Structuring is the practice of breaking down large sums of illicitly acquired funds into less noticeable smaller amounts. For this reason, large sums of illicit transactions are undertaken globally, which raised the cases of suspected financial transactions to 150,418 in 2023.
Additionally, structuring in money laundering is undertaken to circumvent the regulatory requirements and disguise the illicit source of funds. However, structuring is an extreme crime under federal law as it fabricates the transaction sources and uses funds for illicit purposes. All the activities associated with money laundering affect not only the financial sector but also undermine the stability of an entire economy.
This comprehensive guide provides a detailed analysis of how the structuring process works to facilitate money laundering practices and how to overcome such instances in real-time.
Comprehend Structuring in Money Laundering – A Quick Glimpse
Structuring in money laundering involves the division of illegal funds into smaller groups, mainly aimed at financing illegal financing activities. The structuring of large funds is done to avoid investigation from regulatory bodies and law enforcement agencies. The imposters spread the funds in order to adhere to the threshold levels defined by the financial authorities.
Money laundering structuring is an attempt by the imposters to disguise the origin of illegal funds and overcome the tax requirements that they may have to pay otherwise. These activities result in severe financial repercussions and a damaged organizational reputation as well.
Structuring Process – A Distorted Money Laundering Practice
The process of structuring in money laundering enables the imposters to clean their illegal funds and represent them as legitimate funds in order to conduct illicit activities. Money laundering structuring initiates the collection of funds through identity theft, bribery, and gambling. Once the funds are collected through illicit sources, they are divided into smaller groups, with each segment storing the amount under the financial threshold level.
The funds are placed into multiple financial institutions across different countries to clean their illegal cash flows. In addition, the divided funds are used to purchase valuable assets that can be sent abroad for extensive monetary gains. Lastly, they sell the assets and reintroduce the funds into the financial system as legitimate assets and cash flows, reducing the risks of being detected for suspicious activities.
Identify How Structuring and Smurfing Differ from One Another
Structuring and smurfing are similar as they are often used interchangeably. However, they both differ in terms of their complexity and execution. Smurfing involves multiple individuals spreading funds across different accounts. In contrast, structuring is often conducted by a single entity that makes several deposits below the defined threshold levels.
Structuring in money laundering does not always aim to conceal the fund’s sources, whereas smurfing always deals with illegally acquired funds. Therefore, structuring is a less sophisticated operation of money laundering as it is relatively easy to detect and backfire the illicit operations.
Examples of Structuring – Examine Various Money Laundering Practices
Structuring in money laundering can better be understood through various real-world examples. Some of the real-world structuring case scenarios are briefly discussed below:
- Imagine that instead of depositing $300,000 into a single account, an individual divides this sum and spreads it across multiple bank accounts.
- Another structuring instance occurs when a single person deposits large sums in multiple accounts over multiple days.
- Money launderers usually undertake multiple fund withdrawals from multiple bank accounts and online channels in order to avoid the screening and identification process.
Overcome Structuring Through Anti-Money Laundering Measures
The prevention of financial crimes, such as smurfing and structuring in money laundering, requires financial institutions to comply with the AML regulations. Adherence to these regulations is pivotal for maintaining the stability and integrity of the financial system. Some of these modules are as follows:
| Transaction Monitoring | AML rules stress the monitoring of transactions by examining the pattern of deposits, manipulations in account activity, and adherence to the threshold levels defined by the regulatory bodies. |
| Currency Transaction Reports (CTRs) | Financial institutions are required to file the CTR when a transaction exceeds the defined threshold. The CTR department provides excessive information on the individuals’ transaction history and the parties involved in the money laundering process. |
| AML Risk Assessment | Structuring in AML requires organizations to evaluate customers’ risk profiles by examining them against international watchlists and screening them for negative news. These lists help identify suspicious entities and the illegal operations associated with them. |
Wrapping It Up
Structuring in money laundering is an exploitative practice that harms an economy’s financial structure. These activities involve the structuring of large monetary funds into smaller sums in order to conceal their sources and origin.
To circumvent these practices, financial institutions must comply with the AML regulations to combat economic distortions and maintain financial stability. Extensive transaction monitoring and risk-assessment modules disclose the imposters’ illegal activities and ensure a stable business environment that is protected from money laundering and terrorist financing concerns.
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