How money laundering pays for man trafficking

National Human Trafficking Awareness Day is on January 11th, 2021. In recognition of this important day, and to help financial institutions (FIs) and anti-money laundering (AML) professionals develop new approaches to stop this heinous crime, Feedzai crafted this guide to understanding how such horrific injustices are even possible in this day and age and offer new approaches to fighting what is essentially modern-day slavery.Before we begin, it’s important to understand the devastating toll that trafficking takes on human beings and their loved ones.

Meet Ella

In a small village in eastern Europe, 16-year-old Ella works as a waitress after school.  She’s a teenage dreamer with hopes of becoming a famous actress and having millions of social media followers. One day, Ella is approached at work by a customer who introduces himself as a talent scout for a modeling agency. They are looking for beautiful young women like her. They need to take a few glamour photos, and if she is accepted, the agency will arrange her travel on private jets, penthouse accommodations, and global photoshoots. All she needs is her parents’ permission.

She posed like she thought professional models would while the talent scout took the photos. A few days later, the scout came back claiming the agency loved her and presenting Ella with an official employment contract. She just has to sign the contract and share her passport. The next day, Ella waves goodbye to her family for the last time from the back of a hired car as it leaves for the airport.  

But there is no modeling agency, no penthouse, no glamorous life. It was all a lie that deceived Ella into becoming someone else’s property. Bruised, drugged, and persistently abused for weeks, Ella wonders if she will die here. If she tries to run, the “talent scout” threatens to make her situation worse. He knows where her family lives.  

A few weeks later, she is in another European city surrounded by those who share her story. They are forced to sleep with whomever is brought into their rooms and are never allowed out alone. She can’t go to the police and doesn’t speak the local language. She’s ashamed, demoralized, broken. Ella is no more. 

The scale of the problem

Ella’s story might sound like a bad Hollywood movie. It’s not. It’s a nightmare that millions of real-life “Ellas” all over the world endure as we begin 2021. 

The International Labour Organization (ILO) is a United Nations agency and a leading global voice raising awareness of human trafficking. They provide some chilling statistics on the fight we face:

  • An estimated 40 million people are enslaved, including 24.9 million in forced labor and 15.4 million in forced marriage;
  • Out of the 24.9 million people trapped in forced labor:
    • 16 million people are exploited in the private sector such as domestic servitude, construction, or agriculture; 
    • 4.8 million people are in forced sexual exploitation; and 
    • 4 million people are in forced labor imposed by state authorities.
  • 71% of victims are female; 25% of victims are minors.
  • Women and girls are disproportionately affected by forced labor, accounting for 99% of victims in the commercial sex industry, and 58% in other sectors.

Recent human rights prosecutions

The ILO believes that the profit from this activity continues to rise. They estimate that more than $150 billion is made from trafficking in persons a year. By turning a blind eye to these silenced victims, we allow the abuse and human suffering to continue.

The Financial Action Task Force (FATF) recently published the Financial Flows of Human Trafficking. This report gives numerous global examples of how collaboration between National Financial Intelligence Units and suspicious activity reporting (SAR) can lead to successful prosecutions by law enforcement. The report noted that the United States Justice Department seized Backpage.com, a forum for prostitution where sex traffickers frequently advertised children and adults, in 2018. The forum managed to earn hundreds of millions of dollars from prostitution and sex trafficking and served as an online marketplace for traffickers. Seven Backpage executives were indicted and charged with 40 counts of money laundering.

What can AML Professionals do to help? 

The world is collaborating to end human trafficking, which is often a predicate offense to money laundering. Criminals and organized networks depend on FIs to keep the money flowing and extract profit from these crimes. 

These criminals will try everything to hide the illicit source of funds they deposit into your bank accounts. They may claim to own a cleaning business or restaurant to try and hide the real reason they have so many cash deposits when onboarding as a new client. They may evade questions about unusual activity or transactions. 

What can your banks do to stop human trafficking and avoid becoming an unwitting accomplice to these heinous crimes? Offense is sometimes the best defense:

  • Proactively ensure your FI is aware of the human trafficking risks posed by the payments and products your firm offers. Incorporate this area into your enterprise risk assessment  
  • Consistently provide updated information and training to colleagues to detect and identify suspicious transactions that could indicate human trafficking origins. 
  • Ongoing monitoring of internal reporting for staff concerns. Ensure these are current and staff has the ability to act quickly on information gathered.  
    • For example, consider a bank teller who alerts their manager of a strange situation involving the in-branch coercive activity of a female customer. The teller files an internal report and mentions that the customer is always accompanied by a male when she comes into the branch and it seems strange that they always use the automated deposit machines, even when there are open tellers ready to take the deposit.  

This is vital intelligence for your AML Officer to protect the firm against money laundering and prevent human traffickers from using your products, services. Without it, they may fail to detect activity, file a suspicious report, refresh the KYC on an account, and/or ultimately detect illicit activity. All of that information could be lost if your teams are not aware of what to look for and how to report it. 

So what happens if your FI doesn’t have a consolidated view of this intelligence? What if pieces of that information puzzle are scattered all over the individual departments? 

How can FIs Detect and Prevent Human Trafficking?

Banks and other FIs need the right partners and tools. This is how they address compliance and regulatory obligations to monitor transactions for illicit funds and report on suspicious activities that could be funding human trafficking activities. 

The right partners will work closely with you during the implementation process to design tailored detection scenarios. This process maps unique risk-based assessments to automated solutions to identify suspicious transactions.  

The most effective risk detection scenarios should be able to:

  • Identify patterns of behavior that could indicate human trafficking and exploitation, such as multiple transactions – even low value – to identified or suspicious websites and forums
  • Empower your analysts to get to the decision faster with guided dispositioning by thoughtful groupings of alerts alongside previous activity
  • Provide profiling capabilities that do more than group all clients of a certain demographic into one large pot to find the outliers. Instead, identify outliers in that one account that warrants a deeper look into unusual activity.

The right solution will pull all the information your analysts need together in a consolidated view so they can quickly disposition the transaction alerts to make decisions faster. The analysts will not only see the transactions that violated your thresholds but explain why an alert was triggered. Armed with this guided dashboard view of the customer activity, your AML and compliance analysts can spend more time reviewing relevant activity than searching for information in disparate systems. 

Consolidated views not only save time but also helps FIs manage, control, and minimize the risk of their firm being used by perpetrators of these grotesque crimes. Having a built-in feature to pre-populate SARs with high-quality information can help you report on illicit transactions and provide your regulator with better intelligence to stop these crimes faster. The best solutions will report human trafficking activities and stop victims of human trafficking from remaining unseen and unprotected. 

This year, let’s do more than acknowledge the victims of human trafficking for one day. Let’s make a pledge to work together and fight this atrocious crime, for the sake of “Ellas” worldwide.

Watch our on-demand webinar AML: From Pablo to Crypto to learn how anti-money laundering initiatives have evolved since the heyday of notorious drug kingpin Pablo Escobar.