# Understanding Smurfing: How Money Launderers Evade Detection

## What Is a Smurf?

A smurf is a colloquial term for a money launderer who seeks to prevent detection by financial regulators by breaking up large transactions into a set of smaller transactions that are each below the reporting threshold.

Current bank regulations require financial institutions to report cash transactions over $10,000, or any suspicious ones, on a [suspicious activity report (SAR)](https://www.investopedia.com/terms/s/suspicious-activity-report.asp). Another key regulation is the Patriot Act, which expanded law enforcement powers to fight money laundering by requiring reports on any transactions over $10,000. Smurfing is a serious crime and poses significant risks to financial systems by enabling the movement of illegally acquired funds into legitimate channels.

### Key Takeaways

*   Smurfing involves splitting large sums of money into smaller transactions to evade bank reporting requirements.
*   Criminals use smurfing to move illicit money discreetly into the financial system without detection.
*   Regulations require financial institutions to report any transactions exceeding $10,000 to prevent money laundering.
*   The layering stage in smurfing involves separating illicit money from its source through complex financial transactions.
*   Cuckoo smurfing exploits legitimate financial transfers to disguise illegal money movement between countries.

![A person sits at a desk dividing large sums of money into smaller stacks for eventually deposit into different bank accounts to avoid detection from police.](https://www.investopedia.com/thmb/_VtO2IbGWTr4EPTf_qtGzt1iPFw=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/WhatIsaSmurfandHowDoesSmurfingWork-eb30178970b44b6abe59213023ce7d41.jpg)

*— athima tongloom / Getty Images*

## The Mechanics of Smurfing in Money Laundering

Smurfing involves depositing illegally gained money into multiple bank accounts for under-the-radar transfer in the near future.

To prevent money laundering, countries like the U.S. and Canada require financial institutions to file a [currency transaction report](https://www.investopedia.com/terms/c/ctr.asp) for any cash transaction over $10,000.

To evade these reporting requirements, criminal groups might attempt to cover their tracks by splitting their cash into multiple smaller deposits and dividing them between a number of geographically dispersed accounts. This is a form of [structuring transactions](https://www.investopedia.com/terms/s/structured-transaction.asp) to avoid regulatory detection.

After 9/11, the [USA Patriot Act](https://www.investopedia.com/terms/p/patriotact.asp) broadened [anti-money-laundering laws](https://www.investopedia.com/corporate-transparency-act-8413903), allowing tools meant for organized crime to also target terrorism and mandating reports for transactions over $10,000.

## The 3 Stages of Smurfing: Placement, Layering, Integration

[Smurfing takes place in three stages](https://www.investopedia.com/ask/answers/022015/what-methods-are-used-launder-money.asp): placement, layering, and integration. In the placement stage, 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 a sophisticated layering of financial transactions that obscures the audit trail and breaks the link to the original crime. For example, a smurf may move funds electronically from one country to another, then divide the money into investments placed in advanced financial options or overseas markets.

The integration stage is when the money is returned to the criminal. Criminals must disguise the funds to look legitimate and avoid drawing attention during the process. For example, valuables such as property, artwork, jewelry, or high-end automobiles may be purchased and given to the criminal.

## Practical Example: How Smurfing is Executed

One way criminals move money internationally is known as “cuckoo smurfing.”  Imagine a New York criminal owes a London criminal $9,000, while a London merchant owes a New York supplier the same amount.  

1.  The London merchant goes to the London Bank and deposits $9,000, with instructions to transfer the money to the New York supplier’s bank.
2.  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.
3.  The London banker then transfers $9,000 from the London merchant’s account to the London criminal’s account.

The London merchant and New York supplier don't realize the funds weren't directly transferred. All they know is that the London merchant paid $9,000 and the New York supplier received $9,000. However, if caught, the [London banker could face serious consequences](https://www.investopedia.com/ask/answers/021015/if-caught-what-implications-does-money-laundering-have-business.asp).

Another common method is structuring transactions with a group of accomplices, each with their own bank accounts. For example, a person might have $50,000 to send abroad, which would ordinarily trigger a [Currency Transaction Report](https://www.investopedia.com/terms/c/ctr.asp#:~:text=What%20Is%20a%20Currency%20Transaction,currency%20transaction%20greater%20than%20%2410%2C000.) and call attention to the source of their income. In order to avoid a CTR, that person could have ten accomplices make bank transfers of $5,000 each. Even if the money is legitimate, splitting the transaction to avoid reporting it is a crime.

> **Warning**
>
> There is no general law against handling large sums of money. However, the act of structuring transactions to evade federal reporting limits is a serious crime, even if the money is legally sourced.

## Why Is It Called Smurfing?

The name "Smurf" appears to be borrowed from illicit methamphetamine manufacturers. In order to accumulate regulated precursor chemicals, drug manufacturers will often send accomplices to make multiple purchases at multiple locations, without exceeding the legal purchasing limits.

## What Is Smurfing in Money Laundering?

In finance, Smurfing refers to the practice of avoiding regulatory scrutiny by dividing a large sum of money into multiple smaller transactions, sometimes divided into multiple different accounts.

## Why Is Smurfing Bad?

Smurfing is a form of money laundering which may allow criminal groups to move illegally acquired money into the regulated financial system.

## What Is Smurfing in Cybersecurity?

Unrelated to financial Smurfing, in cybersecurity, Smurfing refers to a Distributed Denial-of-Service Attack in which multiple servers are tricked into communicating with the target [all at once](https://usa.kaspersky.com/resource-center/definitions/what-is-a-smurf-attack). Although each contact is small, the cumulative effect is to make the target's network unusable.