Payment Structuring (Smurfing) as Money Laundering

Payment structuring — deliberately breaking a large sum into several smaller ones so that each stays below the mandatory financial-monitoring threshold — looks like a simple way to “slip through unnoticed.” In practice the opposite is true: the very pattern of such payments is one of the classic red flags of money laundering, and both banks and Ukraine’s State Financial Monitoring Service (SFMS, or Derzhfinmonitoring) are tuned to catch it. Below I explain how structuring works, why it tends to attract attention rather than conceal a trail, and what a forensic economic examination actually establishes in these transactions.

What payment structuring (smurfing) is

Structuring (in international practice — structuring, colloquially smurfing) is the artificial splitting of what is, in substance, a single operation into several smaller transfers. The aim is that no individual transaction reaches the amount that triggers mandatory financial monitoring.

Under Ukraine’s legislation on preventing and countering the legalisation (laundering) of criminal proceeds, the mandatory financial-monitoring threshold for a financial transaction is UAH 400,000 (for certain sectors, notably the organisation and conduct of gambling, it is lower). The “smurf’s” logic is simple: instead of one payment of UAH 900,000, make three of UAH 300,000 or ten of UAH 90,000 — often through different people, small-time couriers known as “smurfs,” which is where the typology gets its name.

Classic forms of structuring:

• a single payment is turned into a series of “under-threshold” transfers to one recipient;
• one sum is distributed across several accounts or counterparties;
• one operation is broken into cash deposits or withdrawals in small parts across different branches or ATMs.

It is important to draw the line from the outset: a payment below UAH 400,000 is not, in itself, a violation. What turns it into a factor to be assessed is the artificiality of the split — when a single economic substance and an intent to avoid control lie behind the fragmentation.

Why structuring “doesn’t work”: it exposes the scheme

Here is the central paradox of structuring. The specialised law requires primary financial-monitoring entities (SPFM) — banks, payment institutions, notaries, and other designated persons — to report not only threshold transactions (those reaching UAH 400,000 that bear the features defined by law) but also suspicious transactions regardless of amount.

And a sign of suspicion, under the risk criteria in the financial-monitoring field, is precisely the behaviour characteristic of structuring:

• transactions apparently kept deliberately just below the threshold;
• splitting a payment into parts with no reasonable economic explanation;
• a mismatch between the transaction and the client’s financial standing or ordinary activity.

In other words, by circumventing the “amount threshold,” the client falls under the “suspicion threshold.” Banks’ automated systems are tuned not only to one-off large sums but also to patterns — series of same-type payments, suspiciously equal shares, repeated payment purposes. So structuring, conceived as camouflage, in practice often becomes the very signal that triggers a review.

Related typologies combined with structuring

Structuring rarely exists on its own — it is usually combined with other techniques to sever the link between the source and the ultimate recipient.

Nominees and “money mules”

To keep small payments from converging on one person, nominees are used — nominal account holders, “mules” (in Ukrainian, dropy), onto whose cards and sole-proprietor (FOP) accounts transactions are run. Typical signs: activity on the accounts of socially vulnerable people, students, or persons without matching income; an account opened recently that immediately churns sums incomparable with the holder’s profile.

Pass-through transfers and “mosaic” payments

• Pass-through (transit) accounts — links where funds barely linger: in and, the same or next day, out again, with no signs of real activity (rent, wages, taxes).
• “Mosaic” payments — where one large sum is assembled from dozens of small inflows from different senders or, conversely, “scattered” into many small payouts so that no fragment looks suspicious. The picture only reads when the fragments are put back together — like a mosaic.

It is precisely the chain of “structuring + nominees + transit” that produces the effect the scheme seeks: formally, a multitude of small, “innocent” operations; in substance, a single controlled flow of funds.

Indicators that draw attention

Indicator	What specifically raises concern
”Under-threshold” payments	A run of transactions just below UAH 400,000
Short intervals	Several transfers to one recipient within hours or 1–2 days
Uniform purposes	Identical or near-identical payment-purpose wording
Single economic substance	The split sums cover one contract, delivery, or obligation
”Even” shares	The sum divides into identical or suspiciously “round” parts
Profile mismatch	Volumes inconsistent with the client’s income, activity, or history

No single indicator proves laundering. The evidentiary weight lies in the aggregate — when several signs coincide and are backed by documents.

How structuring is detected

Detecting structuring is not a single act but a chain:

1. SPFM (first line). A bank or other institution flags a suspicious pattern through its automated system and a decision of the responsible officer, halts or places the transaction under control, and files a report.
2. SFMS (Derzhfinmonitoring). It accumulates reports on suspicious and threshold transactions, analyses them in the aggregate — including matching fragments that, taken bank by bank, would raise no questions — and, where grounds exist, forwards consolidated materials to law-enforcement bodies.
3. Law enforcement and criminal proceedings. Materials go to the Bureau of Economic Security (BEB), the National Police, or the SBU; where the predicate offence is a tax violation — with the involvement of the State Tax Service (DPS). Within the proceedings, under the Criminal Procedure Code of Ukraine (KPK) rules on ordering an examination, the investigator, prosecutor, or court may commission a forensic economic study.

The key advantage of this level: the SFMS sees transactions above individual banks. What looks like three independent payments in one bank appears, in the consolidated picture, as a single under-threshold series.

Consequences for participants

• Suspension of financial transactions. An SPFM may halt a suspicious transaction, and the SFMS may extend the suspension for the term set by law while the review continues. For a business this means frozen funds and paralysed settlements.
• Restrictions at bank level. Refusal to carry out a transaction, termination of the business relationship, or account closure under the risk-based approach.
• Criminal liability. Where the purpose of legalisation is proven, liability arises under Article 209 of the Criminal Code of Ukraine. But legalisation is always “secondary”: an established predicate act is required — the source of the criminal origin of the funds (tax evasion, misappropriation, fraud, and so on). Without a proven source, structuring by itself is not yet “laundering.”

A separate point: an SPFM’s own failure to comply with financial-monitoring requirements also carries liability — which motivates institutions not to “let through” suspicious series.

The role of forensic economic examination

When a matter reaches proceedings, the expert’s task is not to label the scheme “laundering” (that is a legal qualification) but to reconstruct the factual side of the fragmented operations from documents. In my expert practice this comes down to three key directions.

• Reconstructing the actual sums. Gather the scattered fragments into one picture and show that the series of small transfers corresponds — by amount, substance, and parties — to a single operation. In essence, reassembling the mosaic.
• Establishing sources and recipients. From bank statements, payment instructions, and contracts, trace where funds came from, through which links they passed, and where they settled.
• Reproducing the sequence. Arrange the operations chronologically — “who → to whom → how much → when → on what basis” — recording the short intervals, the sameness of payment purposes, and the pass-through character.

At the same time, the forensic economist does not qualify the act under a Criminal Code article, does not conclude “money laundering” as a legal assessment, and does not establish guilt or intent — these are the prerogative of the investigation and the court. This delimitation follows directly from the Law of Ukraine “On Forensic Expert Examination” and the Instruction on Ordering and Conducting Forensic Examinations, approved by Order of the Ministry of Justice of Ukraine No. 53/5.

Common mistakes to avoid

• Equating structuring with a crime. Under-threshold payments are a factor, not proof; unlawful purpose is proven by an aggregate of facts, not by the split itself.
• Working without primary documents. A statement without contracts and payment instructions gives only an outline, not confirmation of a single economic substance.
• Ignoring the payment purpose. This is most often where it becomes visible that small transfers serve one obligation.
• Exceeding one’s competence. The wording “the fact of laundering has been established” in an economist’s report is a weak point the defence will seize on at once.

Practical guidance for the parties

• For the investigator / detective — frame questions about the actual movement and connection of the operations (“do the transfers constitute a single operation,” “what is the aggregate sum”) rather than asking to “confirm laundering”; provide the full array of statements and primary documents for all accounts involved.
• For the defence attorney — check whether the expert exceeded their competence, whether reasonable economic explanations for splitting the payments were considered (a contractual payment schedule, limits, technical reasons), and whether the predicate act has been proven.
• For the business owner — remember that even justified splitting (for instance, staged payment) should be backed by documents; artificially “keeping under the threshold” without explanation creates a review risk even absent any bad intent.
• For the private individual — do not lend your own card or FOP for “running” someone else’s payments for a fee: this is the role of a “mule” in another’s scheme, with real consequences.

Payment structuring is an example of how an attempt to hide from control becomes the trail itself. If, as an attorney, investigator, or manager, you face the need to make sense of a series of fragmented operations or to assess an existing report, a considered consultation and a professional forensic economic examination will help you build a position on facts, not assumptions. I would be glad to help within the bounds of expert competence.