Posted by Diana Labori - diana.labori@cerifi.com 03/03/2020
Written by Jennifer Piasecki, Director of Research and Content, ATII And Derek Moore, Research and Content Strategist ATII
ATII Special Report: Human Trafficking, the Financial Industry, and Corporate Social Responsibility
Human trafficking also known as modern-day slavery, is a transnational organized crime of exploitation, fear, debasement, and pecuniary gain. Through its activities, human trafficking violates the tenets of human dignity at its core, as it strips its victims of their freedom, innocence, and, in many cases, their lives.
Despite the prevailing belief that human trafficking is a crime that only occurs overseas or in developing countries, the aggregate data says otherwise.
To illustrate, in 2016, the United Nation’s International Labor Organization (ILO) estimated that more than 40.3 million people worldwide are living in some form of modern-day slavery as a result of human trafficking.
With a high market demand and a bountiful supply of potential victims, U.S. human trafficking activity has evolved into a crime of invasiveness, impunity, and convenience – and the traffickers have their eyes set on our cities, towns, and neighborhoods.
Given its prevalence, the chances of encountering a human trafficker or victim in the U.S. is higher than it has ever been.
It is a disturbing truth that underreporting of human trafficking activities is rampant. Whether this is due to a lack of awareness, enforcement, or reporting – or a combination of all of the above – the truth is that most people do not know how to identify them.
Left unchecked, human trafficking will continue to flourish in environments where traffickers know they can reap substantial financial gains while enjoying a relatively low risk of interference.
These types of environments include rural areas, small towns, and cities with large runaway populations. To maximize their gains, traffickers tend to infiltrate and exploit these areas by trolling for new “products” to meet local demand.
They also engage in importing new, “fresh,” products, while also selling products by moving them out to other areas of the market. It is through this exchange of money where the financial system becomes involved in the crime of human trafficking.
The Money in Modern-Day Slavery
Modern-day slavery encompasses the areas of sexual exploitation, forced labor, and organ harvesting.
Regardless of the form it takes, human trafficking is a booming business that uses exploitation, coercion, and fear to lure and trap innocent victims and deny them of their freedom through slavery, all in the name of money.
Both domestically and abroad, available data compilations confirm that human trafficking activities remain on the rise, a fact that poses an ongoing and substantial threat to society as well as to global financial markets.
With respect to the United States, human trafficking monies stand to substantively interfere with the integrity of our economy by infiltrating and tainting our financial system with money that has been ‘earned’ off of the backs of exploited innocents.
There are many ways in which stakeholders can collectively work to impede human trafficking activities, with one way being through direct financial interference.
Considering that basic economic principles dictate that if there is no money to be made, or if funds become inaccessible, human trafficking businesses will fail. Understanding this lends credence to the premise that banks and other financial institutions can directly influence the tide of human trafficking in the United States.
The Human Trafficking Market
In business “speak,” human trafficking is a monopolistic competitive business endeavor where prices for the product are negotiable – and high.
Flourishing in a black market consisting of many buyers and sellers, it is the lure of profits, coupled with market demand and an ease of product movement, that provides human traffickers with the motivation to move as much product as possible – and the product is human souls.
Interfering with, and ultimately stemming, the flow of profits derived from human trafficking activities is a critical component in the global efforts that are being made towards ending this crime.
This is particularly relevant because, from the trafficker’s perspective, it would be ‘bad business’ to continue to run the business if no profit could be made – or if they were barred from accessing their funds. Traffickers need cash flow to conduct business. Accordingly, without it, traffickers would be forced to close up “shop” and move on from human trafficking activities.
It is therefore of utmost importance for our financial institutions to work collaboratively, both in-house and with other stakeholders such as law enforcement agencies and non-profit organizations such as ATII, to mitigate the surging increases in human trafficking by following the money, flagging suspicious transactions, and reporting them via suspicious activity reports (SARs).
Through collaboration, putting an end to a brutal, egregious crime against humanity can be realized.
Grasping the importance of breaking the financial link of the human trafficking chain is critical. One simply needs to have a cursory understanding of basic economics – such as the concepts of supply and demand – the human trafficking market, and the amounts of money that stand to be made.
The Financial Industry and Corporate Social Responsibility
As recognized by Congress in the 2018 Hearing, “Following the Money: How Human Traffickers Exploit U.S. Financial Markets,” the life-blood of human trafficking lies in the ability to transfer and funnel money while avoiding detection or raising suspicion.
Because human trafficking requires little investment, it is a business endeavor that has minimal risks and high rewards.
In a concerted effort to protect our economy from exploitation by the ill-gotten gains of human trafficking, the involvement of our financial institutions is imperative. The curbing of financial access for traffickers is an excellent proposition, as by doing so their businesses will be doomed to fail – just as any other business would.
Identifying the Red Flags
For financial institutions, it is imperative to learn how to recognize and flag possible human trafficking transactions and activities.
As described by the American Bankers Association, the Financial Crimes Enforcement Network (FinCEN) issued an advisory in 2014 that specified red flags, or indicators, for financial institutions to use in the identification of human trafficking activity.
Financial institutions can infuse and inform their transaction monitoring systems with algorithms and scenarios attuned to the red flags of human trafficking to better uncover the nuanced, diffused financial patterns tied to this crime.
These red flags, in turn, can provide critical alerts and data which can be used to generate SARs. And while the triggering of one red flag may not, in and of itself, provide enough evidence to issue a SAR, it is therefore crucial for banks to be trained to consider additional factors, such as financial activity together with face-to-face encounters and observations.
The factors described can provide the credibility and strength needed to support the red flag – and the creation of a SAR. Further, in addition to the data collected related to the initial trigger, financial institutions can strengthen a potential SAR by reviewing previous FinCEN advisories, such as the 2014 advisory on the use and structure of funnel accounts.
The creation of SARs is an essential element in the fight against human trafficking – and this is so because a SAR provides FinCEN and law enforcement with the data and information needed to conduct an investigation.
In light of FinCEN’s mission, which is to “safeguard the financial system from illicit use and combat money laundering and promote national security through the collection, analysis and dissemination of financial intelligence and strategic use of financial authorities,” being able to add SARs to the FinCEN database strengthens a critical spoke in the law enforcement wheel.
Not only do SARs protect our economy and preserve the reputation and integrity of our financial institutions, but they also aid in the arrest and prosecution of human traffickers.
In view of their importance, the steps required to generate a valid SAR are not as easy as they should be. A confounding factor that further complicates the issue of SAR generation is that most banks lack the appropriate resources and personnel skill sets, such as staff that are familiar with data analytics.
Minimizing the challenges that human trafficking presents our financial institutions and law enforcement agencies would be inherently unfair and even obtuse.
Given its fluidity and diverse nature, human trafficking is a complex crime consisting of numerous layers – similar to the proverbial onion. For financial institutions, this renders the generation of SARs particularly onerous and taxing, especially if the staff completing them is untrained.
To this end, one obstacle that financial institutions face is the ability to appropriately interpret and identify the wide variety of touchpoints and interactions that exist between banks and human traffickers.
Similar to money laundering, many of the illicit businesses that are involved in human trafficking may appear, at first glance, to be legitimate. The reality is, however, that these businesses are fronts that are being used to launder human trafficking money and perpetuate ongoing trafficking activities.
The myriad stumbling blocks that money laundering, fraud, and now, human trafficking, pose for financial institutions and law enforcement is daunting – at best.
The incorporation of transactional keywords into existing monitoring programs, combined with training bank staff to identify suspicious activities at the relationship level, will significantly increase a bank’s ability to identify fraudulent businesses, analyze their ledgers, and unmask their illicit practices – which are often deeply embedded within their supply chain.
Incorporating innovative monitoring software at the account level is one proactive step towards detecting human trafficking activities. The second step involves approaching human trafficking from the relationship level.
While AML professionals within a financial institution are trained to detect suspicious activity through specific patterns in transactional data, the importance of direct customer contact should never be downplayed or dismissed. In many cases, face-to-face interaction has proven to be paramount in the detection of suspicious behaviors.
To illustrate, human traffickers will always take the measures necessary to avoid raising suspicion or being noticed by bank staff.
To dodge detection, traffickers will often force their victims to open multiple accounts for them with the purpose being to avoid leaving a financial footprint. Traffickers are also fond of coercing their victims to conduct financial transactions – such as deposits – on their behalf.
One human trafficking survivor who participated in a focus group claimed that she was forced to make several substantial deposits into her trafficker’s bank accounts.
She lamented, “I wish [someone] would have asked what all that money was for.” Unfortunately, no one did. This incident and plaintive survivor’s testimony illustrates the acute need for increased awareness at the interaction level.
Corporate Social Responsibility
In keeping with the tenets of corporate social responsibility, financial institutions must take the financial initiatives described above to identify human trafficking transactions and activities.
This can be accomplished by utilizing their financial intelligence and anti-money laundering abilities in a collaborative manner in-house and with law enforcement agencies.
Given current legislation, the ability of financial institutions to identify and flag human trafficking funds is understandably curbed, as there is little to no human trafficking training offered to banks by the government.
Furthermore, there is a lack of legislative regulation and oversight regarding human trafficking financial activities. Thus, absent a legal mechanism and plan, the impetus for financial institutions to seek out solutions that would equip them with the tools and skillsets necessary to identify human trafficking monies is low.
While a lack of perceived need for action against human trafficking may be the position of some banks, this certainly does not reflect the stance of all financial institutions.
Indeed, the majority of financial institutions prefer to take action and accept accountability in lieu of looking the other way when it comes to human trafficking. The reality is that numerous financial institutions are in fact deeply concerned with eliminating human trafficking and wish to implement preventative measures – they simply need assistance to do so.
At ATII, we are cognizant that more than a decade ago – before guidance from FATF, FinCEN and other domestic and international watchdog groups, it was the banking sector that took up the mantle to better understand how assets sullied by human traffickers could be flowing through their institutions.
Many of the largest banks in the U.S. engaged in their own internal review to uncover what were then unknown red flags for trafficking, uncovering some bedrock tenets, including that transactions from seemingly lower risk operations, such as a nail salon or spa, occurring between 10 p.m. and 2 a.m., were indicative of illicit activity.
These banks then shared their findings with regional and global investigative agencies and later helped, FinCEN, FATF and a bevy of other non-governmental organizations get up to speed in better understanding, and later fighting, a terrible crime.
By taking advantage of the programs developed by ATII, ethically responsible institutions are not only taking action to protect their consumers, but are also preserving their integrity, reputation, and sustainability.
ATII and Financial Institutions: Collaboration is the Key
It is the belief of the Anti-Human Trafficking Intelligence Initiative (ATII) that by following the money, all stakeholders can engage in the fight against slavery.
Seeing as the motivation for human traffickers is driven by profits, the financial community cannot escape or avoid responsibility for participating in this collective movement to end slavery. The blight of human trafficking not only destroys individuals, it interferes with the welfare of our communities, and threatens our economic stability.
The mission of the Anti-Human Trafficking Intelligence Initiative (ATII) is to combat global human trafficking by leveraging corporate social responsibilities directly through advocacy, awareness, intelligence integration, technology advancement, and strategic data collaboration.
ATII provides workable solutions geared towards helping financial institutions meet their corporate social responsibilities while enabling them to proactively detect and address human trafficking through a comprehensive suite of products that includes training, anti-human trafficking high risk data, and eLearning courses.
By partnering with ATII, financial institutions can demonstrate their proactive stance against modern day slavery, both in-house and in their respective communities.
Human trafficking is a stain on the fabric of humanity. By following the money, we can fight slavery – together.