Structuring, also known as smurfing in

banking A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets. Because ...

jargon Jargon is the specialized terminology associated with a particular field or area of activity. Jargon is normally employed in a particular communicative context and may not be well understood outside that context. The context is usually a partic ...

, is the practice of executing

financial transaction A financial transaction is an Contract, agreement, or communication, between a buyer and seller to exchange goods, Service (economics), services, or Asset, assets for payment. Any transaction involves a change in the status of the finances of two ...

s such as making bank deposits in a specific pattern, calculated to avoid triggering

financial institution Financial institutions, sometimes called banking institutions, are business entities that provide services as intermediaries for different types of financial monetary transactions. Broadly speaking, there are three major types of financial inst ...

s to file reports required by law, such as the United States'

Bank Secrecy Act The Bank Secrecy Act of 1970 (BSA), also known as the Currency and Foreign Transactions Reporting Act, is a U.S. law requiring financial institutions in the United States to assist U.S. government agencies in detecting and preventing money lau ...

(BSA) and

Internal Revenue Code The Internal Revenue Code (IRC), formally the Internal Revenue Code of 1986, is the domestic portion of federal statutory tax law in the United States, published in various volumes of the United States Statutes at Large, and separately as Title 2 ...

section 6050I (relating to the requirement to file Form 8300). Structuring may be done in the context of

money laundering Money laundering is the process of concealing the origin of money, obtained from illicit activities such as drug trafficking, corruption, embezzlement or gambling, by converting it into a legitimate source. It is a crime in many jurisdicti ...

fraud In law, fraud is intentional deception to secure unfair or unlawful gain, or to deprive a victim of a legal right. Fraud can violate civil law (e.g., a fraud victim may sue the fraud perpetrator to avoid the fraud or recover monetary compen ...

, and other

financial crime Financial crime is crime committed against property, involving the unlawful conversion of the ownership of property (belonging to one person) to one's own personal use and benefit. Financial crimes may involve fraud ( cheque fraud, credit card fra ...

s. Legal restrictions on structuring are concerned with limiting the size of domestic transactions for individuals.

Definition

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. Typically each of the smaller transactions is executed in an amount below some statutory limit that normally does not require a

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

, and other

s. The term "smurfing" is derived from the image of the comic book characters,

the Smurfs ''The Smurfs'' (french: Les Schtroumpfs; nl, De Smurfen) is a Belgian comic franchise centered on a fictional colony of small, blue, humanoid creatures who live in mushroom-shaped houses in the forest. ''The Smurfs'' was first created and in ...

, having a large group of many small entities. Miami-based lawyer Gregory Baldwin is said to have coined the term in the 1980s.

Regulations

United States

In the

United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...

, the

requires

currency transaction report A currency transaction report (CTR) is a report that U.S. financial institutions are required to file with FinCEN for each deposit, withdrawal, exchange of currency, or other payment or transfer, by, through, or to the financial institution which i ...

s (CTRs) to be filed for transactions valued at more than $10,000; it applies to both U.S. and foreign currencies. Financial institutions suspecting deposit structuring with intent to avoid the law are required to file a

suspicious activity report In financial regulation, a Suspicious Activity Report (SAR) or Suspicious Transaction Report (STR) is a report made by a financial institution about suspicious or potentially suspicious activity. The criteria to decide when a report must be ma ...

(SAR). In 1986, the U.S. Congress enacted section 5324 of Title 31 of the

United States Code In the law of the United States, the Code of Laws of the United States of America (variously abbreviated to Code of Laws of the United States, United States Code, U.S. Code, U.S.C., or USC) is the official compilation and codification of the ...

, 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. The filing of Form 8300 is required under

section 6050I. Sums of money resulting from deposits of less than $10,000 may be seized after a warrant is issued based on a

. 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 ''The New York Times'' (''the Times'', ''NYT'', or the Gray Lady) is a daily newspaper based in New York City with a worldwide readership reported in 2020 to comprise a declining 840,000 paid print subscribers, and a growing 6 million paid ...

'' of arbitrary seizures resulted in modification of

Internal Revenue Service The Internal Revenue Service (IRS) is the revenue service for the United States federal government, which is responsible for collecting U.S. federal taxes and administering the Internal Revenue Code, the main body of the federal statutory t ...

(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."Law Lets I.R.S. Seize Accounts on Suspicion, No Crime Required"
article by Sahaila Dewan in ''

'' 25 October 2014

Outside the United States

Other uses

The term "smurfing" is also applied to activity associated with

controlled substance A controlled substance is generally a drug or chemical whose manufacture, possession and use is regulated by a government, such as illicitly used drugs or prescription medications that are designated by law. Some treaties, notably the Single ...

s such as

pseudoephedrine Pseudoephedrine (PSE) is a sympathomimetic drug of the phenethylamine and amphetamine chemical classes. It may be used as a nasal/sinus decongestant, as a stimulant, or as a wakefulness-promoting agent in higher doses. It was first charact ...

. 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 Methamphetamine (contracted from ) is a potent central nervous system (CNS) stimulant that is mainly used as a recreational drug and less commonly as a second-line treatment for attention deficit hyperactivity disorder and obesity. Methamp ...

. Also, since the monthly

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
broker A broker is a person or firm who arranges transactions between a buyer and a seller for a commission when the deal is executed. A broker who also acts as a seller or as a buyer becomes a principal party to the deal. Neither role should be con ...
s.

References

External links

Financial Crimes Enforcement Network ruling on structuring
{{Bank regulation in the United States Banking terms Commercial crimes Money laundering Tax evasion Civil asset forfeiture fr:Blanchiment d'argent#Méthodes de blanchiment