Cuckoo Smurfing Definition
Cuckoo smurfing is comparatively a simple and easier method of Money Laundering. In cuckoo smurfing, the money launderers, disguises their illicit money in the bank accounts of legitimate customers through identity theft, ATO Fraud and other unauthorized access to the customer’s credentials. The term cuckoo smurfing is used because it is similar to the basic nature of a cuckoo bird that has a habit of laying eggs in other species nests where those birds take care of these eggs thinking them of their own.
Similarly, in Cuckoo Smurfing, the Money Launderers use legitimate customer’s account who are mostly, unaware of the misuse of their account for criminal proceeds being deposited and transferred. This not only poses a serious threat to the overall economy but also jeopardizes the credibility of the customer and bank’s relationship. Regulatory authorities might also hold the wrong customer accountable and prosecute him for money laundering.
Cuckoo Smurfing Method Explained
Basically, there are 6 elements of Cuckoo Smurfing explained in a guide by AUSTRAC published in 2021.
When the value is transferred internationally without the physical movement of funds
Breaking the large amount of funds into smaller & non-detectable amounts that are deliberately kept below the reporting threshold.
Also Read: What is Smurfing in Money Laundering?
3 Smurf / Third Party Agent
The individuals operating on the behalf of crime syndicate who steal the credentials of legitimate customers for depositing the illegal cash in them. Mostly, smurfs are the trusted agents who exploit the identities of real customers for money laundering gains.
4 Ordering Customer
When the money is transferred in to the customer’s account, it is called ordering customer.
A beneficiary is receiver of the payments who is expecting the amount.
6 Criminal Proceeds
This the criminally earned money that needs to be laundered through Cuckoo Smurfing in Money Laundering.
Cuckooing: The Risk of Exploitation
Cuckooing refers to a malpractice where a fraudster or a criminal takes over property or other assets of another person who is typically unaware of the situation. The criminal then uses this asset or property for illegal and criminal activities such as drug trafficking or weapon smuggling.
5 Signs of Cuckooing
Generally, identifying cuckooing in case of a property is easy. Following are the signs where you can suspect the risk of cuckooing in case of a property:
- An Increase in number of visits outside or inside the property
- Suspected Anti-Social Behavior from or outside the property
- Unusual timings of visits
- Un-explained sources of funds, acquisition of cash and other assets
- excessive approach through phonecalls, threat calls and armed personnel.
In case of Cuckoo Smurfing in Money Laundering, the identification of risks becomes complex.
How to Identify Cuckoo Smurfing Money Laundering?
The Ongoing Monitoring of Transactions is most important element of financial transactions security. Through continuous monitoring, a bank or a financial institution can monitor the accounts of legitimate customers and prevent them from being used by unauthorized people. Also, if a suspicious transaction is observed, the Suspicious Activity Report (SAR) can be filed.
Moreover, the Customer Due Diligence is another important aspect of ensuring financial integrity and security. It ensures that risky customers are thouroughly checked as per their risk-score.
Cuckoo Smurfing poses a serious risk to the legitimate customers, their integrity and goodwill. It also damages the legal financial circle due to being one of the easiest methods of Money Laundering. To prevent it, robust KYC and AML measures must be implemented alongside stringent monitoring of transactions. Banks and Financial Institutions must stay updated with the technological advancements and techniques that criminals use to launder money. Also, the counter strategy should be robust enough to identify and report financial risks before hand.