Cuckoo Smurfing instances are rising

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Dr. Apurva Joshi
Dr. Apurva Joshi
Dr. Apurva Joshi is a regular contributor on the subjects of Money Laundering and Compliance. She is a board member of Quick Heal Technology Limited.

Money laundering is generating huge money through criminal activities. These criminal activities include, drug trafficking, human trafficking, terrorist funding etc. the criminal generate a huge amount of money and make it appear as if the source is legitimate. The most common way of laundering money is through setting up shell companies. However, people usually come up with different ways and means for laundering money. One such scheme or way is known as cuckoo smurfing.

A smurf is a money launderer who steals or launders money from the government by breaking up large transaction into small transactions. This money is deposited by the launderer in the bank accounts. Cuckoo smurfing is a sort of illegal tax avoidance. This is the simplest form of money laundering for criminals. It is done to move huge sums of unlawful money from first world nations where the cost of drugs is very high to nations where the launderers can enjoy these drugs and to the nations where the drugs are sourced so that the next batch of drugs is decided and advance payment for the same is done. Criminals involved in cuckoo smurfing help other criminals to traffic cash or drugs.

Basically, in Cuckoo smurfing, the criminals hide money in the bank accounts of common and innocent men. Criminals use this technique to move their money around the globe. This is usually done with the help of corrupt internal members of a bank. Thus, this is a structured activity which makes use of a third party. Smurfing takes place in three stages. In the first stage the criminal puts the money into a financial system. The most common channel of doing this is through casinos or buying internationally currency.

In the next stage, the source of this forbidden money is separated by doing multiple sophisticated bank transactions which are unclear for the auditors. Now as the auditors find it difficult to trace these transactions, the link between money and the source is broken.

In the last stage the money is returned to the criminal. This process can be done in numerous ways. However, the process should be discreet and the source should be portrayed as legitimate source without drawing any legal attention.

For example – A criminal from Mumbai is in contact with a criminal in Malaysia and owes him $10,000 (or equivalent currency) and at the same time Malaysian importer owes $10,000 (or equivalent currency) to Mumbai exporter. The Malaysian importer goes to a bank in Malaysia and deposits $10,000 (or equivalent currency) in the bank with instructions to transfer it to Mumbai exporter’s account. The Malaysian banker in contact with the Mumbai Criminal asks him to deposit $10,000 (or equivalent currency) in Mumbai supplier’s bank account. The Malaysian banker then transfers $10,000 (or equivalent currency) from Malaysian merchant’s account to Malaysian criminal’s account. This is a serious activity and if the banker is caught, then he may face serious consequences.

The entire idea of money laundering is based on discrete movement of funds between the involved parties. This is the core skill required in money laundering. The launderers usually mask their own identity and use the identity of some other person to avoid getting cough and to smoothly transfer money. Thus, innocent people get caught in such activities and systems in which dirty money gets converted into clean money by using their accounts in way that it can’t be detected.

This is a rare but most effective and the simplest form of money laundering. The criminal network through which the money is moved is intricate. On top of it, when third get involved, it becomes very hard to detect such suspicious and unethical activities. Due to this the criminals get away easily with their laundering crime and the dirty money gets circulated all over the world which is then used by these criminals to buy assets.

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