By Aaron Kahler, founder, and
Adam Furlough, Intelligence Development Manager, ATII
October 9, 2019
With minor editing and content additions by ACFCS VP of Content, Brian Monroe
A bevy of the brightest minds in financial crime compliance and investigating criminal networks, a broad group cumulatively commanding decades of experience, is taking on one of the sector’s most vexing challenges with a new non-profit devoted to countering the rising scourge of human trafficking.
The Anti-Human Trafficking Intelligence Initiative (ATII), which formally formed last month, is designed to be a hub helping to better knit together the at-times disparate groups of public and private entities divining the red flags of human trafficking from customer actions and transactional tells and the law enforcement agencies on the ground putting all the pieces together to identify and crush larger domestic and international trafficking networks.
ATII is also working to foster more aggressive convergence between legacy bank financial intelligence units and the credit card fraud operations in banks, a move that can more quickly help institutions understand when larger trafficking operations are attempting to victimize one institution, enabling them to report those linked transactions more quickly to law enforcement.
As a point of context, human trafficking is a global problem generating billions of dollars annually, a horrific figure indeed, but one that has forced these illicit groups to interact with the financial system – a dynamic that allows specially trained anti-money laundering (AML) teams a chance to identify, interdict and report those instances of human slavery.
The issue of human trafficking and its connections to banks – and what those red flags may look like – is not something lost on top regulatory and investigative watchdogs.
Over the past decade, groups like the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) and the Paris-based Financial Action Task Force (FATF) have released guidance pieces to better help financial institutions understand when human traffickers might be attempting to move sullied funds through their institution.
From crypto to prepaid, countering human trafficking in the real and virtual worlds
ATII will build on the analyses from FinCEN, FATF and others and combine their conclusions with insight from banks, law enforcement and other counter-trafficking groups in a bid to filter down to the latest schemes used by human trafficker operations to launder their ill-gotten proceeds.
Some examples could include delving into and dissecting current flashpoint issues such as trafficking groups weaving together transactions in crypto coins and anonymous prepaid cards before transacting with banks – making financial institution identification all the more difficult and increasing pressure on information sharing between brick-and-mortar operations and virtual coin vaults.
To this end, ATII focuses on disrupting the operations, economics and anonymity of Human Trafficking at the source by partnering with fincrime compliance data and analytics industry leaders, financial gatekeepers, government, watchdog groups, law enforcement, and academia to address and eliminate Human Trafficking.
ATII was founded in August 2019 by the company’s president, Aaron Kahler, a longtime compliance professional with more than 15 years of experience in all areas in and outside of a bank in the areas of AML, securities, remediation, systems integration and data analytics.
“We aspire to pioneer necessary change in the approach to trafficking detection, prevention, reporting and collaboration to achieve justice and to save lives,” Kahler said.
ATII’s core team is comprised of individuals with extensive experience in many different disciplines including financial services, military intelligence, government affairs, special operations, network security, blockchain technology, human trafficking strategy and enforcement.
Additionally, ATII has created an Advisory Council that features individuals with substantial experience in crypto currency, risk and compliance data analytics, AML/Compliance integrated software, Money Service Business (MSB), and regulatory examination and enforcement.
ATII plans on adding prominent individuals to its Board of Directors that are involved in Human Trafficking Advocacy, AML/Compliance, Law Enforcement and Government.
FATF: Human trafficking proceeds in last decade have soared from $30 billion to $150 billion
Many of the goals of ATII align perfectly with recommendations from the penultimate groups in the field of financial crime and compliance, including FATF.
FATF, which sets global counter-crime compliance standards, unveiled new guidance tied to human trafficking just roughly a year ago, stating it felt it needed to release more rigorous, prescriptive guidance as criminals are expanding their use of exploiting human capital around the globe after releasing a detailed analysis in 2011.
While a horrific development that plays on law enforcement vulnerabilities and challenges compliance professionals by jumping international borders, the tens of billions of dollars in revenue generated by human trafficking groups mean more touchpoints with the formal financial system.
In tandem, it also means more opportunities for appropriately trained AML officers – something ATII can help with in a panoply of ways, from in-person training to web-based learning sessions – and banks with properly tuned transaction monitoring systems, to uncover related illicit financial flows and report them to law enforcement.
In recent years, the “number of victims of human trafficking and migrant smuggling has continued to grow significantly,” according to FATF, noting that revenues have more than quadrupled in less than a decade – the last time the watchdog group gauged the pulse of the sector and released guidance.
In addition to the “terrible human cost,” the estimated proceeds that human trafficking generates have increased from $32 billion to more than $150 billion since FATF produced a comprehensive report on the laundering of the proceeds of these crimes in 2011.
At the same time, since then, there is also a “better understanding of how and where human trafficking is taking place, including the increasing prevalence of people being trafficked in the same country or region,” according to the report, noting that such details can give additional color and context to aberrant financials alone.
Along with more aggressive AML analysis from banks, the report is urging countries to build more expansive partnerships between the public sector, private sector, civil society and non-profit communities to “leverage expertise, capabilities and partnership.”
The private sector, and financial institutions in particular, are on the frontline, as they can see human traffickers depositing and moving funds from countries where migrants are trying to leave, where they are trying to go and the jurisdictions where criminal groups are diverting these stolen souls.
That is also where ATII will play a pivotal role.
Building better awareness through synergies, mission-critical relationships
“ATII will deliver innovative solutions through our strategic partnerships to assist financial gatekeepers in better identifying and terminating relationships with individuals and businesses known to be associated with Human Trafficking and aid in financial institutions reporting potentially illicit transactions, individuals and businesses to law enforcement,” Kahler said.
“In doing so, we will disrupt Human Trafficking networks from accessing financial markets and profiting from their illegal enterprises,” he added.
“We will build meaningful mission-driven relationships with other local, state and national nonprofits and not only serve as a funding vehicle, but we will also provide intelligence-based support and awareness with synergistic corporations, financial institutions and law enforcement.”
ATII has already partnered with two prominent firms, preCharge, Inc. and Nominodata LLC.
PreCharge Inc. is a global payments solution provider and creator of a digital currency wallet and Nominodata LLC provides both “plug-and-play” and integrated software solutions supporting the AML, money-laundering, HIDTA HIFCA, and financial industries dealing in fraud, human trafficking detection and compliance.
The group is also in talks with The Data Initiative, CipherTrace, Polarity, Galway, Ireland-based Siren, Jentu Technologies Inc. out of Novia Scotia, Canada and others.
“PreCharge, Inc. has partnered with leading experts on anti-human trafficking/anti-slavery to identify and assist law enforcement agencies to prosecute perpetrators on a global basis,” said Ralph Dahm, the Chief Executive Officer of preCharge.
“The average person is not aware of the scope of human trafficking and how many people are victimized every day,” he said. “The management team at preCharge is committed to identify perpetrators who may be using digital / crypto currencies to hide their transactions.”
“Currently, every transaction made via the preCharge websites using fiat currencies or digital tokens is screened for KYC/AML compliance,” Dahm said.
“In addition, each transaction is processed on an enhanced Bitcoin/Blockchain intelligence platform to de-anonymize transactions and obtain solid forensic evidence on individuals who use Bitcoin to launder money, finance terrorism, [and engage in] drug dealing, extortion, or human trafficking activities. The process identifies risky transaction characteristics and locations, including known criminals, dark market, and gambling sites.”
ATII is also working to challenge the more than 5,500 digital/crypto currency firms across the globe to implement vigorous KYC/AML compliance programs to assist in the prevention of money laundering, human trafficking, drug dealing, and other illegal activities – and learn how they can share information with other financial institutions under Patriot Act 314(b) safe harbor protections.
“Criminals are attracted to digital currencies due to the ease of remaining anonymous while moving funds,” Kahler said. “New technology advances in blockchain forensics, though, can enable digital currency firms to screen and block illegal transactions, plus offer valuable information to law enforcement agencies to identify individuals and their network of illegal activities.”
Suspicious transactions can be automatically “red flagged” to be blocked, and for follow up investigation.
Human trafficking turns human beings into ‘commodities’
On that end, ATII will be working together with cryptocurrency firms to incorporate best practices to prevent the misuse of digital currency.
“Huge profits are the key motivation for human trafficking, which essentially turns human beings into commodities,” said Melissa Christy, the BSA Officer at Optus Bank.
Since financial institutions are gateways for criminals to make and move their profits gained by exploiting vulnerable individuals, banking institutions are unique in their ability to aid in the fight against this heinous crime.
Optus Bank is located in Columbia, South Carolina, a hot spot for human trafficking. Optus Bank believes corporations have a responsibility to arm their staff with knowledge to help identify and report human trafficking.
For Optus Bank, that means partnering with local nonprofits that have specialties in human trafficking such as, Lighthouse for Life, and the ATII to participate in onsite training educating staff on what human trafficking is and is not, as well as what bank frontline staff can help look for during their day to day work and training on what banking patterns they may be able to identify.
“If corporations train their staff regularly about human trafficking, it would bring a great amount of awareness to this issue and in the long run would make it harder for criminals to mask their profits, ultimately making human trafficking less appealing, and more risky for criminals to engage in,” Christy said.
Human trafficking red flags: timing, round amounts and funnel accounts key indicators
ATII will be providing advisory services to banks and financial institutions in order to help detect, prevent and report suspicious activity that is indicative of Human Trafficking.
Although not all encompassing, here are some of the common red flags associated with Human Trafficking that Financial Intelligence Unit (FIU) investigators need to be aware of:
- Ongoing ATM/credit card transactions in even amounts between 10 PM and 6 AM
- A sudden change in the customer’s business account activity that is inconsistent with the customer’s profile
- Several structured cash deposits conducted at multiple bank branch locations
- If a customer is a foreign worker or a student and his/her employment agency or employer is acting as a custodian.
- High volume of deposits that are funneled and immediately withdrawn (especially in locations near the southern boarder)
- Several customers are using the same address and employment information to open multiple accounts in different names.
- Customer is using anonymous monetary instruments to pay for bills instead of traditional methods such as personal/business checks.
Additionally, ATII will be challenging the way banks and financial institutions traditionally manage Human Trafficking prevention within their organizations.
“We have often heard of the term ‘FRAML,’ the combining of the separate worlds of fraud and financial crime,” Kahler said. “Combining the two gives the investigative team a fuller picture of the customer and there are no restraints on information sharing between the different departments.”
On that front, ATII is advocating what could be tectonic changes in the way credit card departments and the FIU share information.
Traffickers are known to use credit cards to fund their illicit enterprises.
Some known red flags include large/frequent purchases of food, motel/hotel rooms, movies and entertainment, vehicle rentals, phones, advertisements and online classified websites.
ATII believes credit card departments should be aware of such red flags and should notify their FIU in these instances so they can be further investigated.
“As the AML/BSA Compliance Officer at Pangea, I champion this mission by promoting Anti-Human Trafficking as part of Pangea’s corporate responsibility and have partnered with a non-profit organization, the Anti-Human Trafficking Intelligence Initiative (ATII),” said Rachel Trujillo, the AML Compliance Officer at Pangea Money Transfer.
Pangea Money Transfer is an MSB offering money transfer services via an app. The company strives to send money in minutes and serve the un-banked and under-banked population of the US who wish to send money back home; usually cross-border.
“There is a correlation between the un-banked and under-banked population and potential vulnerability to exploitation which is echoed in FATF’s 2018 report on Financial Flows from Human Trafficking,” Trujillo said. “Pangea is dedicated to the fight against financial crimes including its efforts to combat Human Trafficking.”
Bringing fintech to the fight: human trafficking modernization in an era of innovation
ATII is also cognizant of the call by FinCEN and federal bank and credit union regulators in late 2018 to be more willing to innovate on AML, fraud, corruption, through engaging new technologies, including artificial intelligence, machine learning and automation – initiatives already underway under the broad ambit of the nascent but burgeoning financial technology, or fintech, space.
In partnership with NominoData, ATII has developed a new method for modernization related to list-screening that effectively and efficiently fits with the latest fintech models.
This innovative screening method leverages information from similar organizations who are dedicated to going above the compliant responsibilities and holding the protection of humanity as its top priority – a powerful move mirroring what many large domestic and international banks are already doing to share data on recalcitrant customers suspected of fraud or other financial crimes.
“Serving as an Advisory Member of ATII, and BSA Officer at Pangea, I am able to share knowledge and collaborate; which is a game changing advantage,” Trujillo said. “Not only am I protecting Pangea and its customers, I am contributing to the global fight against Human Trafficking.”
ATII will be providing advisory services to Money Service Businesses (MSBs), an industry segment subject to many of the same AML rules as other financial services firms, but which in certain instances has struggled mightily to institute compliance practices to the same degree as their financial banking brethren.
This has been borne out as many of the world’s largest money remitters have paid historic AML penalties for not more fully implementing compliance best practices, missing the red flags of crimes such as human trafficking, fraud and money laundering and, in some rare instances, with agents actively helping and profiting from helping foreign fraudsters and repugnant payment processors.
ATII knows that different institutions – banks, MSBs and other financial services operations – will have varying degrees of accumulated AML acumen, either due to budget constraints, lack of available talent and regional lack of capacity.
That is why, as a non-profit, the group will work to strengthen the understanding of red flags tied to multiple classes of MSBs and share those knowledge points far and wide.
Although not all encompassing, here are few common red flags associated with Human Trafficking that MSB investigators need to be aware of:
- Several individuals that appear to be unrelated sending wire transfers to the same beneficiary.
- Payments to employment or student recruitment agencies that are not licensed/registered or that have labor violations.
- Frequent outgoing wire transfers that are inconsistent with the customer’s profile and sent to countries/cities were Human Trafficking is prevalent (eg. Tenancingo, Mexico)
- Customer accompanied by another individual to transfer funds. Many times, the third party may suggest that are present for language interpretation.
- Frequent and large purchases of food, lodging, vehicle rentals, movies/entertainment that are inconsistent with the customer’s profile.
- Multiple wire transfers, in amounts below $3,000 that are sent from various locations across the US to a common beneficiary.
“ATII is fully focused on changing the way financial institutions and other corporate gatekeepers prevent, detect, report, collaborate with law enforcement and terminate relationships associated with human trafficking,” Kahler said.
“We are excited about our current partnerships and look forward to establishing new partnerships in the future,” he said. “By executing on our initiatives, innovative solutions and strategic partnerships, we are confident that we can pioneer change at the highest levels.”