Smurfing (crime)
Encyclopedia
Structuring, also known as smurfing in banking industry jargon
, is the practice of executing financial transactions (such as the making of bank deposits) in a specific pattern calculated to avoid the creation of certain records and reports required by law, such as the United States's Bank Secrecy Act
(BSA) and Internal Revenue Code section 6050I (relating to the requirement to file Form 8300).
Legal restrictions on structuring should not be confused with capital controls, which are statutory or regulatory limits on the money that one can take out of a nation, though they can have some of the same economic effects in some economies, as structuring controls effectively limit the flow of capital by magnitude and duration, and can apply equally to taking money out of a nation as well as putting money into its finance system.
, fraud
, and other financial crimes.
The term "smurfing" is derived from the image of the cartoon characters, the Smurfs
, having a large group of many small entities. Miami-based lawyer Gregory Baldwin is said to have coined the term in the 1980s.
Typically each of the smaller transactions is executed in an amount below some statutory limit that normally does not require a financial institution
to file a report with a government agency. Criminal enterprises often employ several agents (smurfs) to make the transaction.
s such as pseudoephedrine
In this context the agent will make purchases of small, legal amounts from several drug and grocery stores, with the intent to aggregate the lot for use in the illegal production of methamphetamine
.
, the Bank Secrecy Act
requires the filing of a currency transaction report
(CTR) for transactions of more than $10,000 in currency (US or foreign). Financial institutions suspecting deposit structuring with intent to avoid the law are required to file a suspicious activity report
.
Title 31 of the United States Code
, section 5324, provides (in part):
Section 5324 further provides that a violation of this provision may be punished by a fine or up to five years in prison, or both.
The CA$
10,000 rule remains.
The prescribed amount is in Canadian dollars or its equivalent in a foreign currency, based on
Exceptions & clarifications
Jargon
Jargon is terminology which is especially defined in relationship to a specific activity, profession, group, or event. The philosophe Condillac observed in 1782 that "Every science requires a special language because every science has its own ideas." As a rationalist member of the Enlightenment he...
, is the practice of executing financial transactions (such as the making of bank deposits) in a specific pattern calculated to avoid the creation of certain records and reports required by law, such as the United States's Bank Secrecy Act
Bank Secrecy Act
The Bank Secrecy Act of 1970 requires financial institutions in the United States to assist U.S. government agencies to detect and prevent money laundering...
(BSA) and Internal Revenue Code section 6050I (relating to the requirement to file Form 8300).
Legal restrictions on structuring should not be confused with capital controls, which are statutory or regulatory limits on the money that one can take out of a nation, though they can have some of the same economic effects in some economies, as structuring controls effectively limit the flow of capital by magnitude and duration, and can apply equally to taking money out of a nation as well as putting money into its finance system.
Background
Structuring includes the act of parceling what would otherwise be a large financial transaction into a series of smaller transactions to avoid scrutiny by regulators or law enforcement. Structuring often appears in federal indictments related to money launderingMoney laundering
Money laundering is the process of disguising illegal sources of money so that it looks like it came from legal sources. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount...
, fraud
Fraud
In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...
, and other financial crimes.
The term "smurfing" is derived from the image of the cartoon characters, the Smurfs
The Smurfs
The Smurfs is a comic and television franchise centred on a group of small blue fictional creatures called Smurfs, created and first introduced as a series of comic strips by the Belgian cartoonist Peyo on October 23, 1958...
, having a large group of many small entities. Miami-based lawyer Gregory Baldwin is said to have coined the term in the 1980s.
Typically each of the smaller transactions is executed in an amount below some statutory limit that normally does not require a financial institution
Financial institution
In financial economics, a financial institution is an institution that provides financial services for its clients or members. Probably the most important financial service provided by financial institutions is acting as financial intermediaries...
to file a report with a government agency. Criminal enterprises often employ several agents (smurfs) to make the transaction.
Other uses
The term is also applied to activity associated with controlled substanceControlled substance
A controlled substance is generally a drug or chemical whose manufacture, possession, or use are regulated by a government. This may include illegal drugs and prescription medications ....
s such as pseudoephedrine
Pseudoephedrine
Pseudoephedrine is a sympathomimetic drug of the phenethylamine and amphetamine chemical classes. It is used as a nasal/sinus decongestant and stimulant, or as a wakefulness-promoting agent....
In this context the agent will make purchases of small, legal amounts from several drug and grocery stores, with the intent to aggregate the lot for use in the illegal production of methamphetamine
Methamphetamine
Methamphetamine is a psychostimulant of the phenethylamine and amphetamine class of psychoactive drugs...
.
United States
In the United StatesUnited States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, the Bank Secrecy Act
Bank Secrecy Act
The Bank Secrecy Act of 1970 requires financial institutions in the United States to assist U.S. government agencies to detect and prevent money laundering...
requires the filing of a currency transaction report
Currency transaction report
A currency transaction report is a report that U.S. financial institutions are required to file for each deposit, withdrawal, exchange of currency, or other payment or transfer, by, through, or to the financial institution which involves a transaction in currency of more than $10,000...
(CTR) for transactions of more than $10,000 in currency (US or foreign). Financial institutions suspecting deposit structuring with intent to avoid the law are required to file a suspicious activity report
Suspicious activity report
In United States financial regulation, a suspicious activity report is a report made by a financial institution to the Financial Crimes Enforcement Network , an agency of the United States Department of the Treasury, regarding suspicious or potentially suspicious activity.The purpose of a...
.
Title 31 of the United States Code
United States Code
The Code of Laws of the United States of America is a compilation and codification of the general and permanent federal laws of the United States...
, section 5324, provides (in part):
No person shall, for the purpose of evading the reporting requirements of section 5313 (a) or 5325 or any regulation prescribed under any such section, the reporting or record keeping requirements imposed by any order issued under section 5326, or the record keeping requirements imposed by any regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91–508—
[...]
(3) structure or assist in structuring, or attempt to structure or assist in structuring, any transaction with one or more domestic financial institutions.
Section 5324 further provides that a violation of this provision may be punished by a fine or up to five years in prison, or both.
Canada
Canada's legislation on money laundering have been revised recently http://laws.justice.gc.ca/eng/SOR-2002-412/page-1.html#anchorbo-ga:s_2-gb:s_2.The CA$
Canadian dollar
The Canadian dollar is the currency of Canada. As of 2007, the Canadian dollar is the 7th most traded currency in the world. It is abbreviated with the dollar sign $, or C$ to distinguish it from other dollar-denominated currencies...
10,000 rule remains.
- Minimum Value of Currency or Monetary Instruments
- 2. (1) For the purposes of reporting the importation or exportation of currency or monetary instruments of a certain value under subsection 12(1) of the Act, the prescribed amount is $10,000.
The prescribed amount is in Canadian dollars or its equivalent in a foreign currency, based on
-
- (a) the official conversion rate of the Bank of Canada as published in the Bank of Canada's Daily Memorandum of Exchange Rates that is in effect at the time of importation or exportation; or
-
- (b) if no official conversion rate is set out in that publication for that currency, the conversion rate that the person or entity would use for that currency in the normal course of business at the time of the importation or exportation.
Regulatory Table
Capital controls generally regulate how much money can leave a country at any given time. Whereas anti-structuring regulations are more concerned with limiting the size of domestic transactions for individuals and somewhat limiting the outbound foreign currency transfers of firms or company entities.Exceptions & clarifications
- Fiji has its own anti-smurfing laws, but they should not be confused with Fiji's capital controlCapital controlCapital controls are measures such as transaction taxes and other limits or outright prohibitions, which a nation's government can use to regulate the flows into and out of the country's capital account....
s. Fiji has limited outbound withdrawals in hard currency (AUD, NZD, USD) for at least 20 years. - The Cook Islands has "Home Rule" with respect to banking. Cook Islands automated teller machineAutomated teller machineAn automated teller machine or automatic teller machine, also known as a Cashpoint , cash machine or sometimes a hole in the wall in British English, is a computerised telecommunications device that provides the clients of a financial institution with access to financial transactions in a public...
s often fail to fully disclose the fact that the Cooks are not part of the New Zealand banking system. There are structuring regulations in the Cook Islands, but they are not the same as NZ.
| Jurisdiction | Single Transaction | Notes |
|---|---|---|
| Australia Australia Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area... |
A$ Australian dollar The Australian dollar is the currency of the Commonwealth of Australia, including Christmas Island, Cocos Islands, and Norfolk Island, as well as the independent Pacific Island states of Kiribati, Nauru and Tuvalu... 10,000 |
Although there are no weekly or monthly limits, any parceling to evade the rules is a criminal offence. |
| Brazil Brazil Brazil , officially the Federative Republic of Brazil , is the largest country in South America. It is the world's fifth largest country, both by geographical area and by population with over 192 million people... |
varies | Depends on transaction type. |
| Canada Canada Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean... |
CA$ Canadian dollar The Canadian dollar is the currency of Canada. As of 2007, the Canadian dollar is the 7th most traded currency in the world. It is abbreviated with the dollar sign $, or C$ to distinguish it from other dollar-denominated currencies... 10,000 |
All transactions totaling CA$10,000 within a 24 hour period are subject to reporting. Certain businesses may qualify for Alternative to Large Cash Transaction (ALCT) reporting. |
| Fiji Fiji Fiji , officially the Republic of Fiji , is an island nation in Melanesia in the South Pacific Ocean about northeast of New Zealand's North Island... |
FJ$ Fijian dollar The dollar has been the currency of Fiji since 1969 and was also the currency between 1867 and 1873. It is normally abbreviated with the dollar sign $, or alternatively FJ$ to distinguish it from other dollar-denominated currencies... 1,100 |
Individuals are subject to FJ$7,700 in a given week. Businesses engaged as investor tourism operators have no limit. |
| France France The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France... |
€ Euro The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,... 3,000 |
|
| Germany Germany Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate... |
€ Euro The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,... 15,000 |
|
| Guyana Guyana Guyana , officially the Co-operative Republic of Guyana, previously the colony of British Guiana, is a sovereign state on the northern coast of South America that is culturally part of the Anglophone Caribbean. Guyana was a former colony of the Dutch and of the British... |
USD United States dollar The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies.... 10,000 |
|
| Ireland Republic of Ireland Ireland , described as the Republic of Ireland , is a sovereign state in Europe occupying approximately five-sixths of the island of the same name. Its capital is Dublin. Ireland, which had a population of 4.58 million in 2011, is a constitutional republic governed as a parliamentary democracy,... |
€ Euro The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,... 10,000 |
|
| India India India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world... |
Rs. Rupee The rupee is the common name for the monetary unit of account in India, Sri Lanka, Nepal, Pakistan, Mauritius, Seychelles, Maldives, and formerly in Burma, and Afghanistan. Historically, the first currency called "rupee" was introduced in the 16th century... 50,000 |
|
| Italy Italy Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and... |
€ Euro The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,... 12,500 |
|
| Lithuania Lithuania Lithuania , officially the Republic of Lithuania is a country in Northern Europe, the biggest of the three Baltic states. It is situated along the southeastern shore of the Baltic Sea, whereby to the west lie Sweden and Denmark... |
LTL Lithuanian litas The Lithuanian litas is the currency of Lithuania. It is divided into 100 centų... 10,000 |
|
| Netherlands Netherlands The Netherlands is a constituent country of the Kingdom of the Netherlands, located mainly in North-West Europe and with several islands in the Caribbean. Mainland Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east, and shares maritime borders... |
€ Euro The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,... 15,000 |
|
| New Zealand New Zealand New Zealand is an island country in the south-western Pacific Ocean comprising two main landmasses and numerous smaller islands. The country is situated some east of Australia across the Tasman Sea, and roughly south of the Pacific island nations of New Caledonia, Fiji, and Tonga... |
NZ$ New Zealand dollar The New Zealand dollar is the currency of New Zealand. It also circulates in the Cook Islands , Niue, Tokelau, and the Pitcairn Islands. It is divided into 100 cents.... 10,000 |
Not applicable to the Cook Islands Cook Islands The Cook Islands is a self-governing parliamentary democracy in the South Pacific Ocean in free association with New Zealand... |
| Philippines Philippines The Philippines , officially known as the Republic of the Philippines , is a country in Southeast Asia in the western Pacific Ocean. To its north across the Luzon Strait lies Taiwan. West across the South China Sea sits Vietnam... |
PHP Philippine peso The peso is the currency of the Philippines. It is subdivided into 100 centavos . Before 1967, the language used on the banknotes and coins was English and so "peso" was the name used... 500,000 |
|
| Portugal Portugal Portugal , officially the Portuguese Republic is a country situated in southwestern Europe on the Iberian Peninsula. Portugal is the westernmost country of Europe, and is bordered by the Atlantic Ocean to the West and South and by Spain to the North and East. The Atlantic archipelagos of the... |
€ Euro The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,... 10,000 |
|
| Romania Romania Romania is a country located at the crossroads of Central and Southeastern Europe, on the Lower Danube, within and outside the Carpathian arch, bordering on the Black Sea... |
€ Euro The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,... 10,000 |
|
| Spain Spain Spain , officially the Kingdom of Spain languages]] under the European Charter for Regional or Minority Languages. In each of these, Spain's official name is as follows:;;;;;;), is a country and member state of the European Union located in southwestern Europe on the Iberian Peninsula... |
€ Euro The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,... 3,000 |
|
| Sweden Sweden Sweden , officially the Kingdom of Sweden , is a Nordic country on the Scandinavian Peninsula in Northern Europe. Sweden borders with Norway and Finland and is connected to Denmark by a bridge-tunnel across the Öresund.... |
€ Euro The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,... 10,000 |
|
| Thailand Thailand Thailand , officially the Kingdom of Thailand , formerly known as Siam , is a country located at the centre of the Indochina peninsula and Southeast Asia. It is bordered to the north by Burma and Laos, to the east by Laos and Cambodia, to the south by the Gulf of Thailand and Malaysia, and to the... |
US$ United States dollar The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies.... 58,000 |
|
| Turkey Turkey Turkey , known officially as the Republic of Turkey , is a Eurasian country located in Western Asia and in East Thrace in Southeastern Europe... |
US$ United States dollar The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies.... 50,000 |
|
| United States United States The United States of America is a federal constitutional republic comprising fifty states and a federal district... |
US$ United States dollar The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies.... 10,000 |