Structuring in money laundering: How criminals try to skirt AML regulations

When financial institutions fail to adequately implement anti-money laundering (AML) measures via their platforms, it can come with pretty serious consequences, such as AML fines and penalties. In 2024 alone, we saw TD Ameritrade hit with a $3 billion penalty and asset growth cap due to AML-related crimes, while Wells Fargo was prevented from expanding into certain business areas due to its own AML deficiencies.

With this in mind, any business subject to AML requirements has a clear incentive to prevent criminals from using their platforms to launder money. That’s why it’s important to understand the different money laundering tactics that fraudsters use. One of the most common tactics is a process known as money structuring. 

Below, we explain what structuring in money laundering is and how it compares against other related strategies like smurfing. We also take a look at some of the red flags you should be on the lookout for, which may indicate an account holder is engaging in structuring. 

Then, we review the different ways a well-designed AML strategy will empower your business to identify instances of cash structuring so you can take the necessary steps to protect your business and stay compliant.

Contextualizing the stages of money laundering

When criminals make money from crime, they can have a difficult time spending it or moving it without raising suspicions. Unless they want to be stuck spending it as cash, they need a way of making it appear as though it came from a legitimate source. This process of taking “dirty” money and making it “clean” is known as money laundering.

While there are many different strategies and tactics that criminals can use to launder their ill-gotten gains, these strategies will all typically fall into one of three stages:

1. Placement: Illegal proceeds are introduced into the legitimate financial system. This is typically achieved by depositing the money into a bank account, brokerage account, or some other type of financial instrument. 

2. Layering: The source of the dirty money is obscured to make it more difficult for investigators to tie it back to the underlying crime. This often involves repeatedly transferring the money between different bank accounts, leveraging shell companies, or making payments for false invoices.

3. Integration: When the trail has been sufficiently obscured, the money is made available to the criminal via what appears to be legitimate sources.

Cash structuring is a tactic that criminals typically leverage in the first stage of a money laundering scheme: placement. This phase sets the stage for introducing illegal funds into a legitimate financial system. 

What is structuring in money laundering?

Structuring in money laundering refers to the process of splitting a single large transaction into multiple smaller transactions that fall below the reporting threshold. 

Here’s some context around why financial criminals do structuring: In the United States, the Bank Secrecy Act (BSA) requires financial institutions to file a Currency Transaction Report (CTR) whenever a customer completes a cash transaction (deposit, withdrawal, currency exchange, or transfer) of more than $10,000 in a single day. 

This is required whether the limit is reached with a single transaction or multiple transactions in a single day. The goal of these reports is to establish a paper trail for further investigation to determine whether or not the account holder may be engaging in money laundering.

Of course, criminals don’t want this paper trail to exist. To get around this, instead of making a single large transaction, they will often split it into a series of smaller transactions designed to skirt the reporting requirements. In other words, they structure their transactions to avoid detection. 

What is the difference between structuring and smurfing in money laundering?

While structuring and smurfing are sometimes used interchangeably, they’re actually distinct methods that criminals use to place funds for money laundering.

In money structuring, a criminal splits a single large transaction into multiple smaller transactions in order to avoid scrutiny and to steer clear of triggering the filing of a currency transaction report. A single criminal is responsible for making all of the transactions, typically into a single bank account.

Smurfing is similar, but with key differences. Instead of relying on a single criminal to make the deposits, smurfing involves a number of individuals (called smurfs) responsible for making the deposits. And instead of depositing all of the money into a single bank account, smurfs will usually make deposits into a number of different accounts located at different financial institutions. Sometimes, but not always, this may involve the use of fake or stolen identities, used for synthetic fraud. 

Once they’ve deposited the money, the smurfs may then move funds between accounts — including across borders. With this in mind, smurfing accomplishes everything that structuring does, while also serving to obscure the true source of funds (SoF). 

The table below highlights some of the key similarities and differences between structuring and smurfing:

How does money structuring work?

Money laundering often follows familiar patterns, but criminals get creative. They break up large cash amounts into smaller transactions to avoid detection, and layer them across time, people, or accounts. Structuring doesn’t just happen at banks either. It can show up in casinos, money service businesses, and even real estate deals.

The core goal is the same in every case: to introduce illicit funds into the financial system without setting off alarms. But financial institutions are trained to spot these patterns, especially when deposits are regular, just below reporting limits, or out of line with a customer’s profile. What might look like everyday banking behavior on the surface can reveal a deliberate attempt to avoid scrutiny when you connect the dots.

Money laundering structuring examples

Consider this example of how money structuring works in practice: Let’s say someone wants to launder $100,000 in drug profits. Instead of walking into a single bank and raising suspicion, they might recruit friends or paid “smurfs” to deposit $9,000 each at different branches. Or they might buy multiple money orders just under reporting thresholds, then funnel those into shell company accounts.

Here are common structuring examples that appear in real-world money laundering:

• Multiple small cash deposits just under $10,000 across different days or financial institutions

• Use of smurfs to make same-day deposits at multiple institutions or ATMs

• Frequent cash deposits followed by immediate wire transfers to other countries

• Purchase of money orders or cashier’s checks in small amounts from various locations

• Converting cash to chips in casinos, then cashing out without gambling

• Making small loan repayments in cash to structure criminal proceeds into legitimate accounts

• Breaking payments across several business accounts, especially when using front companies

Each of these methods is designed to stay below the radar, but strong AML monitoring and suspicious activity reporting (SARs) helps businesses spot and investigate structuring patterns more quickly.

AML penalties related to financial structuring

Individuals who are caught structuring their deposits to avoid reporting requirements can face significant legal repercussions, including a fine of up to $250,000 and a prison sentence of up to 5 years. In aggravated cases — which involve transaction totals over $100,000 in a twelve month period or structuring conducted in tandem with other crimes — these penalties can be doubled.

Banks and other financial institutions that fail to adequately prevent, detect, and report structuring can also face severe penalties — most notably fines, which are calculated based on the severity of the infraction. 

Employees and executives at these institutions can also face jail time if it is discovered that they willfully or knowingly allowed conditions to exist that make it easier for individuals to engage in structuring. Finally, regulators can impose a variety of different actions against institutions, including asset caps or other limits. 

Strategies to detect and inhibit currency structuring

In the United States and around the world, AML laws and regulations require financial institutions to implement a risk-based approach to prevent criminals from using their platforms to launder money. Reaching compliance means having a plan in place to detect and mitigate both currency structuring and smurfing. Some strategies that can help you achieve this include:

Transaction monitoring 

Transaction monitoring — the process of monitoring customer transactions for suspicious activities, such as structuring money — is a key component for any AML program. 

It can be difficult to detect structuring in money laundering, but there are some red flags that you can look out for that may indicate a customer is trying to structure their transactions. Some actions you’ll want to monitor are when a customer: 

• Makes a series of back-to-back transactions right below the reporting threshold 

• Makes an unusually large number of large cash transactions in a short period of time

• Visits multiple bank branches or ATMs within a single day or week to make deposits

• Routinely visits a bank branch or ATM far from their home or place of business while engaging in cash transactions

• Cannot explain the source of funds if asked

• Specifically asks to be exempt from reporting requirements

• Opens multiple accounts with the same financial institution in an effort to skirt reporting requirements

• Closes an account or allows it to go dormant after a flurry of activity

• Shares account details (such as address, email address, or other contact information) with other account holders for structuring deposits

• Transfers money to suspicious accounts or accounts held in high-risk countries shortly after making a cash deposit

• Engages in transactions (types and volume) that don’t match what is typical for their customer profile

• (For business accounts) Deposits an unusually large amount of cash for their business type, and what you know about their business

The Federal Financial Institutions Examination Council (FFIEC) maintains a comprehensive list of red flags that may indicate money laundering, including those discussed here. 

Suspicious activity reports (SARs)

If you detect suspicious activity like the examples listed above, you are required by law to file a suspicious activity report (SAR) with the Financial Crimes Enforcement Network (FinCEN). The FinCEN will then investigate the incident to determine if it is related to money laundering or other financial crimes. 

This report should contain:

• Account holder information: The name, Social Security number, date of birth, address, and phone number of all account holders related to the suspicious activity

• Transaction details: Including the date that the transaction took place, and documentation of exactly what took place and why it raised flags

• Financial institution information: Including the name of the organization’s AML officer and the organization’s contact information

Generally speaking, your organization should file an SAR as soon as possible after the event. However, in most instances, you will have 30 days from when the suspicious activity is detected to file the report — or up to 90 days, if you need to collect more evidence. 

Keep learning: Social Security number (SSN) verification: What it is and why it matters

Link analysis 

Criminals will often leverage multiple accounts within the same financial institution to launder money — whether it’s a single person holding multiple accounts or a number of people engaging in smurfing. That’s why it’s important to understand how different accounts are connected to one another so that you can determine if there are any suspicious links that may indicate fraud. This is where link analysis can be a powerful tool. 

Link analysis is a data science technique that can be used to understand how accounts in your database are connected to one another. When accounts are connected, link analysis makes it possible to evaluate whether these connections are normal and expected, or if they are suspicious and potentially fraudulent. 

For example, let’s say you identify a group of accounts that share certain details that normally would not be shared by multiple accounts — information like addresses, phone numbers, device or browser fingerprints. 

By identifying these accounts, you can perform a more thorough investigation to understand if there is a legitimate reason that these details are shared. If no legitimate reason can be uncovered, then it is possible that the accounts are a part of a fraud ring engaged in illegal activities like currency structuring. 

Link analysis can also be used to evaluate transactions between accounts, which can be particularly helpful in identifying smurfing and layering. 

Get AML compliance right and prevent suspicious structuring activities with Persona

To build a successful AML program for your business, you first need to understand how money laundering tactics like structuring and smurfing work. Armed with this knowledge, you’ll be better equipped to assess the risks that your business is subject to and form a plan to mitigate those risks. 

While AML can be complicated, there’s good news. Having the right AML tools and software in place means that compliance doesn’t have to feel like an uphill battle. 

With Persona’s flexible suite of identity tools, for example, you’ve got a comprehensive platform with solutions to help with every aspect of AML, including:

• Know Your Customer (KYC): Pick and choose the specific identity verification methods you need for your KYC program, including government ID verification, database verification, selfie recognition, and more.

• Customer Due Diligence (CDD): Leverage additional risk reports — such as watchlist screenings, sanctions list screenings, PEP reports, adverse media reports, and more — to get a clearer sense of the different risks posed by your customers.

• Suspicious activity reporting: Investigate suspicious structuring activities and automatically file SARs from our central case management platform.

• Link analysis: Understand how customer accounts are connected — for example, to identify potential instances of smurfing — via our link analysis tool, Graph.

Ready to learn more about how Persona can help you prevent structuring in money laundering? Start for free or contact us for a demo today.