Structuring
 | The examples and perspective in this article deal primarily with the United States and do not represent a worldwide view of the subject. (October 2014) |
Structuring, also known as smurfing in banking jargon, is the practice of executing financial transactions such as making bank deposits in a specific pattern, calculated to avoid triggering financial institutions to file 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). Structuring may be done in the context of money laundering, fraud, and other financial crimes. Legal restrictions on structuring are concerned with limiting the size of domestic transactions for individuals.
Definition
[edit]Structuring is the act of parceling what would otherwise be a large financial transaction into a series of smaller transactions to avoid scrutiny by regulators and law enforcement.[1] 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 may employ several agents ("smurfs") to make the transaction. Structuring 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][3]
Regulations
[edit]United States
[edit]In the United States, the Bank Secrecy Act requires currency transaction reports (CTRs) to be filed for cash transactions involving coin or paper money valued at more than $10,000; it applies to both U.S. and foreign currencies.[4] Contrary to popular misunderstanding, it does not apply to checks or electronic transactions.[5] Financial institutions suspecting deposit structuring with intent to avoid the law are required to file a suspicious activity report (SAR).[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] The filing of Form 8300 is required under Internal Revenue Code section 6050I.[9]
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.[10]
Outside the United States
[edit]| 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.[11] |
| Brazil | varies | Depends on transaction type.[12] |
| 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.[13] |
| Germany | €15,000 | €10,000 for goods deals.[14] |
| Ireland | €10,000 | Per the 4th EU Anti-Money Laundering Directive (2017)[15] |
| Italy | €12,500 | [16] |
| Netherlands | €15,000 | [17] |
| Sweden | €10,000 | [18] |
| Switzerland | CHF 15,000 | Under Switzerland's self-regulatory approach, banks through the Swiss Bankers Association set and enforce their own due diligence rules under Art. 25 AMLA supervision.[19] Their code requires customer verification for cash transactions exceeding CHF 15,000 to prevent structuring of payments.[20] Merchants face a higher threshold, requiring customer identification for cash transactions above CHF 100,000, including when multiple related transactions reach this amount.[21] |
| Thailand | US$58,000 | [22] |
Other uses
[edit]The term "smurfing" is also applied to activity associated with controlled substances such as pseudoephedrine.[23] 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.[23] 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.[24]
See also
[edit]References
[edit]- ^ Linn, Courtney J. (2010). "Redefining the Bank Secrecy Act: Currency Reporting and the Crime of Structuring". Santa Clara Law Review. 50 (2): 407–513.
- ^ Gross, Samantha; Barrett, Devlin (11 March 2008). "Spitzer Tripped Up on Laws He Enforced". Fox News. Archived from the original on 22 March 2008. Retrieved 14 March 2008.
- ^ Nestmann, Mark (11 November 2014). "Anti-Smurfing Statute and Structuring". The Nestmann Group. Retrieved 16 September 2024.
- ^ 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.
- ^ Federal Financial Institutions Examination Council (February 2021). "BSA/AML Examination & Compliance Manual" (PDF). Federal Financial Institutions Examination Council. Retrieved 7 March 2024.
- ^ 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 (27 October 1986).
- ^ See 31 USC section 5324(d)(1).
- ^ 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.
- ^ "Law Lets I.R.S. Seize Accounts on Suspicion, No Crime Required" article by Sahaila Dewan in The New York Times 25 October 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. Archived from the original (.PDF) on 19 November 2016. Retrieved 12 March 2008.
- ^ Conselho de Controle de Atividades Financeiras. "Lavagem de Dinheiro" (in Portuguese). Ministério da Fazenda. Archived from the original on 3 July 2007. Retrieved 12 March 2008.
- ^ "Guideline 9: Alternative to Large Cash Transaction Reports to FINTRAC". fintrac.gc.ca. 17 April 2009.
- ^ "§ 10 GwG - Einzelnorm". www.gesetze-im-internet.de. Retrieved 26 May 2019.
- ^ "Annual Report on Money Laundering and Terrorist Financing 2014" (PDF). Archived from the original (PDF) on 10 September 2016.
- ^ Dipartimento del Tesoro. "Antiriciclaggio" (in Italian). Ministero dell'Economia e delle Finanze. Archived from the original on 15 March 2008. Retrieved 12 March 2008.
- ^ FIU-Nederland. "Meldingen Ongebruikelijke Transacties" (in Dutch). Ministerie van Justitie. Retrieved 12 March 2008.
- ^ Europa Taxation & Customs Union (21 December 2007). "Cash controls". European Commission. Retrieved 12 March 2008.
- ^ "Federal Act on Combating Money Laundering and Terrorist Financing (Anti-Money Laundering Act, AMLA) Art. 25". Swiss Federal Council. 1997. Retrieved 7 March 2024.
- ^ "Agreement on the Swiss banks' code of conduct with regard to the exercise of due diligence (CDB 20, Art. 4(2)(g))" (PDF). Swiss Bankers Association. 2020.
- ^ "Federal Act on Combating Money Laundering and Terrorist Financing (Anti-Money Laundering Act, AMLA) Art. 8a". Swiss Federal Council. 1997. Retrieved 7 March 2024.
- ^ 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. Archived from the original (PDF) on 20 March 2009. Retrieved 15 September 2008.
- ^ a b "DEA" (PDF). Justice.gov. p. 16. Archived from the original (PDF) on 17 October 2010.
- ^ "Transcript – The Meth Epidemic". Frontline – PBS.
