As federal authorities confront a wave of illegal immigrants at the US-Mexico border, including large numbers of unaccompanied minors, US law enforcement agencies are teaming up to find the “coyotes” helping fuel the border crisis. These human smuggling rings facilitate a dangerous and expensive journey that is riddled with extortion, violence and complicity with narcotics cartels.
Homeland Security Investigations (HSI) launched an initiative in June to curtail the criminal business of human smuggling along the southern border of the United States, especially focusing on the region of the Rio Grande Valley. Through Operation Coyote, the agency has already launched a number of investigations, which have led US authorities to the culprits of human smuggling, their victims, and the proceeds of taking them illegally across the border.
Like any other business, human smuggling rings receive payment and must find a way to store it for easy access. Money laundering tied to smuggling operations has become more sophisticated, as law enforcement agencies target the exploitation of currency exchange, money transfer services, and trade price manipulation (see an ACFCS article published in July for more on this isssue). In this CrimeCast, ACFCS speaks with two experts from HSI who are currently investigating and cracking down on human smugglers through a careful analysis of financial data reported under the US Bank Secrecy Act.
Stephenie Lord Eisert, the Unit Chief of Illicit Finance & Proceeds of Crime Unit of the Financial, Narcotics and Special Operations Division for Homeland Security Investigations and Michael Tutko, section chief for the Human Smuggling and Trafficking Unit for Homeland Security Investigations provided insights on the human smuggling crisis, the criminal actors behind it, and their emerging methods of laundering and storing their illicit proceeds.
Tutko: Our office, the Human Smuggling and Trafficking Unit of Homeland Security Investigations oversees over 2,000 human smuggling investigations a year and within that, the field officers are the boots on the ground that are proactively and sometimes reactively investigating human smuggling organizations based on events or encountered aliens by border patrol at the ports of entry, between the ports of entry.
We are basically the investigative entity of all that activity. In light of what the media is projecting today is Operation Coyote which is a 90 day human smuggling initiative that we launched back in June and that was a result of an another operation that we did back in May, Operation Southern Crossing, which entailed all five of our southern border offices of the human smuggling operation.
As a result of that we saw the focus of activity as a huge spike in the Rio Grande Valley sector. The Rio Grande Valley sector, for HSI purposes, covers our San Antonio field office and the Houston office – basically the southern border of Texas. We launched this 90-day operation to target and proactively pursue human smuggling investigations against the networks and organizations that are bringing the influx of migrants across the Rio Grande Valley area. We deployed over 60 people to those offices as a force multiplier in the pursuit of this and as of today, we’ve got over 150 investigations initiated, 325 arrests, 103 indictments, 78 convictions, seizure of 7 firearms, over 31,000 in cash and 34 vehicles. This will go on through the end of September. So we anticipate activity – have we seen any results or can we articulate the impact of this? It’s just too early to tell. We are going to do an assessment upon the conclusion of the operation.
So it seems to be that Operation Coyote is a two pronged effort on the ground to arrest the smugglers and also to attack their profits. So how is the Department of Homeland Security collaborating with financial intelligence agencies, specifically FINCEN to seize the proceeds of that crime?
Eisert: HSI focuses not only on human smuggling by going after the smugglers themselves but also on their illicit proceeds. We work with FINCEN in our investigations. We utilize Bank Secrecy Act data to augment [information on] those folks that we’re looking to identify as being involved in the organization and the illegal activity and also to identify assets.
So through the analysis of financial data, you’re able to target these smuggling rings that you’ve seen as a trend are using US financial institutions and US bank accounts to obscure, to launder and to store their money. Mike, maybe you can talk about this in terms of human smuggling and what the operation entails, but how lucrative exactly is this criminal business?
Tutko: It’s not like your drug business. In the drug business, you’re moving loads of dope, you really don’t have an overhead other than where you’re storing it. With human smuggling, you’ve got quite an overhead because you’ve got to provide for these people : food, water, shelter, on their whole journey and each one of those parts of that journey costs money.
On the flip side, the closer you are to the US, the less it is to smuggle you in. For instance, the central Americans that are coming up can be anywhere from 2000 if you’re right at the border to $15,000. If you go further out like Europe to Asia to South America, now you’re talking bigger money. For example, China, you pay anywhere from $50,000 to $70,000 to smuggle one person from China. So the farther you go, the higher your overhead is because you had to pay for those transportation and storage costs for this human cargo.
But it’s definitely driven by profit and these criminals are seeing that it is a lucrative business to take people across the border, right?
Tutko: The migrant flow itself is driven by many factors, but every crime is profit-motivated.
Eisert: Human smuggling organizations have one goal in mind, it’s usually to turn a quick and significant profit by continuing to move undocumented aliens across our borders.
How do they get that profit from the victim or the victim’s family into their own pockets? How does the payment go from the smuggled individual into the hands of a criminal organization that is ready to spend that money?
Eisert: Two of the methods that we’ve identified and are focusing our efforts on right now are the exploitation of money services businesses and also the exploitation of financial institutions through the use of interstate funnel accounts.
Can you explain how they are exploiting money services businesses in order to legitimize their funds?
Eisert: They are using money services businesses to move the smuggling debt from the sponsors or family members in the US to the smuggling organizations located either within the US, in the source country or the transit country. That’s how the profit is being moved in some instances.
Why do criminals see this as an avenue to move their funds?
Tutko: There’s distribution. You’re not seeing a lump sum of money going from the US to a smuggler because that smuggler has different people that he has to pay throughout that pathway so that money services business allows him to redirect payments to different individuals throughout the whole journey.
Eisert: The footprint of MSBs is that you can transfer funds from the US to other countries quite easily and depending on the dollar amount without providing much identification.
So it seems that money services businesses are actually a popular way for human smugglers or drug traffickers to move their funds, so why are they also using funnel accounts?
Eisert: In the last few years, we’ve been looking at the suspicious activity that’s being reported and the information identified by the financial institutions, so we have come up with a methodology within HSI that we have termed as interstate funnel account. It describes the money laundering method that exploits branch networks of financial institutions- the larger financial institutions that have branches spread out throughout the US. So an individual, be it a narcotics trafficker or a human smuggling organization, can deposit funds within the interior of the US and then those funds are available in an account and can be readily withdrawn the same day or the next day with minimal fees associated with the transaction.
Does that mean that the funnel accounts are consolidating all the profit into one account from different smugglers or different people working within a smuggling ring?
Eisert: Yes, it can mean that. So you see this spider of deposits that will be a pattern throughout the US and those deposits will be for satisfying a human smuggling debt or paying off a drug load. They can be deposited into these interior city accounts and can be withdrawn where the account is domiciled where a criminal organization is centered along the southwest border.
My understanding is that human smuggling rings are based out of the countries where the migrants are coming from, so why is it beneficial to them to use accounts that are based in the US?
Eisert: Smuggling fees get paid incrementally depending on the segments of travel. Usually the fee doesn’t get paid all the way from one country into the US, it’s usually satisfied in increments. So what we’re seeing by using interstate funnel accounts is that the last leg of the journey and the money that smugglers are being paid to bring someone into the US from Mexico or perhaps as they’ve been smuggled into the US to their final destination to the city in the US that they’re destined to.
To what extent are we seeing these smuggling rings overlap with the kind of organizations that traffic drugs and that dominate the northern Mexican region and the southern border of the US?
Tutko: Well they align themselves, especially the drug cartels that control the route corridors. These human smuggler networks will have to pay some part of the cartel for permission to come up that road and use that road that the particular cartel controls. So they’re basically paying a toll. They’re not teaming up with the cartels to move narcotics, this is simply them saying “we know cartels control this area, we got to pay them a fee per head” and they pay the fee and keep moving.
Beyond the methods that we already talked about, which are funnel accounts and money services businesses, how are smugglers illegally profiting from the situation, how are they exploiting the situation to get the most money out of it? Is there any element of extortion or fraud?
Eisert: Yes, family members will usually pay the fees associated for getting a family member into the US, and this is what they are responsible for paying and obviously, they’re motivated by bringing the individual in. However, they may not realize the violence that is commonplace with smuggling. Or smugglers trick them into believing that there will be no hardship along the journey. Sometimes there is violence associated with these criminal organizations or the route, how they are smuggled. Sometimes there are deplorable conditions along the way and sometimes they are extorted for additional money.
Tutko: Sometimes you’ll see that in the stash houses, we’ll get calls and have to rescue somebody. The family here has agreed to pay a certain amount of money, they’ve made their payments, they get a call from the organization “your relative is here, we got them in the US and we want additional fees and if you don’t, we’re not letting them go,” that kind of thing. So what’s a person to do? They either end up paying the fees or they call us or local PD and we all get involved and it becomes a rescue operation. We see that kind of minimally but it’s not commonplace.
Eisert: In the Operation Coyote news release that we issued there was an instance mentioned of extortion.
On the financial side, is this something that financial institutions are reaching out to the agencies for, or is it more of a collaborative exchange of information, is it concentrated in one geographic area that you’re investigating banks along the border?
Eisert: Well as you know, financial institutions are required to file certain reports under the BSA. One important aspect of that is providing suspicious activity reports to law enforcement and that has really aided our investigation. We’re able to identify – by looking at the suspicious activity reports as well as currency transactions and other BSA data – we’re able to identify additional conspirators or corroborate information that we already have or identify assets.
HSI very much values the relationships we have cultivated with financial institutions. We have information sharing sessions with them and we work alongside them to identify new trends associated with all sorts of criminal activity to include this issue itself of human smuggling. They have been very positive in working with us and helping to identify trends and looking at what policies they can implement internally to slow down the activity or minimize the vulnerability.
One such instance is having highlighted the fact that larger financial institutions can be exploited by transiting proceeds from one city to the next quite easily as in the case of interstate funnel accounts as some of the larger banks that have seen that this is an issue and that they have implemented policies that eliminates the anonymity associated with these transactions. Before anyone had policies in place, an individual could walk into a bank branch and make a deposit anonymously into someone’s account and there have been financial institutions that have now changed policies and they’re looking at restricting that activity. We really give kudos to those financial institutions that are on the cutting edge of making that type of activity more difficult.
There have been advocates within the financial system that say that the suspicious activity report should have a specific checkbox to identify that there’s red flags that are associated with transactions that could be related to human trafficking. Whereas the current situation is that someone working at a financial institution would have to fill out the suspicious activity report and just describe in the narrative portion of it that there’s something relating to human trafficking. Do you think that this would be something beneficial to law enforcement in order to identify these related transactions and these customers more efficiently?
Tutko: Absolutely. No one is turning a blind eye to the trafficking situation either. In fact, we do a lot of outreach along with Stephenie’s group through the banking industry and we have actually issued trafficking red flag indicators that they’re using now. A lot of the banks will put some type of narrative there. There’s no specific checkbox but they’ll put it in the narrative if there’s indications of possible trafficking based on current activity. And again, that will come to the alert of our field offices and it will get passed down and investigations are opened up and we’ll go forward.
Eisert: It would be useful to have a checkbox but our investigators are used to analyzing data by using the keyword search function to look at the narrative within the report. That’s one of the ways that we do conduct analysis and it is very fruitful that way.