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‘Cuckoo smurfing’ used in million dollar money laundering scheme

Image or person handing another person money

AUSTRAC disseminated a suspect transaction report (SUSTR) to a law enforcement partner agency, which sparked an investigation into a widespread money laundering syndicate.

Investigations revealed that the syndicate, which operated in multiple states across Australia, was using a money laundering technique known as ‘cuckoo smurfing’. A more detailed explanation of ‘cuckoo smurfing’ can be found in the AUSTRAC Typologies and Case Studies Report 2008.

The criminal syndicate misused the bank account of a legitimate Australia-based export company in its money laundering scheme. The scheme also exploited legitimate international funds transfers made by a customer of the export company, who was based in Pakistan.

The Pakistan-based customer sent funds, via a remittance business in Pakistan, to the Australia-based export company. The funds transfers were payments for legitimate invoices owing to the Australian company.

However, investigations revealed that the Pakistani remitter used to remit the funds had connections with money laundering crime syndicates in Australia.

The following steps outline how the illicit funds were laundered:

  1. The Pakistan-based customer of the export company attempted to send funds via a Pakistani remittance business to the export company’s Australian bank account, for the payment of legitimate invoices.
  2. The Pakistani remitter informed the money laundering syndicate in Australia of the export company’s bank account details and the amounts required to be deposited into the company’s account in Australia.
  3. Australian syndicate members made a number of cash deposits into the Australian account of the export company equal in value to the expected payments from Pakistan. The cash deposits were often made in structured amounts, intended to fall below the AUD10,000 cash transaction reporting threshold. These funds were the proceeds of illicit activities undertaken in Australia.
  4. Meanwhile, the remitter in Pakistan transferred the funds provided by the customer in Pakistan into another account in Pakistan, to be later accessed by a member of the syndicate.

Over a 15-month period, 13 SUSTRs were reported to AUSTRAC by major banks, identifying multiple structured cash deposits made by third parties into the export company’s Australian bank account.

During this period approximately ten syndicate members conducted 217 cash deposits totalling AUD2.1 million into the Australian bank account of the export company. A total of 196 of these cash deposits were structured deposits, totalling AUD1.6 million. The structured deposits were primarily conducted in amounts between AUD8,000 and AUD9,500 at multiple bank branches throughout Sydney and Melbourne.

The syndicate members were careful to provide the bare minimum of personal information when undertaking the cash deposits. Nevertheless, 18 bank deposit receipts examined by law enforcement revealed identifying characteristics such as phone numbers. This information led to the identification of some of the depositors.

Case 20 - Cuckoo smurfing used in million dollar money laundering scheme

Reporting requirements for threshold transaction reports (TTRs) were strengthened on 1 October 2011 to require reporting entities to include details of the individual conducting a threshold transaction where that individual is not the customer of the designated service.

Effectively, this additional TTR reporting requirement means that reporting entities must report details of any third parties depositing physical currency or e-currency of AUD10,000 or more (or foreign currency equivalent) into an account, a requirement that assists AUSTRAC to identify the use of third parties to launder illicit cash.

Offence

  • Money laundering

Customer

  • Business

Industry

  • Banking (ADIs)

Channel

  • Physical

Report type

  • SUSTR

Jurisdiction

  • Domestic
  • International - Pakistan

Designated service

  • Account and deposit-taking services

Indicators

  • Multiple third-party cash deposits into the same account conducted on the same day
  • Third-party cash deposits conducted at multiple branches in the same city
  • Third-party customer undertaking transaction provides the bare minimum of information to reporting entity about the transaction
  • Structuring of cash deposits
Last modified: 27/08/2018 13:45