Smurfing involves depositing illegally gained money into bank accounts for under-the-radar transfer shortly.
A Smurf is a money launderer or someone who seeks to evade scrutiny from government agencies by breaking up a transaction involving a large amount of money into smaller transactions below the reporting threshold so that it will not be detected.
It is also someone who deposits illegally gained money into bank accounts for under-the-radar transfer. Smurfing is an illegal activity that can have serious consequences. It is a colloquial term for a money launderer.
The United States and Canada require a currency transaction report to be filed by a financial institution handling any transaction exceeding $10,000 in cash to prevent money laundering by criminals involved in illegal activities, such as drugs and extortion. Therefore, a criminal group with $50,000 in cash for laundering may use several Smurfs for depositing anywhere from $5,000 to $9,000 in several accounts geographically dispersed.
How a Smurf Works
Smurfing has three stages placement, layering, and integration:
In the placement stage, a Smurf may pack cash in a suitcase and smuggle it to another country for gambling, buying international currency, or other reasons. The criminal is relieved of guarding large amounts of illegally obtained cash by placing it into the financial system.
During the layering stage, a Smurf moves funds electronically from one country to another, then divides the money into investments placed in advanced financial options or overseas markets. The illicit money is separated from its source by a sophisticated layering of financial transactions that obscures the audit trail and breaks the link to the original crime.
The integration stage is when valuables such as property, artwork, jewelry, or high-end automobiles may be purchased and given to the criminal. The money is returned to the criminal. Although there are numerous ways of getting the money back, funds must appear to come from a legitimate source, and the process must not draw attention.
Examples of Smurfing
“Cuckoo Smurfing” is one of the ways criminals move money internationally. For example, a New York criminal owes a London criminal $9,000, and a London merchant owes a New York supplier $9,000.
Placement: The London merchant goes to London Bank and deposits $9,000, with instructions to transfer the money to the New York supplier’s bank.
Layering: The London banker, working with the New York criminal, instructs the New York criminal to deposit $9,000 in the New York supplier’s bank account.
Integration: The London banker then transfers $9,000 from the London merchant’s account to the London criminal’s account.
The New York supplier and the London merchant had no idea that the funds were never directly transferred. All they know is that the London merchant paid $9,000 and the New York supplier received $9,000. However, if caught, the London banker could face serious consequences such as going to jail and paying.