Structuring in AML: How Criminals Hide Illicit Funds and How to Stop Them

When it comes to money laundering, criminals become even more creative and sophisticated in using a variety of methods to hide the origin of illicit funds. One of the most common tactics is structuring in AML. Also known as smurfing. Layers of tactics are used to break down the large sum into smaller amounts to ensure it becomes very hard to detect the unlawfully obtained money. 

Criminals accomplish the structuring process by making less suspicious transactions to evade detection by regulatory bodies and financial institutions. This method also enables them to circumvent legal reporting requirements and launder illicit funds with minimal risk. Money laundering involves the three stages of money laundering, smurfing is often conducted at the layering stage of money laundering. Providing financial benefits and accommodations to people involved in helping them successfully structure in AML helps them find experts in structuring. 

Structuring in Anti Money Laundering 

Structuring in AML refers to the deliberate act of dividing large sums of illicit money into smaller amounts and then conducting multiple transactions to avoid triggering reporting requirements. Regulation across jurisdictions varies based on the threat level, however, under most of the AML regulations, all the financial institutions are obliged to report every transaction that touches the threshold of 10,000 or more. Criminals have become very sophisticated, knowing the loopholes and thinking out of the box to manipulate the AML system. The structuring method is designed to smurf the money without being detected. Breaking down the large sum into small amounts, deposited into multiple accounts under the name of different people. 

These layers of money laundered are used to avoid raising red flags that can lead to an investigation. 

Most Common Techniques of Structuring in Money Laundering

1. Breaking Large Deposits into Smaller Ones
Money launderers actively use this technique at the layering stage of money laundering to avoid detection initially. An example of structuring in money laundering is when a criminal deposits $50,000 in small and multiple transactions each under $9,000 or $9,500 into different bank accounts over several days or weeks under the name of different people. 

While each deposit individually might seem like a regular transaction, the total amount is significant enough to raise suspicion when viewed in context.

2. Using Multiple Individuals or Smurfs
Hiring the professional individuals who are widely known as the Smrufs, is another common method opted by the criminals to carry out smaller transaction on their behalf. 

What these hired people do, they make small deposits of less than 10,000 dollars to ensure that the transaction is legitimate. Then multiple transactions constitute a much larger sum that helps the criminal to easily launder the large sum of money with the help fo multiple professional individuals. 

3.  Moving Money Through Multiple Accounts
Criminal never stop surprisinsg the financial institutions and regulatory bodies when it comes to the new techniques they use for money laundering. 

Another structuring technique in Anti money laundering is through transferring the funds between the multiple back accounts to make the fund ambiough and hard to detect.  in the AML technique is transferring funds between multiple accounts. For compliance officers and regulatory bodies,  it becomes harder to trace the origin of the funds and detect any suspicious patterns.

4. Use of Third-Party Payments
Criminals may also use third-party payment methods, such as prepaid cards, money orders, or online payment systems, to further break up large sums of illicit money. By moving funds through these channels, they can evade detection by traditional banking systems and complicate the process of tracking the flow of money.

Structuring and Smurfing: How the Two Tactics Work Together

In AML world,Structuring and smurfing are widely used interchange, or some say its the comprehensive strategy to launder illlcint money. Hoever, the smurfing technique involve the hiring or using the several individual or multiple bank accounts to transfer money under the threshold. These smaller transactions, when combined, can add up to a large sum of money that criminals want to launder.The relationship between structuring and smurfing lies in the fact that both tactics are designed to exploit reporting loopholes and regulatory weaknesses. Smurfing is the means through which the illicit money is spread out, while structuring is the underlying tactic that ensures the money stays under the radar of financial institutions. 

Why Structuring in Anti-Money Laundering is a Serious Concern

Though all the techniques used in money laundering are important to understand for the compliance officer, the structuring and smurfing are more crucial because they are often used at the initial or first stage of the money laundering. If they are stopped at start, chances of money laundering reduce to large. i

Criminals use this method to conceal the origins of illegally obtained money from activities such as drug trafficking, human trafficking, corruption, and fraud. By making it appear that the funds are coming from legitimate sources, they can freely invest or spend the money without raising suspicion.Understanding how structuring in money laundering works and how to recognize the signs of structuring and smurfing is essential for preventing financial crimes. Institutions must remain proactive and leverage advanced technologies to stay ahead of the ever-evolving tactics used by criminals.