Smurf

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.

RELATED TERMS
  1. Money Laundering

    Money laundering is the process of creating the appearance that ...
  2. Bank Secrecy Act - BSA

    Government legislation that was created in 1970 to prevent financial ...
  3. Financial Crimes Enforcement Network ...

    A network administered by the United States Department of the ...
  4. Anti Money Laundering - AML

    A set of procedures, laws or regulations designed to stop the ...
  5. Financial Forensics

    A field that combines criminal investigation skills with financial ...
  6. Merchant Agreement

    A contract between a business and a credit card service provider.
Related Articles
  1. Investing

    Understanding Money Laundering

    The process of creating the appearance that large amounts of money obtained from serious crimes actually originated from a legitimate source.
  2. Investing

    What's Anti-Money Laundering?

    Anti-money laundering involves the laws and regulations designed to prevent criminals from generating income through illegal activities.
  3. Personal Finance

    How Much Money Do You Need to Live in London?

    Find out what it takes to live in London, including the average costs of living for students, professionals and unemployed individuals.
  4. Markets

    What Does a Merchant Bank Do?

    A merchant bank is a financial institution that performs underwriting, loan services, financial advising and fund raising services to large corporations.
  5. Personal Finance

    Is It the Right Time to Buy a Home in London?

    The "Help to Buy" scheme has been sweetened further for first time home buyers in London. Should you jump to buy a home in London now?
  6. Investing

    London's FX Trading Dominance Threatened by Brexit

    London's FX market after Brexit is likely to lose its privileged access to the EU - and thus its dominance.
  7. Markets

    London's Effect On Gold Prices

    Read about the nearly 100-year-old London gold fix, why the process may be winding down and how Shanghai now threatens London as the world's gold master.
  8. Personal Finance

    What It Costs To Study Abroad In London

    Studying in London puts you right at the center of a cultural, academic and business hub. And careful budgeting will get you there. Here's how.
  9. Investing

    5 ATM Scams That Can Break The Bank

    Don't get scorched by ATM thieves who want to burn a hole in your wallet.
  10. Financial Advisor

    New York's Economy: The 6 Industries Driving GDP Growth

    Learn about the six most influential industries in New York, the most economically productive city in the country, and home of Wall Street and Fifth Avenue.
RELATED FAQS
  1. Why does fighting money laundering reduce overall crime?

    Fighting money laundering reduces overall crime by helping identify perpetrators, restoring stolen money to victims and disrupting ... Read Answer >>
  2. What methods are used to launder money?

    Learn about the methods that criminals use when they are looking to launder money. Many different methods are used, and they ... Read Answer >>
  3. If caught, what implications does money laundering have on a business?

    Understand the damaging effects of money-laundering on businesses as well as anti-laundering measures businesses can use ... Read Answer >>
  4. Money laundering has become a specific concern in all legitimate financial institutions ...

    The correct answer is b). There are three phases to money laundering. Placement is the physical disposal of the initial proceeds ... Read Answer >>
  5. What is the difference between investment banks and merchant banks?

    Merchant banks and investment banks, in their purest forms, are different kinds of financial institutions that perform different ... Read Answer >>
  6. How liquid are money market accounts?

    Understand the characteristics that distinguish money market accounts from checking, savings account and money market funds ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center