In today’s digital business Smurfing, the banking sector struggles to monitor and track the streams of funds that revolve around the financial system. The evolving threats of illicit monetary transactions caused businesses to experience 1,263 money laundering cases in 2019. Imposters break down large transactions into smaller portions to disguise the source of illegal funds.
Additionally, an emerging variant of money laundering practices, known as smurfing, is gaining attention as it exploits the environment of digital transactions. Now, one must wonder what is smurfing and how does it relate to the money laundering practices.
Read this blog to understand what smurfing means and how the imposters use this technique to avoid detection against regulatory violations.
What is Smurfing? A Quick Overview
Smurfing is the practice of breaking down large monetary funds into multiple portions to disguise the source of illicitly acquired funds. The Smurfs use these small sums to stay below the reporting threshold set by the regulatory bodies. The ultimate aim of smurfing is to dodge the penalties set by the legal system.
Understanding the Various Smurfing Techniques
Smurfing is considered a financial fraud as it deteriorates the financial sector’s transaction practices. The Smurfs use several techniques to evade regulatory requirements and transfer illegal funds, which are briefly discussed below:
- The smurfing process begins when the imposters deposit the illicitly acquired funds across various bank accounts. They place the funds into multiple accounts and introduce them into the financial system as a legitimate source.
- Another technique through which funds are smurfed is by undergoing a series of transactions. They use digital servers to transfer funds across different accounts and borders. These layering practices disguise the original source of funds, which hinders the tracking of financial transactions.
- Oftentimes, the imposters use the laundered funds to purchase assets, including real estate, luxury vehicles, and stocks. Through this process, they wash out the black money and introduce it in the financial sector as legitimately acquired sources.
Smurfing in Money Laundering – An Overview
Smurfing plays a critical role in conducting money laundering practices. The imposters involved in the fraudulent activities use smurfing to avoid being detected for suspicious transaction activities. It facilitates money laundering attempts because of the placement, layering, and integration of illicitly attained funds into the legitimate financial system.
These techniques result in businesses facing financial repercussions. Therefore, it is essential for the financial institutions to employ anti-money laundering (AML) screening practices to rectify such attempts.
Smurfing and Structuring – Understand the Difference
Money laundering is often conducted through smurfing and structuring methods. Its aims to conceal the source of illegal funds through multiple accounts and is conducted by multiple entities. Moreover, these practices are difficult to detect and prevent.
Alternatively, structuring focuses on the division of illicit funds into smaller portions in order to avoid reporting requirements set by the government. One entity typically manages multiple deposits. Additionally, Additionally, structured money laundering practices are detected through the utilization of AML smurfing and monitoring operations.
Targets of International Smurfing
Smurfing is a common money laundering practice that affects various industrial operations. Some of the most common targets of it are discussed below:
- Cryptocurrency practices greatly influence transactions due to their anonymous nature. The money launderers exploit the virtual currencies and transform them into real money to illicitly transfer money across multiple online channels.
- Smurfing operations frequently target the real-estate sector. The imposters use illicit funds to purchase real estate properties and assets, which complicates law enforcement efforts.
- It negatively affects financial institutions as they conceal the source of funds, which exploits the overall transaction monitoring and tracking procedures.
Combat Smurfing with AML Screening
The prevention of smurfing requires businesses to adopt various anti-money laundering strategies. AML screening process encompasses the businesses to appoint a compliance officer and conduct extensive risk-assessment operations. Furthermore, these procedures enable businesses to implement extensive due diligence programs to evaluate the customer’s risk profiles in real-time.
Anti-money laundering screening operations facilitate extensive risk assessment approaches, which allow businesses to onboard legitimate entities. These checks ensure that a business operation appoints and registers only entities presenting legitimate financial records. Additionally, enhanced AML checks screen high-profile customers extensively to ensure their compliance. Due diligence screening approaches, which evaluate all the customers against several international watchlists.
Summing Up
What is smurfing?A term that requires extensive analysis regarding money laundering attempts. These procedures deal with the division of large monetary funds across various bank accounts and through various individuals. Moreover, it exploits the various industry’s business operations because of its explicit nature.
Therefore, businesses need to implement several anti-money laundering checks to rectify the risks related to money laundering practices. These practices help businesses combat financial scams that exploit industrial operations.
