Smurfing is when someone launders money by breaking it up into several smaller sums, hoping to evade detection. It is also known as structuring. By making many small transactions, money mules who use the smurfing method try to avoid setting off suspicious activity reporting thresholds, which would naturally raise suspicion.
A smurf is a fake online store that is used to launder money. It could be owned by a criminal or a business operating legitimately. Smurfing is a term used to refer to the practice of conducting multiple small transactions to hide the origins of funds.
For example, a person may purchase $10,000 in $500 increments to create the appearance that the transaction is smaller, when in fact the total is $10,000.
Smurfing could be used to illegally move money from one jurisdiction to another, or to avoid reporting large transactions to financial institutions. Underreporting or missing records could result in less scrutiny or no scrutiny at all.
In order to smurf, you need a handful of fake accounts, either in real life (also called “smurfing”) or on the internet, and a way to transfer money.
A real-life smurf would be someone who opens a fake bank account under a different name and then acts as if that was their only bank account. With an online smurf, the person would use a personal email under an alias, creating an account with a different email address than their own.
People involved in smurfing often use cash to avoid tracking systems and paper trails. While online currency exchanges make it easy to move large amounts of funds, they are not as anonymous as cash.
The main impacts of smurfing on ecommerce businesses are increased chances of fraud and lost revenue as a result of money laundering. Smurfing can be used to hide the true source of purchases made online, which could make your business a target for thieves.
Keeping tabs on your customers is one way to prevent this type of fraud. Smurfing could result in the loss of revenue due to missing credit card or PayPal fees. For example, if you charge customers a $100 fee and they make five purchases of just $50 each, they may be smurfing and you may be missing out on $250 in fees.
The word smurf, as in the blue cartoon people, is a slang term for a small amount of money. The term “smurfing” (as a verb) may have evolved from the word “smurf” because laundering money is referred to as “smurfing” in some circles.
The phrase “smurfing the system,” was coined by investigators as a term for skirting various anti-money-laundering (AML) and counter-terrorism finance (CTF) laws.
Smurfing is a type of fraud that can happen in online gaming. It is also known as structuring and could take place in online casinos, poker rooms, online lottery platforms, and sports betting sites.
Online gambling sites rely on funding provided by depositors to pay out players. The money is often deposited in small increments to avoid raising suspicions of the operators and to make it less likely to be detected by gaming authorities.
There are many different ways that smurfing can be used by criminals to steal money from unsuspecting people. Let’s take a closer look at some of the most common examples of smurfing in fraud.
Gamble for Credit: A person who gambles for credit might bet $1,000 on a few different games and then take out $950 in small winnings from their gaming account.
Overdraft Protection: Someone who has overdrawn their bank account might withdraw $1,000 from an ATM, but then deposit $500 of that money into another account.
Credit Card Abuse: Someone may charge a large amount of money to a credit card that has a low limit—around $2,000 or less. They then try to make up the difference by making small purchases.
The best way to prevent smurfing from happening at all is to have a strong fraud prevention strategy in place. This could involve identifying which customers are the most likely to try to circumvent the payment system, conducting an audit of your financial records, and tightening your account verification processes.
Fraud prevention strategies like these can help you identify smurfing activity, which could lead to the identification of other types of fraud, such as account takeover or identity theft. You could also use these strategies to strengthen your customer retention strategy, by identifying customers who are most likely to leave if they encounter a problem paying their bill.