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What Is Smurfing in Money Laundering?

04 July 2025
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Understanding the mechanics of money laundering is essential for any law firm. Criminals employ a variety of tactics to disguise the illicit origins of their funds, from layering via complex financial transactions to integrating funds through seemingly legitimate businesses. Among these, smurfing remains one of the most widely used methods within the placement stage; sums of cash are broken down into smaller transactions to make monitoring harder. 

This article aims to raise awareness among legal professionals about smurfing as a key money-laundering tactic and to provide practical guidance on how to detect and prevent this financial crime. We’ll explore the red flags to look for in client transactions, outline best‑practice due diligence procedures, and suggest ways in which law firms can strengthen their anti-money laundering (AML) controls.

3 Stages of Money Laundering

What Is Smurfing & How Does It Work?

Smurfing is a money laundering technique in which a large volume of illicit cash is broken down into numerous smaller transactions or deposits. By fragmenting the funds in this manner, criminals seek to introduce (“place”) their dirty money into the financial system without triggering Suspicious Activity Reports (SARs) or other mandatory disclosures.

Although Smurfing is often found in the placement stage, the first of the three recognised stages of money laundering (placement, layering, and integration), it can technically occur at any point of the money laundering process. Once placed, the smaller sums can then be layered through more complex financial means before ultimately being integrated back into the legitimate economy. 

Why Is It Called Smurfing?

The term “smurfing” is derived from the little blue cartoon characters known as the Smurfs, who are both small and numerous. In the money laundering context, each “smurf” is a low‑level operative (or mule) tasked with carrying out one or more of the many small transactions needed to keep each cash deposit under the radar.

Smurfing Example

A criminal network with £100,000 in illicit cash recruits five “smurfs,” each given £20,000 to deposit; they break their share into five £3,900 chunks (totalling £97,500) and, over two weeks, make these sub‑£10,000 deposits across different branches and accounts to avoid triggering a SAR.

Because the activity is spread across multiple people and locations, the funds can slip past automated client checks. Once in the system, the funds are then layered through shell company accounts and used to buy high‑value assets, effectively concealing their criminal origin.

What Is Cuckoo Smurfing?

Cuckoo smurfing is a method of smurfing in which a money launderer injects illicit funds into the regular, unsuspecting transactions of a legitimate third party. Rather than depositing cash directly, the launderer transfers dirty money into an account controlled by an innocent individual or business, whose genuine transactions then mask the illegal funds as they move through the financial system. This mirrors the way that cuckoo birds lay their eggs in the nests of other species of birds, making them believe that the eggs are their own! 

Why Does Smurfing Matter to Law Firms?

Smurfing is a criminal method that is particularly challenging to spot. Regulations such as the Money Laundering Regulations (MLR) 2017 require firms to monitor customer transactions for unusual patterns, file SARs under the Proceeds of Crime Act 2002, and conduct Enhanced Due Diligence (EDD) when greater scrutiny is required. However, since smurfing deliberately keeps each deposit below historic reporting thresholds, spotting clusters of small, repetitive cash movements is a key trigger for further investigation. 

Firms that fail to detect or report suspected smurfing risk severe consequences, including fines, criminal prosecution of the firm or its reporting officers, and lasting reputational damage that can undermine client trust. In the most severe of circumstances, the firm may be shut down altogether. 

What Is the Difference Between Smurfing and Structuring?

Although smurfing and structuring refer to similar activities within money laundering, they are different in their mechanics: 

  • The biggest difference between the two is that smurfing involves a larger network of criminals, usually making it more complex for legal professionals to detect. 
  • The Source of Funds (SoF) are concealed more often during smurfing, compared to structuring. 
  • Structuring doesn’t always involve illegally obtained money, whereas smurfing is strictly used to move illegal cash. 
  • Unlike structuring, smurfing largely relies on shifting funds across borders, either via digital transfers or by physically transporting cash.
 

Smurfing

Structuring

Definition

A method where illicit funds are broken into smaller amounts and deposited by multiple individuals (“smurfs”).

A broader method of dividing up large transactions to avoid suspicion or triggering a SAR.

Key Characteristic

Uses several people who make small transactions across different locations.

Can be done by one person through multiple smaller transactions.

Main Goal

To avoid suspicion and prevent triggering a Suspicious Activity Report (SAR).

To avoid scrutiny by staying under the radar of financial institutions.

Scale of Operation

Often part of a wider network using many low‑level actors to move funds.

May be used by individuals or small groups.

Example

Several people deposit £8,000 each into different banks or branches.

One person makes several £9,000 deposits to avoid detection.

Use of Third Parties

Yes - relies on multiple individuals.

Not necessarily.

Common Contexts

Organised crime, drug trafficking, or money mules.

Tax evasion, fraud, or smaller criminal operations.

Summary:

  • Smurfing is essentially a type of structuring, but specifically involves using many individuals to conduct small transactions.
  • Structuring is the umbrella term for breaking up transactions to avoid financial reporting, whether done by one or many people.

7 Red Flags of Smurfing in Money Laundering

Although smurfing is challenging to detect, there are several red flags that solicitors must be aware of:

  • High Frequency of Small Deposits Within a Short Timeframe: Multiple, sub historical‑threshold deposits, clustered in days or weeks.
  • Inconsistent or Vague Source of Funds (Sof) Explanations: Client provides unclear, changing, or implausible reasons for where the cash originated.
  • Multiple Unrelated Individuals Structuring Payments to the Same Matter: Several different “smurfs” each making small payments toward a single property purchase, for example.
  • Requests for Rapid Withdrawals or Transfers Immediately After a Deposit: “Place and move” behaviour; funds go in, then swiftly out again to other bank accounts or locations.
  • Transactions Made Across Multiple Locations: Deposits which are split between several bank branches or geographical areas to disguise patterns. 
  • Transactions Involving High-Risk Nations: Funds routed through or originating from countries with weak AML controls, such as Myanmar or Iran. 
  • Mismatches Between Client Profile and Transactions: A small‐scale business or individual suddenly handling multiple large cash deposits without a clear business rationale.

Best Practices to Detect and Prevent Smurfing

Here are some best practices to help relevant individuals stay vigilant against the risks of smurfing: 

  • Maintain an up‑to‑date Firm‑Wide Risk Assessment (FWRA) and review it at least annually or whenever your risk profile changes.
  • Strengthening the client onboarding process, including verifying consistency between verbal explanations and documented evidence.
  • Involve tiered Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD) for high‑risk clients, Politically Exposed Persons (PEPs) or transactions involving high‑risk nations.
  • Implement trusted industry technology (RegTech) for automated monitoring of client transactions and instant red‑flag alerts.
  • Set up automated systems to detect patterns of structuring (e.g. clusters of small  deposits) and generate SAR triggers.
  • Provide regular AML training for all fee‑earners and compliance staff, including updates on the latest SRA guidance as and when they become available.
  • Conduct periodic audits of your AML policies, controls, and procedures (PCPs) and record‑keeping to identify gaps and implement improvements.
  • Establish clear SAR‑filing protocols and escalation procedures, so that any red flag transaction is promptly reviewed by your Money Laundering Reporting Officer (MLRO).

What Should Firms Do if They Suspect Smurfing?

Your firm’s MLRO sits at the heart of your defence against money laundering; upon receiving any “reasonable suspicion” that funds are being smurfed, it is their duty to investigate the circumstances, decide whether a SAR must be submitted to the NCA, and ensure that no offending transaction proceeds until authorisation is granted. 

Your AML Officers must be well-informed of their responsibilities, especially since smurfing is a challenging tactic to spot; negligence can be very costly for all involved. 

PDA Legal’s AML experts offer tailored MLRO support and practical SAR‑filing workshops, ensuring that you not only understand your reporting obligations but can discharge them confidently as part of your firm‑wide AML framework.

Our Compliance Experts Can Help Your Firm Strengthen Its AML Controls

There’s no room for complacency within the regulated sector, especially considering the rising risk of money laundering and the more sophisticated strategies that criminals are adopting. However, at PDA Legal, we can help your firm stay compliant with the latest AML regulations and prevent money laundering, thanks to our wide range of AML services.

With over two decades of experience, helping over 500 legal practices, our team provides a bespoke solution for your compliance needs. For more information or to get started with us, simply get in touch today for a FREE, no-obligation consultation.

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