Structuring
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' Bank Secrecy Act (BSA) and Internal Revenue Code section 6050I (relating to the requirement to file Form 8300).[1]
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 laundering, fraud, and other financial crimes.
The term "smurfing" is derived from the image of the comic book 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.[2]
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.
Other uses
The term is also applied to activity associated with controlled substances such as pseudoephedrine[3] 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.[3] Also, since the monthly pseudoephedrine purchase limits in US are too low for mass meth production, this practice often involves using multiple "smurfs".
As Robert Pennal of the Fresno Meth Task Force explains:
Then we started seeing "smurfing." Remember how the smurfs were little gatherers? We started getting calls from different retail stores that people were buying two or three packs — that's the most you can buy — and they went to one store, they bought three, they went to another store, bought three. We're seeing blister packs everywhere because they're sitting in the car, they're punching the pills out of the blister packs, they're putting them in the freezer bags and they're turning them over to chemical brokers.[4]
United States
In the United States, 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).[5] Financial institutions suspecting deposit structuring with intent to avoid the law are required to file a suspicious activity report.[6] In 1986, the U.S. Congress enacted section 5324 of Title 31 of the United States Code,[7] which 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.[8]
Sums of money resulting from deposits of less than $10,000 may be seized after a warrant is issued based on a suspicious activity report. Legal proceedings, which may cost in the vicinity of $20,000 or more, may be required for an innocent party to retrieve his or her money. Reports in October 2014 by The New York Times of arbitrary seizures resulted in modification of Internal Revenue Service (IRS) practice to focus on investigations that "closely align" with IRS "mission and key priorities.” Banks are not permitted to warn or advise customers unless the customer asks, but sometimes bank tellers will informally warn customers.[9]
Regulatory table
 | This article needs additional citations for verification. (March 2008) |
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 controls. 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 machines 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 | AU$10,000 | Although there are no weekly or monthly limits, any parceling to evade the rules is a criminal offence.[10] |
| Brazil | varies | Depends on transaction type.[11] |
| Canada | CA$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.[12] |
| Fiji | FJ$1,100 | Individuals are subject to FJ$7,700 in a given week. Businesses engaged as investor tourism operators have no limit. |
| France | €1,000 | For French residents, starting from September 2015. |
| Germany | €15,000 | |
| Guyana | US$10,000 | |
| Ireland | €10,000 | |
| India | ₹ 50,000 | |
| Italy | €12,500 | [13] |
| Lithuania | LTL10,000 | |
| Netherlands | €15,000 | [14] |
| New Zealand | NZ$10,000 | Not applicable to the Cook Islands |
| Philippines | PHP500,000 | |
| Portugal | €10,000 | |
| Romania | €10,000 | |
| Spain | €3,000 | |
| Sweden | €10,000 | [15] |
| Thailand | US$58,000 | [16] |
| Turkey | US$50,000 | |
| United States | US$10,000 |
See also
References
- ^ Internal Revenue Service (1 June 2006). "Part IV Examining Process; Chapter 26 Bank Secrecy Act; Section 13 Structuring". Internal Revenue Manual. Washington, D.C.: US Treasury Department. OCLC 37305546. Retrieved 11 March 2008.
{{cite book}}: External link in|chapterurl=|chapterurl=ignored (|chapter-url=suggested) (help) - ^ Gross, Samantha; Barrett, Devlin (11 March 2008). "Spitzer Tripped Up on Laws He Enforced". Fox News. Retrieved 14 March 2008.
{{cite news}}: CS1 maint: multiple names: authors list (link) - ^ a b "DEA" (PDF). Justice.gov. p. 16.
- ^ "Transcript - The Meth Epidemic - FRONTLINE - PBS". FRONTLINE.
- ^ See generally 31 U.S.C. § 5313, 31 U.S.C. § 5324, 31 C.F.R. sec. 1010.311, and 31 C.F.R. sec. 1010.314.
- ^ See generally 31 C.F.R. sec. 1010.320.
- ^ See section 1354(a) of the Anti-Drug Abuse Act of 1986, Public Law No. 99-570, 100 Stat. 3207, at 3207-22 (Oct. 27, 1986).
- ^ 31 U.S.C. § 5324(d)(1).
- ^ "Law Lets I.R.S. Seize Accounts on Suspicion, No Crime Required" article by Sahaila Dewan in The New York Times October 25, 2014
- ^ Australian Transaction Reports and Analysis Centre (September 2002). "AUSTRAC Guideline No. 1: Suspect Transaction Reporting" (.PDF). Financial Transaction Reports Act 1988. Government of Australia. Retrieved 12 March 2008.
- ^ Conselho de Controle de Atividades Financeiras. "Lavagem de Dinheiro" (in Portuguese). Ministério da Fazenda. Retrieved 12 March 2008.
- ^ "Guideline 9: Alternative to Large Cash Transaction Reports to FINTRAC". fintrac.gc.ca.
- ^ Dipartimento del Tesoro. "Antiriciclaggio" (in Italian). Ministero dell'Economia e delle Finanze. Retrieved 12 March 2008.
- ^ FIU-Nederland. "Meldingen Ongebruikelijke Transacties" (in Dutch). Ministerie van Justitie. Retrieved 12 March 2008.
- ^ Europa Taxation and Customs Union (21 December 2007). "Cash controls". European Commission. Retrieved 12 March 2008.
- ^ Netipoom Maysakun. "MONEY LAUNDERING IN THAILAND" (PDF). The United Nations Asia and Far East Institute for the Prevention of Crime and the Treatment of Offenders. Retrieved 15 September 2008.
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