Structuring, also known as smurfing, is a method of money laundering that involves breaking down large amounts of illicit funds into smaller, less conspicuous transactions to avoid detection by financial institutions and regulatory authorities. These smaller transactions are often conducted in such a way as to avoid triggering mandatory reporting requirements.
Key Points:
- Purpose: The primary goal of structuring is to prevent large, suspicious transactions from attracting the attention of authorities by keeping each transaction below the reporting threshold, thus evading AML (Anti-Money Laundering) measures.
- Methods of Structuring:
- Cash Deposits: Depositing small amounts of cash into one or multiple bank accounts over a short period.
- Withdrawals: Withdrawing small amounts of cash frequently to avoid large withdrawals that might trigger scrutiny.
- Money Orders and Checks: Purchasing multiple money orders or cashier’s checks in amounts below the reporting threshold.
- Electronic Transfers: Sending multiple small wire transfers domestically or internationally to avoid detection.
- Splitting Transactions: Dividing a large transaction into several smaller ones and conducting them at different branches or institutions.
- Challenges in Detection:
- Volume and Frequency: The high volume and frequency of small transactions can make it difficult for financial institutions to detect suspicious patterns.
- Multiple Accounts: Using multiple accounts and financial institutions can obscure the overall picture of the laundering activity.
- Anonymity: Structuring can involve using third parties (smurfs) who make the transactions on behalf of the criminal, further complicating detection efforts.
- Regulatory Measures:
- Currency Transaction Reports (CTRs): Financial institutions must file CTRs for cash transactions that exceed a certain threshold (e.g., $10,000 in the U.S.).
- Suspicious Activity Reports (SARs): Institutions must file SARs if they detect patterns of structuring or other suspicious activities, even if the individual transactions are below the reporting threshold.
- Know Your Customer (KYC): Verifying customer identities and monitoring their transactions to identify unusual behavior.
- Automated Monitoring Systems: Implementing sophisticated software to detect patterns and anomalies indicative of structuring.
- Examples of Structuring:
- A criminal deposits $9,000 in cash into a bank account multiple times over several days to avoid the $10,000 CTR threshold.
- Using multiple individuals to deposit small amounts of cash into various accounts, which are then consolidated into a single account.
- Purchasing several money orders just under the reporting limit and then using them to fund a single large transaction.
- Consequences: Structuring is illegal and considered a form of money laundering. Financial institutions that fail to detect and report structuring activities can face regulatory penalties, fines, and reputational damage. Individuals involved in structuring can be prosecuted and face severe legal penalties.