Saturday Brain Storming Thought (224) 25/05/2024

SMURFING

Smurfing

Smurfing is a money laundering technique that involves the structuring of large amounts of cash into multiple small transactions

This is done in order to conceal the source of money

Smurf

A Smurf is a money launderer 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

Key Takeaways of Smurfing

1) Smurfing aims to conceal the true nature and source of funds being laundered

2) Smurfing involves multiple individuals and accounts, making it a more sophisticated form of money laundering

3) Smurfing is a form of structuring, in which criminals use small, cumulative transactions to remain below financial reporting requirements

Working of Smurfing

1) The Smurf receives illegally obtained funds

2) The Smurf spilts the funds – digitally or physically – into amounts just below the declaring, reporting or alert threshold

3) The Smurf works alone or with others to launder, the funds, working separately with each smaller sum

4) Once laundered independently, the sums can be consolidated into one account again, if needed

5) These funds are received by the criminal

Cuckoo Smurfing

Cuckoo Smurfing is a money laundering method where criminals target bank accounts of legitimate customers expecting to receive funds from overseas

Elements of Cuckoo Smurfing

1) No physical transfer

2) Structuring

3) Involvement of Smurfs

4) Cross – border transactions

5) Illicit money

Overseas transfer in Cuckoo Smurfing

1) Overseas transferor wants to make a cross-border money transfer, and he deposits funds with a remitter

2) The remitter does not transfer funds to the cross-border beneficiary

3) The remitter asks a professional money laundering syndicate in the beneficiary’s country to deposit cash in the beneficiary’s bank account

4) Once the cash is deposited into the beneficiary’s account, the funds are transferred by the remitter to the money laundering syndicate

Beneficiary in Cuckoo Smurfing

1) Professional money laundering syndicate deposits cash into the beneficiary’s bank account in small amounts to avoid reporting threshold (structuring)

2) Beneficiary thinks funds have legitimately arrived from the overseas trasnferor (Cuckoos Nest)

Demographic Red Flags in Cuckoo Smurfing

1) Cash deposits across multiple bank branches and ATMs on the same day

2) Cash deposits from a different location than the home location of the beneficiary

3) Multiple cash deposits in quick succession at the same location

4) Cash deposits in the bank account and ATMs

5) Cash deposits at remote ATMs with less surveillance

Account indicators in Cuckoo Smurfing

1) The beneficiary is an unemployed person, a student or a retired person

2) Multiple cash deposits in quick succession

3) Multiple cash deposits for an amount less than the reporting threshold

4) Cash deposits not matching the customers profile

5) Cash deposits via ATMs using a single card favouring multiple beneficiaries

6) Cash deposit into a beneficiary’s account matching with an international fund transfer instruction

Deposit indicators in Cuckoo Smurfing

1) Cash deposits into multiple beneficiary accounts by the same person

2) Depositor initiating cash deposits into a beneficiary account from a distant location

3) Multiple depositors using the same beneficiary details and making frequent cash deposits

4) The depositors name appears to be fictitious

How to detect Cuckoo Smurfing

1) Check if there’s a relationship between the depositor and beneficiary

2) Check if the beneficiary is aware of the cash deposits made into his account

3) Check if the beneficiary is aware of the fund transfer from the overseas account

4) Check with the remitter for the source of funds

5) Check video footage to identify suspicious third-party depositers

Stages of Smurfing

1) The placement stage

2) The layering stage

3) The integration stage

Smurfing Red Flags

1) Frequent small deposits

2) Multiple transactions across different locations

3) Sudden surge in account activity

4) Round number transactions

5) Multiple accounts

6) Inconsistent business transactions

7) Rapid movement of funds

8) Multiple transactions by different people

9) Frequent international transactions

10) Overcomplication of simple transactions

Ways to prevent Smurfing

1) Adopt Know Your Customer (KYC) protocols

2) Monitor transactions

3) Implement advanced fraud detection

4) Training and education

5) Risk assessment

6) Report suspicious activity

7) Two factor authentication

8) Cooperation with authorities

9) Conduct regular audits

10) Limit cash transactions

Smurfing example in Real Estate

1) The real estate industry can be targeted by those looking to buy properties using illicit funds

2) The scammer can apply for a short-term mortgage

3) Pay monthly using illegally acquired funds asxa way to launder that money

COMPILED BY:-

Er. Avinash Kulkarni
9822011051

Chartered Engineer, Govt Regd Valuer, IBBI Regd Valuer