The Difference Between Smurfing & Structuring – Financial Crimes
Financial crimes/frauds are common within the money service business space, especially smurfing and structuring. They come in different shapes and sizes, be they, domestic issues, international issues, or both. Domestic crimes are bad, when these crimes involve offshore and international tax-related matters, the penalties can be outrageous.
In banking and cross-border payment violation, two of the most common types of financial crimes are Smurfing and Structuring. Both terms are often used interchangeably and somehow similar.
It’s not hard to see why they are thought to be the same thing as this post would explain. However, Smurfing slightly differs from Structuring. To see how we start by understanding the Achilles’ Hills of money launderers; Currency Transaction Report (CTR) and Suspicious Activity Report (SAR).
CTR and SAR
Banks globally are usually required to report any single bank transaction or multiple transactions on a single business day, going through an account, exceeding a certain amount. These reports are Currency Transaction Report (CTR) and the Suspicious Activity Report (SAR).
CTR usually applies when a single transaction exceeds the statutory limit set by regulators. SAR may be filed if activity gives rise to a suspicion that the account holder is attempting to hide something or make an illegal transaction. An example of such activity is making multiple small transactions on a single business day into one account, especially if the total of these transactions exceeds the statutory limit.
In the United States, the limit is $10,000, meaning any cash deposit or withdrawal in excess of $10,000 must be subjected to CTR filing. Limits differ from country to country depending on the regulatory requirements. These are in place to curb crimes such as money laundering, terrorism financing, and more.
Now that that’s out of the way, let’s break down Structuring;
Structuring is the act of arranging a financial transaction in an obscure way, so as to avoid detection of a large amount of money being transacted which would trigger the bank to file a CTR or SAR.
Let’s throw a person into the picture and call him Joe. Assuming Joe needs to get $100,000 into the United States financial system, he cannot deposit it all in one bank or in a single transaction since the limit per transaction is $10,000. If Joe does that, the bank would file a CTR and his transaction would come under an investigation. What Joe would likely do is arrange the money in a series of deposits below the limit.
Now Structuring does not have to be around illegally sourced money. Perpetrators could use it to evade taxes on legally acquired money or to hide how much money they generate and the sources.
Now, let’s see Smurfing;
Smurfing is everything Structuring is, and more. It goes deeper than and more complicated. Smurfing involves depositing illegally gained money into multiple geographically dispersed accounts, following a series of transactions and techniques so as to avoid detection.
The multiple transactions performed are usually done using runners (called “smurfs”). These are people who make the structured transactions at different banks and at different intervals to mask linking the money back to the money launderer.
In Smurfing, the sources of funds are concealed via complex transactions and bookkeeping tricks called “layering”. Some of the tricks used are tying the illegal money close to legal money in the books and depositing them as one. This is called “placement” and usually involves offshore bank deposits. “Integration” is the different techniques through which the money legally flows back to the launderer.
The movement of illegally acquired money, use of ‘smurfs’, and the three techniques mentioned above are what differentiates Smurfing from Structuring. Smurfing is purely illegal and attracts serious consequences.
Protecting your business
Since smurfing usually involves offshore transactions or cross-border payments, criminals may look to leverage money transfer operators to pass their money. They can do this by running a number of remittance transactions through an operator to a single beneficiary or multiple beneficiaries.
As a money service business owner, it is your duty to protect your business against smurfing and structuring activities as these could lead to severe penalties if legal investigations implicate your business. Ignorance of these illicit activities is usually a weak defense at law as the court can decide you allied with criminals.
A smart way to protect your business is integrating remittance software strong in Anti-Money Laundering (AML) protections through cutting-edge technology. This automating checks for money laundering through transactions your business processes, saving you the time to concentrate on running your business.
MTAComply® is one such AML technology built into the Money Transfer Application – a leading remittance and cross-border payment software. MTAComply® works by searching your business transaction database to identify the number of transactions received by a beneficiary or transmitted by the sender over a given period of time.
If you’re serious about protecting your money service business from the dangers of financial crimes, you need an advanced AML technology MTAComply® working within your system. Contact us to learn more about the Money Transfer Application, and how we can help secure, automate and scale your business.