Table of Contents
What is Structuring?
Structuring, or colloquially known as smurfing, refers to a white-collar crime in which a criminal looks to avoid scrutiny and investigation by dividing large transactions into sets of smaller transactions all below the reporting threshold. In short, structuring is a money laundering technique that allows criminals to hide their black money from regulators.
The term “smurfing” reportedly comes from Smurfs, the famous comic book characters. The connection to structuring is that small figures live in a big community.Lawyer Gregory Baldwin coined the term in the 1980s
Money laundering occurs across a global network of financial criminals. The United Nations estimates that the money laundering transactions account for $800 million to $2 trillion annually. In this article, the Zero Theft Movement will take a look at how structuring works in money laundering schemes and discuss current protections against this white-collar crime.
The Zero Theft Movement is a crowdfunded effort to fight against the rigged economy and crony capitalism with hard proof gathered through citizen-led investigation. As a distributed organization, we firmly adhere to our policy of one-citizen-one vote. Regardless of who you are, how much you donate, or what company you work for or represent, you get one vote per investigation.
Understanding the Money Laundering Process
Money laundering has three stages: placement, layering, and integration. Structuring can take place throughout the process, and can be combined with other laundering strategies. Furthermore, in reality, there is often an overlap in these three stages of money laundering. Sometimes criminals can bypass the placement stage to enter the black money into the financial system.
After the criminal has illegally profited through theft, bribery, corruption, or other means, they need to start laundering the money. The black money first goes through the placement stage, wherein financial criminals inject the funds into legitimate financial systems.
Criminals might set up an offshore bank account in countries with secrecy laws, for example. Some nations have banking provisions on privacy, which ensure customers (and criminals) have a high degree of secrecy. Financial criminals would likely start the smurfing scheme here, spreading the illegal profits across multiple accounts.
During the layering stage, financial criminals distance the funds from their source by sending them electronically to shell companies and/or banks around the world. Complex schemes will involve money going through multiple ‘layers’ or filters to ‘clean’ the money. The audit trail can become so byzantine and obscure that investigators/regulators cannot track these funds to the original source.
The final stage of money laundering is called integration. This process enables financial criminals to use the black money to purchase major investments (e.g., property, jewelry, automobiles, etc.). Of course, anyone who integrates the cleaned money must have a plausible explanation for its source. You could, for example, cook the books of one of your shell companies to account for the funds.
By the time the funds reach this point, it has become extremely difficult to differentiate between the criminal’s legal and illegal wealth. They can use the money with little fear of detection. Any trail or evidence cannot really be followed due to the many layers of obfuscation.
How Structuring Works
To get a bit more into the weeds, let’s take a look at a hypothetical example of how structuring works.
Company X has approximately made $100 million net profits through legal activity. Nevertheless, its executives do not want to reduce the amount of taxes they have to pay. They devise a plan to split up a portion of the money and deposit it into different banks.
But the executives want to take extra precautions with their structuring scheme. They decide to add another layer to obscure the money further by filtering sub-$10,000 deposits through a bunch of shell companies and offshore accounts. The money goes through numerous electronic transfers, obscuring the trail and source. Eventually, the executives decide to integrate the money back into the system by purchasing expensive gifts to be shared among themselves.
An Alleged Case Involving Smurfing
The Financial Crimes Enforcement Network (FinCEN) reported on a 2008 court case allegedly involving structuring. The Agency states:
“Over the course of multiple years, the defendant and co-defendants submitted millions of dollars worth of false and fraudulent claims to Medicare on behalf of Medicare recipients, resulting in their actual receipt of more than $2 million from the Medicare program.
The defendant bribed physicians, who were charged as co-defendants in the federal indictment, to verify that Medicare beneficiaries needed the medical equipment. The physicians have admitted that at least half of those claims were fraudulent…The jury also found the defendant guilty of more than a dozen counts of structuring currency transactions to evade the federal reporting requirements. The defendant made a series of cash withdrawals of $10,000 or less, in order to evade the federal requirement for filing a CTR [currency transaction report].”
Protections against Structuring & Money Laundering
While structuring allows financial criminals to launder their dirty money, governments around the world have established regulations and other security measures to combat money launderers. Nations have even collaborated to collectively prevent these schemes. For example, the Group of Seven (G-7) formed the international authority known as the Financial Action Task Force (FATF) in 1989, to eradicate global money laundering networks.
Domestically speaking, the U.S. has three major legislation to prevent money laundering:
The BSA mandates that banks must report any deposits, withdrawals, or currency exchanges exceeding $10,000. In general, financial institutions must also document any dubious dealings on a suspicious activity report (SAR), regardless of the amount involved.
It wasn’t until 1986, however, that money laundering was criminalized. Congress passed the Money Laundering Control Act, which prohibits individuals from financial transactions with profits generated from “specified unlawful activities” (SUAs).
Lastly, the Patriot Act came about in the wake of 9/11 and expanded the investigative tools used to prevent terrorism (often funded by laundered money).
Smurfing, or structuring, can lead to considerable issues that end up hurting citizens across the globe. These financial crimes fund profiteering and kleptocracies, leaving innocent people with pennies. Nationally speaking, we’ve had significant issues properly regulating the use of shell companies. It was, at one point, supposedly harder to get a library card than to set up a shell company.
Congress has recently shaped up and passed a provision to ban anonymous shell companies in the 2020 National Defense Authorization Act. For Americans, the main concern we should continue to have with money laundering is ‘missing’ tax money. The nation is already deep in debt, and those lost billions could be going towards improving the quality of and access to federal programs and support to underserved communities.
While the problem might appear much bigger than you can handle, the Zero Theft Movement provides the powerful tools for you to help your fellow citizens. We have created the only platform where you and your fellow citizens can systematically and democratically determine the rigged areas of the U.S. economy. Many of us could be losing money every year because of broken legislation, corrupt lawmakers, and predatory corporations. It’s up to us to protect ourselves.
Through our software, you decide whether (1) theft is or isn’t occurring in a specific area of the economy, and (2) how much is being stolen or possibly saved. Through direct democracy, we can collectively decide where the problem areas are and start working on addressing them systematically.
The Zero Theft Movement does not have any interest in partisan politics/competition or attacking/defending one side. We seek to eradicate theft from the U.S economy. In other words, how the wealthy and powerful rig the system to steal money from us, the everyday citizen. We need to collectively fight against crony capitalism in order for us to all profit from an ethical economy.
Terms like ‘steal,’ ‘theft,’ and ‘crime’ will frequently appear throughout the article. Zero Theft will NOT adhere strictly to the legal definitions of these terms (since congress sells out). We have broadly and openly defined terms like ‘steal’ and ‘theft’ to refer to the rigged economy and other debated unethical acts that can cause citizens to lose out on money they deserve to keep.