201811.05
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What is Smurfing in Banking (When Splitting Bank Deposits is a Crime)

What is Smurfing in Banking (When Splitting Bank Deposits is a Crime) - Golding & Golding

What is Smurfing in Banking (When Splitting Bank Deposits is a Crime) – Golding & Golding

What is Smurfing in Banking (When Splitting Bank Deposits is a Crime)

Sometimes, even the most innocuous actions can have serious consequences beyond the intended result — especially when the IRS is involved.

This is especially true when a person inadvertently commits a financial crime by smurfing money – which occurs as the result of illegal bank deposit splitting.

Smurfing – The Basics

David has $250,000. He wants to deposit into 30 different accounts, at 30 different banks, to avoid a CTR (Currency Transaction Report) or SAR (Suspicious Activity Report) from being issued. Therefore, he structures the deposits to avoid detection, by hiring people to make multiple small deposits at different banks.

*It is not solely that David had the money deposited into separate accounts BUT because David did it with the intent of avoiding reporting.

Smurfing vs. Smurfs

If like me, your childhood included running downstairs on Saturday mornings to catch new episodes of the Smurfs, smurfing is different.

The smurfs were fun (and blue). Smurfing is criminal, and may leave you sitting in jail…with the blues.

First, What is Structuring?

Before understanding what smurfing is, it is important to get a basic idea of what structuring is.

Structuring does not have to include illegally sourced money or money laundering – it can be legal money, and it can be as simple as you do not want the amount  of money, or frequencies of your deposits to be scrutinized by the bank….so you structure them accordingly.

Unfortunately, Structuring is a Crime

Structuring is the idea of structuring your deposits, withdrawals, etc. to avoid detection by the Bank. Typically, this means avoiding depositing more than $10,000 of cash at any one-time — to avoid a Currency Transaction Report (CTR) from being issued, and/or to avoid a potential Suspicious Activity Report (SAR) from being issued.

For reference, bank regulations require financial institutions to file reports when certain transactions occur in either high dollar amounts, or in high frequency. These reports are not limited to the United States.

In fact, many countries have similar rules in place.  The reason being, is that no financial institution wants to learn that they were a conduit or catalyst for any sort of fraud, money-laundering, terrorism, etc.– like a game of Hot Potato.

In order to successfully structure, you need a plan…

What is Smurfing (Example)

Let’s keep it simple: Gargamel has about $500,000 that he received in legal sourced money that he would like to deposit into different banks to avoid reporting. (aka Structuring)

Gargamel is a U.S. person and doesn’t want to have to report the income on his return, even though the income is all legally sourced.

Gargamel does his research and hatches a plan. And, to carry out his plan, he decides to facilitate his structuring by smurfing, and who better to go smurfing than the smurfs, right?

Therefore, Gargamel orders Papa Smurf, Clumsy Smurf, Grouchy Smurf, Greedy Smurf, Brainy Smurf, and (of course, Smurfette) to each deposit various amounts of small transactions into numerous different banks to avoid detection.

The idea is that, if for example, Brainy Smurf takes $70,000 and splits it into 14, $5,000 transactions that he makes at 14 different banks across smurf village, no one will be the wiser.

If instead, Lazy Smurf deposited all of the $70,000 cash into one account, when there is no proof that he has his own business or otherwise generates that type of money – it could lead to further questioning from the bank, as well as a potential CTR report or an SAR report.

Using Offshore/Foreign is Even More Dangerous

Beyond U.S. structuring/smurfing, once a person is doing these types of transactions overseas and possibly not filing necessary informational returns, FBARs, Form 8938, etc. they might find themselves in some serious trouble.

The reason is that the penalties for failing to report foreign accounts, assets, investments, or income can be brutal — far exceeding the nature of the violation itself.

What if I am Out of IRS Compliance?

When you have not met your prior year IRS foreign bank account compliance obligations, your best options are either the traditional IRS Voluntary Disclosure Program, or one of the Streamlined Offshore Disclosure Programs.

We Specialize in Safely Disclosing Foreign Money

We have successfully handled a diverse range of IRS Voluntary Disclosure and International Tax Investigation/Examination cases involving FBAR, FATCA, and high-stakes matters for clients around the globe (In over 65 countries!)

Whether it is a simple or complex case, safely getting clients into compliance is our passion, and we take it very seriously.

Be Careful of the IRS

With the introduction and enforcement of FATCA for both Civil and Criminal Penalties, renewed interest in the IRS issuing FBAR Penalties, crackdown on Cryptocurrency (and IRS joining J5), the termination of OVDP, and recent foreign bank settlements with the IRS…there are not many places left to hide.

Golding & Golding, A PLC

We have successfully represented clients in more than 1000 streamlined and voluntary disclosure submissions nationwide, and in over 70-different countries.

We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe.

International Tax Attorney (Specialist) Offshore Asset & Account Disclosure

International Tax Attorney (Specialist) Offshore Asset & Account Disclosure

Golding & Golding: Our international tax lawyers practice exclusively in the area of IRS Offshore & Voluntary Disclosure. We represent clients in 70+ different countries. Managing Partner Sean M. Golding is a Board-Certified Tax Law Specialist Attorney (a designation earned by < 1% of attorneys nationwide.). He leads a full-service offshore disclosure & tax law firm. Sean and his team have represented thousands of clients nationwide & worldwide in all aspects of IRS offshore & voluntary disclosure and compliance during his 20-year career as an Attorney.

Sean holds a Master's in Tax Law from one of the top Tax LL.M. programs in the country at the University of Denver. He has also earned the prestigious IRS Enrolled Agent credential. Mr. Golding's articles have been referenced in such publications as the Washington Post, Forbes, Nolo, and various Law Journals nationwide.
International Tax Attorney (Specialist) Offshore Asset & Account Disclosure

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