Smurfing is a procedure where financial transactions are broken done into a smaller transaction to avoid investigations by authorities. This can be explained by an example:
For example, if a person wants to purchase a certain percentage of shares of a company say 20%, but the company only allows the purchase of only 5% shares by an individual. The person then smurfs by developing dummies shareholders who will purchase shares on his behalf. In this way, he is able to control the excess amount of shares, permitted by the company and for this, he doesn’t have to register these shares in his name. Such smurfing activities are considered as criminal activities and they are not legal. People also use smurfing to develop smurf deposits to deposit illegally gained money into bank accounts.
Smurfing is a criminal procedure used by criminals for money laundering for activities like extortion, smuggling of drugs and other illegal substances.
Smurfing is used for numerous purposes and ways:
- Smuggling of currency from one country to another, this money is used for buying international currency, gambling, human trafficking and other such crimes. It is known as the placement stage.
- Smurfs can transfer a large amount of money through smurfing by depositing money electronically in different accounts and then invest this smurfed money for investment in the international or overseas markets. This is also known as the layering stage.
- Then there is the integration stage where the money returns to the criminal in the form of white money or legitimate form, this can be in the form of property, artwork, jewelry or another such asset, which can be purchased or gifted or given to the criminal.
How legal authorities try to track smurfing issues. They generally look for the following indicators:
- If a person receives regular cash from countries which have a high level of corruption.
- If they gain any form of information regarding concealed or hidden transportation of cash.
- If a person occasionally receives a large amount of cash or finances in his bank account.
- If a person deposits a large amount of cash in straw accounts, or in accounts of his nominees.
Through smurfing, a group of individuals tries to put money into the system to make it look it is a legal and legitimate way of investment. It is done in such a way that it looks like any other legal organization or group of people working with white money.
Such money laundering techniques are high-risk activities globally. They are used for criminal activities which are a threat to the whole society. The networking of smurfing is so strong that it is very difficult to track and control. Through smurfing criminal use the money in illegal activities and then again gain it in the form of white and legal money through international and overseas markets. Controlling smurfing issues becomes even more difficult because smurfs operate globally across international borders. Surfing, in general, is the movement of finances and funds through criminal networks in a sophisticated manner. Sometimes surfers deposit money in accounts of other people without even their knowledge. This can be done if they get access to the bank details of that person. By the time the person gets to know about this criminal activity, the surfers transfer the deposited amount to another account or their own account in the form of white money.