Money laundering is generation of 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. Cuckoo Smurfing is one of the ways.
Definition of a Smurf
A smurf is a money launderer who steals or launders money to avoid regulatory inspection by splitting large transaction into small transactions. This money is deposited by the launderer in the various bank accounts. Cuckoo Smurfing is a sort of illegal Tax Avoidance. This is the simplest form of money laundering for criminals. The main aim is to move huge sums of unlawful money from first world nations to nations where the launderers can enjoy these drugs. It is because the cost is high or drugs are banned in first world nations. Hence they are moved to the nations where the drugs are sourced so that the next batch of drugs is decided. The decision is taken and advanced payment for the same is done. Criminals involved in Cuckoo Smurfing help other criminals to traffic cash or drugs.
Stages of Cuckoo Smurfing
Basically, in Cuckoo Smurfing, the criminals conceal illegal funds in the bank accounts of common and innocent men. Criminals use this technique to move their money around the globe. Here criminal takes 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. Let us explain with example. Suppose a criminal SK residing in Canada has an obligation to pay $10,000 to his drug dealer MJ in Sydney. At the same time AJ a working woman from Sydney wants to send money i.e. $10,000 to her sister MK in Canada.
Stage 1- Transaction Matching
In the first stage the criminal place the funds into a financial system. Here SK will deposit the money with the help of corrupt bank officer. But this money will not be deposited in his own account. The corrupt bank officer in Canada will wait till the amount of transaction is met for another account holder whose is supposed to get remittance from Sydney for the same amount i.e. MK.
Stage 2- Transfer of Funds
In the next stage, the source of this forbidden money is separated by doing multiple sophisticated bank transactions which are unclear for the auditors. In our case the Canadian bank officer will come to know from his Sydney counterpart about AJ transferring $10,000 to MK in Canada. That’s the time when Canadian bank officer will instruct SK to transfer the funds in MK’s account and Sydney counterpart to divert the funds from AJ’s account to MJ’s one.
Stage 3-Completion of Transaction
In the last stage the funds get deposited to the criminal account. 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. In our example AJ and MK are used to launder $10,000 without them realizing about it. MK will never come to know that the money she received is from criminal and AJ will never come to know that the money she sent was to the criminal.
Concluding Cuckoo Smurfing
The entire idea of money laundering is based on discreet 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 caught 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.