Client onboarding and AML

AML typologies

Learning Outcome

Smurfing

Smurfing involves breaking down a large sum of illicit money into multiple small deposits, often made by different individuals (‘smurfs’ or money mules) across different branches, accounts, or even banks. The intent is to keep each individual transaction small and unremarkable so that no single deposit draws attention or crosses a reporting threshold.

Red Flags

Many different people deposit small amounts of money into the same account.

Frequent cash deposits just below the reporting limit, often made at different branches on the same day.

An account receives many small deposits from different people without any clear business or personal reason.

Structuring

Structuring (sometimes called ‘smurfing’ in common usage, but distinct in emphasis) refers to deliberately splitting a single large transaction into several smaller transactions, specifically to stay under the regulatory reporting threshold — for instance, keeping cash deposits under the limit that would otherwise trigger a CTR filing under PMLA. Unlike Smurfing, which typically uses multiple people, Structuring usually involves one individual or entity repeatedly transacting in amounts calibrated to avoid detection.

Red Flags

The same customer makes several small cash transactions just below the reporting limit within a short period.

The customer repeatedly makes round-number transactions that appear designed to avoid reporting requirements.

The customer's transaction pattern changes suddenly after a reporting limit or threshold is introduced or announced.

Round Tripping

Round-Tripping is a technique where funds are moved out of a country — often through informal channels or shell entities — and then brought back into the same country disguised as legitimate foreign investment, such as Foreign Direct Investment (FDI) or Foreign Portfolio Investment (FPI). This allows illicit domestic funds to re-enter the economy carrying the appearance of a clean, foreign source.

Red Flags

Money is sent out and then returned to the same person or company through one or more accounts.

Funds move through multiple companies or countries without a clear business purpose.

The same amount of money returns to the original account after a series of transactions.

Transactions involve related companies or parties with little or no genuine business activity.

The movement of funds creates the appearance of legitimate business, but there is no real economic reason for the transfers.

Layering

Moving money through a complex chain of multiple accounts, shell companies, and countries, one transfer after another. Each extra transfer adds a "layer" that further separates the funds from their illegal origin. This makes the money trail too complicated for investigators to trace back to the original source.

Red Flags

Money is moved through multiple accounts or companies without a clear purpose.

Shell companies are used to hide the real owner of the funds.

Funds are transferred through different countries to make them difficult to trace.

Summary

Quiz

Which AML typology involves several individuals making small deposits into the same account?

Quiz-Answer

Which AML typology involves several individuals making small deposits into the same account?