Phoenix Compliance Essentials #15
Today’s focus: “smurfing”, a money laundering method still widely used today.
➡️ What is it?
Smurfing is one of the money laundering methods described in international ML/FT-P-C typologies. It consists of breaking down illicit funds into multiple transactions carried out by several coordinated accomplices, known as “smurfs”, in order to remain below the usual monitoring and reporting thresholds.
This method may involve various payment instruments:
– Cash deposits,
– Low-value wire transfers,
– Purchases of monetary instruments (cashier’s cheques, money orders),
– Transfers through payment service providers,
– Top-ups of prepaid payment instruments.
By multiplying transactions and using different payment methods, criminals reduce the visibility of financial flows and make detection more difficult.
➡️ Who is concerned?
Smurfing does not only affect financial institutions. It may also occur in other sectors, such as:
– Casinos and gaming: bets or purchases of gaming chips below monitoring thresholds.
– Payment service providers: repeated transfers of small amounts to circumvent controls.
– Retail and luxury businesses: multiple purchases of goods, such as small leather goods or luxury handbags.
➡️ Practical example:
A criminal organisation wishes to launder EUR 50,000 in cash.
To avoid exceeding the usual monitoring thresholds, the organiser recruits six smurfs, each instructed to deposit between EUR 8,000 and EUR 9,000 into different banks in exchange for payment.
The EUR 50,000 is therefore introduced into the financial system in small amounts, spread across several accounts, without triggering enhanced scrutiny. Once deposited, the funds can then be transferred, consolidated or invested.
➡️ How can it be prevented?
– Conduct robust KYC procedures: verify customers’ identity and ensure the consistency of their economic profile.
– Monitor unusual transactions: identify structured deposits or transfers and other atypical behaviour.
– Train staff: raise awareness of ML/FT-P-C typologies and local regulatory requirements.
– Implement robust internal procedures.
– Cooperate with the AMSF: submit suspicious transaction reports without delay.
