Smurfing

In money laundering, a smurf, or money mule, plays a key role in moving funds across multiple bank accounts. Whether knowingly or unknowingly involved, their goal is to make tracking suspicious transactions harder, as smaller deposits draw less attention than a single large one.

Smurfs divide illicit funds into small transactions during smurfing as a way to launder money without getting caught. The smurf splits the funds either digitally or physically, often working with other criminals. They launder smaller sums separately. After that, the sums can be combined into a single account if necessary. This way, the money is “cleaned” and can be used further. 

Cuckoo smurfing is a smurfing tactic, also used for money laundering, but focusing on transferring large sums of illicit cash from regulated countries with high drug prices to safe havens or drug-sourcing countries. This technique is often used by gangs that assist other criminals, often drug dealers, in moving illicit funds across borders. Using cuckoo smurfing, fraudsters get away with living the luxury lifestyle and can prepay for future drug shipments to keep the chain and process effective. This way, they also avoid paying taxes. 

A criminal organization wants to move a large sum of illicit money across borders. Instead of using a direct wire transfer, the criminals target an unsuspecting business owner involved in regular international transactions. For this to work, the criminals promise a substantial commission to help transfer the funds.

They then break the illicit money into smaller, seemingly legitimate transactions, blending them with the business owner’s (or the money mule’s) regular business activities. This makes the funds appear as part of normal trade, moving through the business owner’s accounts unnoticed. 

It has a different meaning in iGaming. Here, smurfing means that the user on an online gambling platform, such as a sports betting site, creates new, secondary accounts on purpose against the platform’s policy. 

That’s why smurfing in iGaming is also linked to fraud, such as:

• Using fraudulent tactics like bonus abuse or arbitrage betting.
• Competing against less skilled players while hiding their true skills.
• Experimenting with different outcomes without any negative effects on the main account. 

However, unlike in traditional financial sectors, smurfing in iGaming is generally not considered a criminal offense.

The Bank Secrecy Act (BSA) was updated to include USA Patriot Act requirements, mandating that all banks and other regulated entities implement a customer identification program (CIP). This update was aimed at combating money laundering schemes like smurfing, setting clear reporting thresholds and requiring financial institutions to report suspicious transactions. 

The two standard tools that companies use to detect smurfing are setting up proper Know Your Customer (KYC) processes during the onboarding process and screening customers against various AML lists, such as PEPs or sanctions. This also includes transaction monitoring or bank account verification before onboarding to check if no potential AML red flags exist and if the customer isn’t an overly high-risk entity. For ongoing due diligence, ongoing monitoring is required.