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Criminals are always looking to stay one step ahead of the authorities, and in recent years, they've been using a money laundering scheme called “cuckoo smurfing." While the name may sound like child's play, it's actually a sophisticated method of laundering money that can affect everyday consumers without them even knowing it.
Here's what you need to know about cuckoo smurfing to make sure you don't fall prey to this activity.
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Smurfing is a money laundering technique where criminals split large transactions into smaller ones of less than $10,000 and spread these amongst multiple transactors or accountholders. Because they become many and small, those involved are sometimes referred to as “Smurfs” (just like the little blue cartoon characters).
This benefits criminals because reputable financial institutions are registered with the Financial Transactions and Reports Analysis Centre of Canada, and financial institutions must report cash transactions of $10,000 or more. They may also report suspicious transactions related to potential money laundering and/or terrorist financing.
With cuckoo smurfing, criminals use the bank accounts of multiple unwitting third-party consumers who are expecting money to come into their accounts. Only they don't realize the money deposited is from criminal activity.
The term "cuckoo" refers to the cuckoo bird, which lays its eggs in the nest of other birds, tricking them into raising its young. Essentially, criminals are trying to make the money transfer look legitimate by tricking account holders.
Many people assume they couldn't possibly be a party to cuckoo smurfing, but the reason it's popular is that they have no idea they're part of any criminal activity.
Here's an example of how it works:
- A family overseas needs to send $9,000 to their child studying in Australia to pay for their tuition and living expenses. They give the funds to a money transfer business so the money can be sent to Australia.
- The syndicate then sources money from criminal activity and deposits it into the student's Australian bank account.
- The original money that was supposed to be deposited in the student's account is then given to the criminals
- In the end, everyone gets the money owed to them, but the criminal organization has washed their funds and avoided detection. However, the student's account may be frozen because the authorities believe the cash transactions are the proceeds of a crime.
- This is only possible because the money transfer business is corrupt or part of a criminal organization.
- The innocent family is shocked as they had no idea they were unintentionally involved in a financial crime.
In the end, everyone gets the money owed to them, but the criminal organization has washed their funds and avoided detection. However, the student's account may be frozen because the authorities believe the cash transactions are the proceeds of a crime.
This is only possible because the money transfer business is corrupt or part of a criminal organization.
The innocent family is shocked as they had no idea they were unintentionally involved in a financial crime.
For the average person, cuckoo smurfing may seem more complicated than it needs to be, but that's the point. With cuckoo smurfing, innocent people are involved, making it more difficult to track down the criminals. In addition, not all financial institutions outside of Canada are required to register with FINTRAC and even worse they may be working with the criminals for a commission. This makes it even harder for the criminal activity to be detected.
Another method of money laundering is called structuring. For example, let's say a criminal organization needs to send $50,000 abroad without attracting too much attention. They could enlist 10 accomplices and transfer each of them $5,000. These small transactions are intended to avoid any FINTRAC reporting. However, this money laundering method can only go so far because if those accomplices are getting regular money transfers or making large cash deposits, their banks may become suspicious.
Cuckoo smurfing may shock people, but to criminals, it's part of the job. The goal is to mix legitimate sources of income with money from a criminal's account. Criminals or professional money launderers control many of the companies involved, so they're all in on the scheme together.
It can be challenging to detect if you're at risk of cuckoo smurfing, but there are a few steps you can take to protect yourself.
- When sending money overseas, only deal with a reputable financial institution or money service that's registered with FINTRAC. If you're accepting funds, ask your relatives to use only reputable companies in their home country.
- Watch out for too good to be true offers such as interest rates well below market prices.
- Keep an eye out for any unusual or irregular transactions that are going on with your account. For example, you should contact your financial institution if you have received unexplained deposits. They'll open up a review to look into the suspicious transactions. They'll also be able to advise you on what you can do until their investigation is complete.
Basically, if it sounds too good to be true, it probably is. Don't forget these scams can come from anywhere. They can be sent via text, email, phone or in-person. Report any suspicion of money laundering or fraud.
If you're a Scotiabank customer, call 1-800-4-SCOTIA immediately if you think you're a target of online fraud.
Money laundering can affect our safety and quality of life as the proceeds of crime come from drug trafficking and other illegal activities. While financial institutions use anti-money laundering (AML) techniques, criminals use cuckoo smurfing and structuring to avoid any reporting requirements.
Anyone who receives money overseas regularly — or irregularly — should make efforts to ensure the money is sent through a reputable company.
Remember, always monitor your bank accounts regularly and report any suspicious transactions immediately — whether you think it might be cuckoo smurfing or another common scam.
