Posted by Brian Monroe - firstname.lastname@example.org 07/08/2021
Special ATII Report – How Human Traffickers Exploit International Economics: Cryptocurrencies, Banks, and Credit Cards (Part 2 of 4)
By Mackenzie Martinez
Special contributor, ATII
July 8 , 2021
With minor edits and content additions by Brian Monroe, VP of Content, ACFCS
This story was originally published by the Anti-Human Trafficking Intelligence Initiative. Republished with approval and appreciation. To read the original piece, click here.
In this second piece in a four-part series by the Anti-Human Trafficking Intelligence Initiative (ATII), the group tackles how criminal groups exploit the gaps between, in and around brick-and-mortar banks, crypto and credit cards.
This blog series dives into the many avenues traffickers follow to hide their crimes and highlights criminal cases illustrating such efforts. Some methods have long been utilized, while others are just beginning to emerge.
Understanding how human traffickers exploit international economics will help inform how we can most effectively follow the money to fight slavery.
This piece also touches on current initiatives by top banking groups, crypto exchanges, credit card companies, retailers and prepaid card operators to engage in cross-industry information sharing and supercharge their collective intelligence with darknet analytics, leaving no refuge, corporeal or digital, for criminals to hide their ill-gotten gains.
Much of the information from this blog series comes from Louise Shelley’s “Human Trafficking and the International Financial System,” which can be found here (link).
That report was part of prepared statements by many of the top minds in the financial crime investigations and compliance fields discussed during a virtual hearing – “Ending Exploitation: How the Financial System Can Work to Dismantle the Business of Human Trafficking.”
The hearing took place March 25 before the House Committee on Financial Services, subcommittee on National Security, International Development and Monetary Policy.
To read the full list of prepared statements and view a recording of the hearing, click here.
Cryptocurrency: Criminals, Buyers Turn to Virtual Value to Muddy Money Trail
Cryptocurrency is a digital currency that is becoming increasingly coveted by criminals for its pseudo-anonymous and nearly untraceable nature.
Examples include Bitcoin, the world’s most popular cryptocurrency, Ethereum, and Dogecoin.
Cryptocurrencies are used by traffickers to purchase advertisements and by sex buyers to purchase premium memberships on review board websites.
These are members-only platforms where the users of illicit sex operations – be they an individual sex worker or, say, an illegal massage parlor – rank the willingness, depth of depravity and price of workers.
In a growing number of cases, trafficking groups are swimming together multiple laundering techniques to make it as difficult as possible for individual banks, prepaid card operators, virtual value exchanges and law enforcement investigators to put all the pieces together of the financial network and related laundering cycles.
For instance, some trafficking networks will buy open-loop prepaid cards – such as a gift card that acts and looks like a debit or credit card to a payment processor – just below ID thresholds, making them essentially anonymous.
The group will then use them to purchase virtual currencies and further move the value through exchanges with weak anti-money laundering (AML) controls and in jurisdictions rife with corruption and historically lax counter-crime compliance defenses.
To that end, FinCEN has issued warnings of traffickers using multiple layers of payment along with cryptocurrency to protect their identities, as demonstrated in a recent case study.
Case Study: Welcome to Video – The Financial Networks Behind Exploiting Children
Human traffickers, and other groups that find and share illicit images of exploited children, make hundreds of thousands of dollars at a minimum annually from selling of the acts themselves and profiting from images and videos – vile media that in most countries is illegal to even possess.
The website “Welcome to Video,” which was a platform for child sexual abuse material (CSAM) on the dark web, handled membership through a cryptocurrency-based points system.
To ensure users had a stake in the effort – and to possibly ward of law enforcement infiltration – in order to view more videos, members were required to either upload their own new content (gaining points for the number of views from other members), or to pay for new videos using Bitcoin.
Federal authorities shut the site down in 2018, but numerous other sites have subsequently developed as replacements.
To Counter Traffickers, Protect Children, Country FIUs Band Together
More broadly, banks are trying to band together to better identify transaction patterns tied to exploiting children, particularly tied to online streaming.
That is one of the goals set out by the Egmont Group of Financial Intelligence Units (FIUs), which include many of the largest countries in the world.
The group, as part of a jointly-led project by Austrac, Australia, UKFIU, United Kingdom and AMLC, Philippines, is collaborating with INTERPOL and the FIUs from around the globe to better understand the financial and banking components of the online streaming of child sexual abuse and exploitation (CSAE) material.
To review the group’s just-released findings, click here.
The Egmont Group report also noted the potential involvement of organized crime in such exploitation networks.
“In impoverished communities, online streaming offers a financial incentive for criminal networks, which creates a commercial element for CSAE,” according to the group.
“The illicit business models in relation to this activity, whereby offenders pay to view CSAE material via online streaming, means there is a money trail in the form of payments and profits.”
While it is noted that a lack of large profits means wide-scale involvement of organized criminal groups (OCGs) is likely to be limited, there “is some evidence of criminal business structures in developing countries exploiting the commercial opportunities presented by online streaming of CSAE.”
Case Study: West Side City Crips and Payment Layering through prepaid, crypto
Beyond international organized criminal groups, low level street gangs have also used online ads, and the further complexities of virtual value, to monetize skin and sin.
In April 2016, federal investigators discovered members of the West Side City Crips gang from Phoenix, Arizona trafficking women out of a motel in El Paso, Texas.
Homeland Security Investigations found evidence through one gang member’s mobile phone and Bitcoin wallet that the group was purchasing Vanilla Visa prepaid credit cards, using these prepaid cards to purchase Bitcoin, and using those bitcoins to purchase sex ads on the now defunct online classified site, Backpage.
Federal agencies seized and shut down Backpage and its affiliated websites in April 2018, with the founders and five others indicted on federal charges of facilitating prostitution and using foreign banks to hide revenues.
The bust roughly coincided with the U.S. government pushing and the President signing a pair of laws — the Fight Online Sex Trafficking Act (FOSTA) and the Stop Enabling Sex Traffickers Act (SESTA) — that added harsher penalties to sites knowingly supporting prostitution or sex trafficking.
In some estimates, the specter of the new laws and dominant player Backpage exiting the market led to a drop of more than 80 percent of online sex ad revenue – a gulf that was nearly refilled just months later with revenues rebounding some 75 percent, according to law enforcement analyses and industry estimates.
Similarly, banks have had to quickly adapt, cognizant that when criminals lose one avenue to sell sex, they quickly find another.
With Backpage’s downfall, other sites, such as “Skip the Games,” among others, have seen a surge in use, allegedly by organized criminal, trafficking and sex worker groups, according to media reports.
The site portrays itself as a dating platform, though it is replete with pics of scantily clad women, some brazen enough to detail the sexual services they are willing to engage in – with nary of mention of pricing.
Prosecutors say the site handsomely profits from sex, while company representatives say they cannot always police the infiltration of illicit trafficking groups due to limited resources, and, to the contrary, routinely help and respond to law enforcement requests for information and assistance.
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