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. Bank Secrecy Act - BSA

    The Bank Secrecy Act (BSA) is federal legislation to prevent ...
  2. Structured Transaction

    A structured transaction is a series of transactions, which individuals ...
  3. Merchant Discount Rate

    The merchant discount rate is the rate charged to a merchant ...
  4. Black Money

    Black money is payment from illegal activity, usually received ...
  5. Acquirer

    An acquirer is a company that acquires rights to another company ...
  6. Book Transfer

    A book transfer is the transfer of funds from one deposit account ...
Related Articles
  1. Investing

    What's Anti-Money Laundering?

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

    3 Recent Money Laundering Scandals

    The market for laundering money has been estimated to be as high as $500 billion annually. Here are some recent investigations.
  3. Investing

    Deutsche Bank Faces New Fines

    The bank has paid fines for laundering money for Russian criminals and for selling toxic assets that caused the global recession. Now illegal currency trades may be the latest source of pain.
  4. Personal Finance

    Where Will London's Banking Jobs Go After Brexit?

    Frankfurt? Dublin? New York? No one is sure what will happen to the City's banking jobs after Brexit, but its looks like London will lose quite a few.
  5. Investing

    Why Money Market Funds Break The Buck

    These funds are noted for their safety in a rough market. Read on to find out why.
  6. Tech

    How to Keep Accounts Safe From Cyber Criminals

    With the advancement of financial technology online comes the risk of criminals who try to hack your accounts. Here's how to protect yourself.
  7. Retirement

    Introduction To Retirement Money Market Accounts

    Money market funds are used in retirement plans and accounts because they are liquid, stable and pay competitive rates of interest.
  8. Investing

    London Banks Want Gold Traded on Exchange

    London's ancient gold bullion market is looking to make major shifts in its operations.
  9. Investing

    Deutsche Bank Fined for Russian Money Laundering Scheme

    Deutsche Bank helped Russians launder $10 billion in assets over several years through a co-ordinated scheme run through its offices in Moscow, London and New York.
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 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 >>
  3. What determines the interest rate on my money market account?

    Placing funds in a money market account may provide a higher interest rate than a savings account due to the underlying securities ... Read Answer >>
  4. How safe are money market accounts?

    Learn the difference between a money market account and a money market fund. Both savings vehicles are relatively safe, but ... Read Answer >>
Hot Definitions
  1. Intrinsic Value

    Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ ...
  2. Current Assets

    Current assets is a balance sheet account that represents the value of all assets that can reasonably expected to be converted ...
  3. Volatility

    Volatility measures how much the price of a security, derivative, or index fluctuates.
  4. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  5. Cost of Debt

    Cost of debt is the effective rate that a company pays on its current debt as part of its capital structure.
  6. Depreciation

    Depreciation is an accounting method of allocating the cost of a tangible asset over its useful life and is used to account ...
Trading Center