Large cash transactions are simple to flag. A string of smaller ones spread across days, branches or accounts is another matter entirely, which is why structuring remains one of the most persistent AML challenges facing banks, FinTechs and regulators.
According to AiPrise, the difficulty lies not only in spotting suspicious transactions, but in recognising the pattern that emerges when seemingly ordinary activity is viewed as a whole.
AiPrise recently put together a complete guide on what is structuring in AML and why it matters.
According to FinCEN’s FY 2024 Year in Review, financial institutions filed approximately 20.5 million Currency Transaction Reports (CTRs) and 4.7 million Suspicious Activity Reports (SARs), volumes that make pattern detection critical.
Structuring is the deliberate splitting of one large financial transaction into several smaller ones to sidestep bank reporting or recordkeeping rules. The aim is to keep the full amount from attracting attention, and it is frequently deployed to mask money laundering, tax evasion or fraud. Under US law, the practice is illegal even when each individual transaction looks entirely routine.
Smurfing is a specific variant that recruits multiple people, accounts or locations to carry out the smaller transactions, making them still harder to detect. Rather than one person depositing $30,000, three individuals might each deposit $10,000 or less at different branches or on different days. All smurfing is structuring, but not all structuring is smurfing.
The technique typically unfolds across three stages. Placement sees illicit cash enter the financial system through dozens of smaller deposits rather than a single lump sum.
Layering then moves the money through various accounts, transfers or jurisdictions to muddy the trail. Finally, integration returns the funds to legitimate use through purchases, investments or business activity, such as buying property.
Exposure is broad. Banks and credit unions process the deposits and withdrawals that give customers room to spread activity. Money services businesses handle heavy cash flows, while FinTech and payment providers process high transaction volumes across multiple channels.
Cryptocurrency exchanges face attempts to split transfers across wallets, casinos handle significant cash, and real estate offers a route to conceal funds in high-value purchases.
Red flags include transactions kept just below reporting thresholds, activity spread across days or branches, repeated small purchases of money orders or cashier’s cheques, use of third parties, inconsistent identification details, and transactions that do not match a customer’s occupation or income.
The stakes are considerable. Structuring violates the Bank Secrecy Act, whose CTR requirement obliges institutions to report cash transactions exceeding $10,000 in a single business day.
Offenders face fines and up to five years’ imprisonment, rising to ten years where larger patterns of unlawful activity are involved. Institutions, meanwhile, shoulder mounting compliance costs and reputational risk.
Prevention demands a layered approach: a risk-based AML programme tailored to products, customers and geography; robust customer due diligence and KYC checks; transaction monitoring that goes beyond simple threshold checks; link analysis to expose coordinated activity across related accounts; and strong SAR investigation and escalation processes.
Platforms such as AiPrise use AI and automation to verify identities at onboarding, surface beneficial owners, prioritise higher-risk customers and detect cross-account patterns that manual review would miss.
Read AiPrise’s full post here.
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