What is a 'Smurf'
A smurf is a colloquial term for a money launderer, or one 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. A smurf deposits illegally gained money into bank accounts for transfer in the near future.
BREAKING DOWN 'Smurf'To prevent money laundering by criminals involved in illegal activities, such as drugs and extortion, countries such as the United States and Canada require a currency transaction report be filed by a financial institution handling a transaction exceeding $10,000 in cash. 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 a number of accounts geographically dispersed.
Stages of Money Laundering
The placement stage is where the criminal is relieved of guarding large amounts of illegally obtained cash by placing it into the financial system. For example, a smurf may pack cash in a suitcase and smuggle it to another country for gambling, buying international currency or other reasons.
During the layering stage, illicit money is separated from its source by sophisticated layering of financial transactions that obscures the audit trail and breaks the link with the original crime. For example, the smurfs move funds electronically from one country to another, and then divide the money into investments placed in advanced financial options or overseas markets.
The integration stage is where the money is returned to the criminal from what appear to be legitimate sources. 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. For example, property, art work, jewelry or high-end automobiles may be purchased and given to the criminal.
Example of Smurfing
Cuckoo smurfing is one way criminals move money internationally. For example, say a New York criminal owes a London criminal $9,000, and a London merchant owes a New York supplier $9,000. The London merchant goes to London Bank and deposits $9,000 with instructions to transfer the money to the New York supplier’s bank. 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. The London banker then transfers $9,000 from the London merchant’s account to the London criminal’s account. The London merchant and the New York supplier do not know the funds were never directly transferred; all they know is the London merchant paid $9,000 and the New York supplier received $9,000.