Disintegrating the Illicit Funds Through Structuring in Money Laundering

Structuring in money laundering

It is no surprise that the biggest threat to economic stability is the surge of money laundering practices. Over the recent few years, various financial operations have been carried out digitally, which allows the imposters to break down large illicit funds into smaller amounts. For this reason, the money laundering risk index score of 8.25 was recorded in Haiti in 2023. 

Usually, imposters conduct illicit operations by structuring funds into smaller amounts. Structuring in money laundering is the most common practice through which illicit and unauthorized financial activities are facilitated. This blog aims to identify the different channels that are used during money laundering structuring.           

In money laundering structuring, it is the process of breaking the amounts that have been derived from the unlawful business. It is the most common operation through which imposters successfully blend illegal funds with legitimate sources. 

 

Money laundering structuring makes way for various fraudulent activities, such as terrorist financing and drug trafficking. Additionally, structuring in money laundering is often conducted through the following steps:

  • Money laundering structuring begins with the accumulation of unauthorized funds through bribery and corrupt activities. 
  • In the next step, these funds are divided into smaller portions that are slightly below the determined threshold level. 
  • Later, the imposters submit these funds to legitimate financial accounts, which masks the original source of these illegally acquired funds. 
  • Not only that, money launderers then make several transactions between various accounts, both domestically and internationally. 
  • Lastly, these funds are reused and legalized through investment in legitimate business ventures and properties. 

The Fine Line Between Smurfing and Structuring - An Analysis

In most economic structures, both structuring and smurfing are often used interchangeably. However, there is a fine line between the two as the entities involved in these operations differ from one another. Structuring in money laundering is conducted by a single entity, whereas smurfing is undertaken through multiple partners, with the funds revolving around the money laundering process.

Imposters involved in smurfing are referred to as “smurfs,” as these are the entities that are involved in multiple transactional and deposit activities. Therefore, both structuring and smurfing pose threats to the financial system due to their susceptible operations. 

Red Flags Signaling Structuring in AML

To identify and tackle the influence of structuring in money laundering, examiners are required to understand several red flags. Here is the list of several activities that show the probability of money laundering activities:

  • When the frequency and volume of financial transactions and cash withdrawals rise, it represents an inconsistent financial practice that signals money laundering. 
  • The transactional practices covering smaller withdrawals are the major identifier of money laundering practices. 
  • When transactions between multiple accounts become frequent, they are probably used for money laundering operations. 
  • As international transactions become frequent without major business motives, they must be thoroughly analyzed and examined for money laundering operations.   

Hypothetical Examples of Structuring - Understanding the Practices

The understanding of structuring in money laundering requires businesses to evaluate several hypothetical situations. For instance, an imposter coordinates with legitimate financial account holders to help them facilitate illicit fund transactions. Additionally, the legitimate entity successfully sets up a shell company to disguise the imposter’s illicit money laundering tactics. Therefore, these practices effectively hide the origin and source of illegal activities. 

Techniques Opted For Money Laundering Structuring

Structuring in money laundering is carried out through various techniques and tactics that involve the investment and purchasing of expensive art and asset purchases. Several structured real estate investments are made to conceal the money laundering structuring activities. Additionally, restaurant cash flow is also a common technique. This includes the submission of illegal funds into legitimate restaurant deposits, making money laundering detection impossible to detect.  

AML Regulations to Combat Structuring Meaning in Money Laundering

To identify the structuring of money laundering, businesses and financial institutions are required to implement several anti-money laundering (AML) regulations. AML regulations include the incorporation of a risk-based approach that involves continuous transaction monitoring through automated financial modules. 

These modules also require businesses to understand the account holder’s risk profiles through extensive PEP and sanction screening. Additionally, adverse media screening is an influential identification technique because it involves evaluation through online media channels and social media platforms. Therefore, compliance with AML regulations is crucial to facilitate risk-free business activities that lead to economic growth and stability in the long run.    

The Role of Web Development Services in Combating Structuring Tactics in Money Laundering

Web development services play a crucial role in combating structuring tactics used in money laundering. By building advanced financial monitoring systems and developing tools that analyze transaction patterns, these services help detect suspicious activities in real time. Effective web platforms allow financial institutions to track and report structuring activities, ensuring compliance with anti-money laundering regulations. With the integration of AI and machine learning, web development services enhance the ability to identify and prevent the illicit movement of funds, making it harder for criminals to exploit financial systems.

Summing It Up

Structuring in money laundering is a common practice that is undertaken by imposters for illicit operations. Imposters use different channels and accounts to conceal the source and origin of illicitly acquired funds. Additionally, imposters usually break down large monetary sums into smaller amounts that are less likely to be identified during the customer identification process. Therefore, screening against regulatory databases and continuous transaction monitoring are critical to identifying and rectifying money laundering practices. Adherence to the AML regulatory guidelines is, therefore, necessary for effective business practices. 

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