Large cash transactions are easy to spot. But a series of smaller transactions spread across days, branches or accounts can be far harder to detect at a glance, which is why structuring remains one of the most persistent AML challenges facing banks, FinTechs and regulators alike.
According to AiPrise, the difficulty is not simply flagging suspicious transactions, but recognising the pattern that emerges when seemingly ordinary activity is viewed in its entirety.
AiPrise recently put together a complete guide on what is structuring in AML and why it matters.
According to FinCEN’s FY 2024 Year in Review, financial institutions filed approximately 20.5 million Currency Transaction Reports (CTRs) and 4.7 million Suspicious Activity Reports (SARs), volumes that make spotting hidden patterns all the more critical.
Structuring is the deliberate splitting of one large financial transaction into several smaller ones to sidestep bank reporting or recordkeeping rules. The aim is to keep the full amount from drawing attention, often to conceal money laundering, tax evasion or fraud. Under US law, the practice is illegal even when each individual transaction appears entirely ordinary.
Smurfing is a specific variant that uses multiple people, accounts or locations to carry out the smaller transactions. Rather than one person depositing $30,000 in cash, three individuals might each deposit $10,000 or less at different branches or on different days. All smurfing is structuring, but not all structuring is smurfing.
Structuring typically unfolds in three stages. Placement sees the illicit cash enter the financial system through dozens of smaller deposits rather than a single lump sum. Layering moves the money through various accounts, transfers or jurisdictions to obscure the trail. Integration then returns the funds to legitimate use through purchases, investments or business activity, such as buying property.
The risk spans any industry where money moves through regulated channels. Banks and credit unions, money services businesses, FinTech and payment providers, cryptocurrency exchanges, casinos and real estate all face exposure, with regulators expecting robust AML controls across the board.
Warning signs include transactions kept just below reporting thresholds, repeated small purchases of money orders or cashier’s cheques, the use of third parties, inconsistent identification details, and activity that does not match a customer’s occupation or income.
The stakes are high. Structuring violates the Bank Secrecy Act, under which institutions must generally file a CTR when cash transactions exceed $10,000 in a single business day. Offenders face fines and up to five years’ imprisonment, rising to ten years where structuring forms part of a wider pattern of unlawful activity. Accounts may be frozen or closed, and businesses risk investigations and lasting reputational damage.
Prevention demands a layered approach: a risk-based AML compliance programme, strong customer due diligence and KYC checks, advanced transaction monitoring that looks beyond simple thresholds, link analysis to expose coordinated schemes, and robust SAR processes.
Read AiPrise’s full post here.
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