Structuring Money Laundering: How Criminals Stay Below the Radar

In today’s increasingly digitized financial ecosystem, money launderers have evolved alongside compliance systems. One of the most deceptive methods in their playbook is structuring—also known as smurfing. Structuring is a money laundering technique used in financial crimes, involving multiple transactions across several bank accounts to disguise financial transactions and avoid detection by authorities. While seemingly innocuous on the surface, structuring poses a significant threat to the integrity of financial institutions and challenges compliance officers tasked with spotting illicit flows of money before they disappear into the system.

This blog unpacks how structuring works, why it’s so effective, and what businesses can do to detect and stop it—especially with the help of Bynn’s AI-powered transaction monitoring and biometric KYC/KYB solutions.

What Is Structuring (Smurfing) in Money Laundering?

Structuring is a method used to bypass financial reporting requirements by breaking down large sums of money into smaller transactions. Structuring involves the deliberate organization of structuring transactions to conceal illegally obtained money or illegal funds. These smaller amounts fall below the mandatory reporting thresholds—making them appear routine, legal, and unthreatening.

Criminals often employ “smurfs”—networks of individuals or mule accounts—to deposit or transfer these smaller sums across various accounts and institutions. Structuring and smurfing are money laundering techniques that use multiple deposits, sometimes into the same account, to avoid detection. By avoiding patterns that appear overtly suspicious, they effectively place illicit funds into the financial system with a low risk of triggering compliance alerts.

Example:

Instead of depositing $50,000 at once, a smurf might deposit $9,900 into five different banks across several days, each one beneath the $10,000 reporting threshold. These multiple cash deposits are often carried out by junior money launderers or low level financial criminals, and in more sophisticated schemes, the illicit funds may be routed through offshore bank deposits or converted into foreign currencies to further obscure their origin.

Why Structuring Is Dangerous

Structuring isn’t merely clever—it’s strategically dangerous. By disguising criminal profits as legitimate income, it enables the entire laundering process to begin. Structuring is a criminal offense often linked to organized crime and other criminal activities, and can be used to avoid tax obligations, compliance regulations, or conceal a monetary bribe.

More importantly, it can go undetected for months—sometimes years—before an audit or investigation catches on. Those who engage in structuring risk serious legal repercussions, including prosecution for criminal offenses and penalties for failing to pay taxes.

Key Risks:

• Facilitates criminal activity: From narcotics to terrorism, structuring often finances serious crimes.
• Undermines regulatory oversight: Launderers exploit loopholes in outdated or siloed systems.
• Financial institutions bear the burden: Fines, lawsuits, and loss of public trust follow when institutions fail to detect structured transactions.
• Destabilizes financial markets and enables financial crime: Structuring allows laundered money and illegally obtained funds to enter the legitimate economy, often through cash intensive businesses. This process undermines the stability of financial markets and contributes to the broader problem of financial crime.

Real-World Examples of Structuring

Structuring has been at the center of several major regulatory enforcement actions:

• Wachovia Bank (U.S.): Fined $160 million for failing to detect structured transactions tied to drug cartels.
• Commonwealth Bank (Australia): Found to have allowed thousands of structuring incidents through smart ATMs, resulting in a massive AU$700 million penalty.
• HSBC (Global): Faced reputational fallout when structured deposits linked to laundering operations slipped through due to oversight gaps.

When a financial institution suspects structuring, it is required by government agency regulations—such as those enforced by the Financial Crimes Enforcement Network (FinCEN)—to engage in suspicious activity reporting. If suspicious transactions or suspicious patterns are detected, the institution must file a suspicious activity report (SAR) with FinCEN. This process ensures that potential financial crimes are promptly reported and investigated, helping to prevent further illegal activity.

These cases show how structuring can severely damage even the largest and most sophisticated institutions.

How Structuring Evades AML Systems

Traditional Anti-Money Laundering (AML) systems often focus on individual transactions, flagging large or anomalous activities. Structuring bypasses this by spreading risk thinly across time, space, and people. Criminals intentionally structure transactions to avoid triggering automated reporting systems, making it essential for financial institutions to invest in AML compliance, AML compliance software, and AML compliance platforms that can detect structuring and suspicious behavior.

To effectively combat these tactics, advanced systems are needed to trigger automated reporting systems when suspicious activity is detected.

Common Weak Points:

• Threshold blindness: Systems only flag what exceeds preset limits.
• Siloed account views: Lack of holistic customer profiling means behavior across multiple accounts goes unnoticed. Criminals often use multiple bank accounts or several bank accounts to spread multiple transactions and avoid detection.
• Static rule-based engines: Legacy AML tools struggle to adapt to dynamic and evolving laundering strategies.

Robust identity verification is essential to link suspicious activity across different bank accounts and prevent criminals from exploiting these weaknesses.

Detecting Structuring on Financial Systems with AI and Data Analytics

Detecting structuring requires more than rules—it demands insight. That’s where artificial intelligence excels. AI-powered systems are designed to detect suspicious activities and money laundering activities in compliance with AML regulations and other compliance regulations.

Bynn’s AI-powered systems can:

• Identify cross-account behavior that suggests coordination among seemingly unrelated users.
• Use biometric verification to detect repeat individuals using different identities.
• Apply geographic pattern recognition, revealing suspicious transaction dispersal across regions.

These features help monitor financial transactions for signs of structuring.

Unlike rigid rule-based systems, Bynn’s machine learning models learn what structuring looks like based on real-world patterns, continuously updating their detection logic.

Features in Action:

• Real-time alerts on clustered transactions
• Behavioral modeling over time, identifying suspicious patterns and multiple transactions indicative of structuring
• Velocity checks for deposit/withdrawal activity

These tools drastically reduce false positives while enhancing detection of subtle laundering attempts.

Regulatory Requirements for Detecting Structuring

Structuring is not just unethical—it’s illegal in most jurisdictions. Regulatory bodies mandate that financial institutions proactively monitor for structuring and report suspicious activity. Financial institutions are required to report structuring, comply with AML regulations, and adhere to counter terrorist financing requirements as part of their legal obligations.

Global Standards:

• U.S. (FinCEN): Requires Currency Transaction Reports (CTRs) for transactions over $10,000 and Suspicious Activity Reports (SARs) for suspected structuring. Financial institutions must engage in suspicious activity reporting to the relevant government agency when they detect structuring or other suspicious transactions, ensuring proper report structuring for compliance.
• EU (AML Directives): Obligates institutions to monitor patterns over time, not just single transactions.
• FATF (Global): Emphasizes a risk-based approach, urging members to apply enhanced measures in high-risk scenarios.

Institutions failing to meet these requirements risk not only financial penalties but also license suspension and criminal charges.

How Bynn Helps Businesses Stay Compliant

Bynn’s platform was purpose-built for today’s complex AML environment, offering seamless compliance features integrated into a single solution. Bynn’s AML compliance platform and AML compliance software are designed to help businesses meet compliance regulations, detect financial crime, and prevent money laundering schemes.

Bynn’s Structuring Defense Toolkit:

• Automated alert generation for suspected structuring attempts.
• Biometric-backed KYC and KYB checks, tying transaction data to real user identities, enabling robust identity verification to detect suspicious behavior and suspicious activities.
• Risk dashboards that combine transaction volume, velocity, and behavioral insights in one place.
• Audit-ready compliance trails, making SAR generation efficient and regulator-approved.

By monitoring both user behavior and transaction flows in tandem, Bynn provides a 360° defense against structuring and other laundering schemes.

Best Practices to Prevent Structuring

A proactive approach is your best defense. Transaction monitoring is essential to detect multiple deposits and prevent structuring and smurfing, as these money laundering techniques involve splitting large sums into smaller transactions to evade detection. Here’s what businesses should implement:

• Implement robust transaction monitoring systems to identify suspicious transactions and suspicious activity.
• Set clear policies and procedures for reporting unusual or large transactions.
• Train staff to recognize signs of structuring, smurfing, and other money laundering tactics.
• Regularly review and update anti-money laundering (AML) compliance programs.

Enhanced Due Diligence (EDD)

Apply deeper screening and verification for high-risk customers or entities, as enhanced identity verification is crucial for identifying high risk customers. This may include document re-verification, biometric matching, and source-of-funds analysis.

Velocity & Volume Monitoring

Track not just how much money moves, but how fast and how often—monitoring for multiple transactions and suspicious patterns is key to identifying structuring. Structured activity often reveals itself through repetitive or patterned actions.

Ongoing KYC Refresh Cycles

Static identity data becomes stale quickly. Set intervals for re-verifying customer identities, as ongoing identity verification is required to meet compliance regulations, especially when risk profiles change or transaction behaviors spike.

Educate Compliance Teams

Training your AML staff on new structuring methods—especially those involving crypto wallets, fintech apps, or cross-border rails—is essential, as ongoing education is crucial for AML compliance, adhering to AML regulations, and detecting financial crime.

Smarter Monitoring, Safer Business

Structuring thrives on invisibility—on going unnoticed, undetected, and unchallenged. But with the right tools, that invisibility can be shattered. Effective transaction monitoring and AML compliance software are essential to detect suspicious activity and prevent money laundering activities.

Bynn empowers businesses to spot patterns, analyze behavior, and make informed compliance decisions in real time. From biometric onboarding to AI-powered monitoring, every piece of the platform is engineered to reveal what others miss.

If your institution is serious about AML, it’s time to stop playing catch-up. It’s time to stay ahead.

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