What type of transaction is commonly associated with money laundering?

Structuring, commonly referred to as smurfing, is a method employed in money laundering where large amounts of illicit money are broken down into smaller, less suspicious amounts. This technique is used to avoid detection by financial institutions and regulatory authorities, who are vigilant about large transactions that may signify money laundering activities. By depositing smaller sums that fall below reporting thresholds, the individual attempts to circumvent the scrutiny of regulators, making it difficult for them to trace the funds back to their illicit origin.

This practice is particularly effective in masking the source of funds since the smaller transactions can easily blend in with legitimate banking activity. Financial institutions are required to monitor and report suspicious activities, and large or unusual cash deposits can trigger alerts. Thus, structuring serves to obscure the origins of money and facilitates the laundering process.

Understanding this concept is crucial for AML compliance professionals, as it highlights a common method used by criminals to integrate illicit funds into the financial system without raising red flags.