definition

Smurfing is a money laundering technique in which large sums of illicit money are broken down into smaller, less suspicious amounts and deposited or transacted through multiple individuals or accounts to avoid detection and regulatory reporting thresholds. Also known as structuring, this method aims to circumvent laws such as the Currency Transaction Report (CTR) requirements in the U.S. and similar large transaction thresholds in other jurisdictions.

The term “smurfing” originates from the idea of using many small, low-profile agents (or “smurfs”) to distribute and conceal the illegal activity.

🔹 Frequently Asked Questions (FAQs)

Q1: How does smurfing work in practice?

• A criminal splits a large sum of money into smaller deposits, each below the reportable limit (e.g., under USD 10,000 in the U.S.)
• These funds are deposited into multiple bank accounts, often across different branches or by using different individuals
• The money may then be transferred, withdrawn, or converted to other instruments (e.g., prepaid cards, crypto, casino chips) to further obscure its origin

Q2: Why is smurfing used?

• To evade detection by financial institutions and regulators
• To avoid triggering automated alerts for large or unusual transactions
• To launder cash-based criminal proceeds through otherwise legitimate channels
• To break the audit trail, making investigation and prosecution more difficult

Q3: What are the compliance red flags of smurfing?

• Multiple cash deposits just below the reporting threshold
• Deposits made at different branches or ATMs within a short timeframe
• Use of multiple individuals depositing similar amounts into the same account
• Rapid movement of deposited funds to offshore or high-risk jurisdictions
• Attempts to avoid verification or questioning about deposit patterns

Q4: How can institutions detect and prevent smurfing?

• Implement transaction monitoring systems with cumulative thresholds and pattern recognition
• Use customer risk profiling to identify abnormal behaviors based on known activity
• Train frontline staff to spot structuring behaviors and report suspicious activity
• File Suspicious Transaction Reports (STRs) when smurfing is suspected
• Apply Enhanced Due Diligence (EDD) on cash-intensive or high-risk clients

Q5: Is smurfing illegal?
Yes. Smurfing is considered a criminal offense in many jurisdictions as it constitutes an attempt to evade financial reporting requirements, often as part of a broader money laundering scheme. It is prosecutable under AML laws such as:

• The Bank Secrecy Act (BSA) in the U.S.
• The Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act in Singapore
• FATF-aligned AML regulations globally