Compliance Blog

Written by Shari R. Pogach, Regulatory Paralegal

What is cuckoo smurfing?  The term originated in Europe due to its similarities to the activities of the cuckoo bird.  You might remember that cuckoo birds lay their eggs in the nest of other bird species which then unwittingly take care of the cuckoo’s eggs believing them to be that of their own.  When money laundering criminals look to transfer funds through the bank accounts of innocent, legitimate customers who are expecting genuine payments from overseas you have a case of cuckoo smurfing.  What happens is the payment sends the criminal’s money to the account expecting an incoming payment, just as the cuckoo bird lays her egg in another bird’s nest.

The term might be amusing but this is complex money laundering and a bigger issue with international wire transfers.  There are four key steps in the process:

1. A legitimate customer deposits funds with a remitter, other than a bank, in a foreign country to another customer’s account in the U.S.
2. The customer isn’t aware that the remitter is part of a wider criminal syndicate looking to launder money.  This criminal remitter in the foreign country gives the details of the transfers, including the amount of funds and account details, to a criminal based in the U.S. 
3. The U.S. criminal deposits his illicit cash profits into the account of the customer waiting for the overseas transfer.  This cash is usually small amounts to avoid reporting requirements.  After the customer checks the balance, he believes the overseas transfer has been legitimately completed.
4. The U.S. criminal travels overseas and gets the legitimate funds initially deposited with the remitter.  The criminal has gotten his funds successfully laundered and simply owes a commission to the money launderer syndicate. 

This form of money laundering has been prevalent for some time overseas but the United States Secret Service believes it is becoming more widely used to launder funds through financial institutions here in the U.S.  You will want to be alert to third parties making structured or unusual cash deposits into third party accounts as this could be an instance of cuckoo smurfing activity.