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Emerging Financial Crime Trends in Money Transfer: Shells/Money Mules/Smurfing

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Abstract

With the advancement of technology, money launderers seem one step ahead of financial authorities with their daily innovations on ways to circumvent the law. They use smurfs, mules, and shells to place, layer, and integrate their ill-gotten money into the financial system. This article shall briefly discuss these means.

Introduction

Money launderers typically use methods to avoid detection and hide the real sources from where their money comes. Some of the most common methods include

  1. Smurfing: Smurfing is a money-laundering technique, a form of structuring large amounts of cash into multiple small transactions to remain below financial reporting requirements. Smurf is the term used to describe a money launderer who wants to avoid government scrutiny. Large sums of money are deposited in different banks using smaller transactions.
  2. Money Mule: A money mule is someone who transfers or moves illegally acquired money on behalf of someone else. Money mules are recruited to launder proceeds derived from criminal activities. They add layers of distance between crime victims and criminals, making it harder for law enforcement to trace money trails accurately. Some money mules knowingly support criminal activities while others are unaware of the fact that they are being used as mules. Mules may be classified into
  • Unwitting or unknowing mules: These are not aware that they are involved in a criminal scheme. They are typically recruited via romance or employment scams and made to genuinely believe they are helping someone who is acting as their romantic partner or employer.
  • Witting mules: These ignore warning signs of criminal activity or are willfully blind to the financial activity they are participating in. They generally start as unwitting mules.
  • Complicit mules: These are aware of their role as a money mule and complicit in the larger criminal scheme. They might regularly open bank accounts at various institutions to receive illicit funds or openly advertise their services as a money mule and actively recruit others.
  1. Shells: Shells or shell corporations are companies that don’t have any business activity or operations, physical operations, assets, or employees. These types of corporations are not all necessarily illegal, but they are sometimes used illegitimately, such as to disguise business ownership from law enforcement or the public. However, some other cases involve the creation of shells by fraudsters who want to hide illegal activities and/or avoid paying taxes. Many individuals do this by setting up shell companies in jurisdictions that guarantee anonymity, allowing them to make deposits and transfer money into different accounts allowing them to avoid reporting income and paying taxes to authorities
  2. Money launderers may also choose to avoid detection by:
  • Investing in mobile commodities such as gems and gold that can be easily moved to other jurisdictions
  • Discretely investing in and selling valuable assets such as real estate
  • Gambling
  • Counterfeiting