FCC Training Corner: Tackling Human Trafficking – Boosting investigative skills, enhancing compliance knowledge, effectiveness in rules, roles, results

By Brian Monroe
bmonroe@acfcs.org
January 11, 2022

In this new initiative for 2022, ACFCS is focusing on the how key skills, roles and training could be strengthened or updated to better counter emerging or perennial fincrime compliance challenges, in this case, we are focusing on human trafficking.

This effort is meant to coincide with and provide guidance in support of Human Trafficking Awareness Month in January and Human Trafficking Awareness Day, January 11th.

This piece is a sidebar to our annual ACFCS story covering the latest updates in human trafficking, which you can read here.

For fincrime compliance teams, the crime has risen in importance and weight, particularly in light of recent high-profile celebrity convictions and updates to broader national countercrime priorities – some under the overarching auspices of anti-money laundering and national security objectives.

At issue: despite an increasing understanding of the geographic trafficking routes, rising resources and more aggressive capturing and sharing of financial red flags, the trafficking of persons – for illicit aims including sex trafficking, forced labor and more – remains a multi-billion-dollar criminal enterprise.

The crime affects tens of millions of victims and continues to challenge financial institutions in the areas of detection and prevention, with annual profits of more than $150 billion, generated from human and drug trafficking syndicates, organized criminal groups and terror networks.

In recent months, the issue of human trafficking has taken center stage, from high-profile verdicts in celebrity and tainted socialite cases to updates to a United States National Action Plan to counter human trafficking.

In that same vein, the crime of human trafficking in June also became one of eight National Anti-Money Laundering (AML) priorities set by the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN), along with other illicit actions including corruption, cyber-enabled frauds and terror financing.

So let’s take a look at some considerations for how fincrime compliance teams can review, refine and retool approaches to fighting human trafficking in the areas of roles, investigative skills, sharpened decision-making and buttressed training.

Role players: Human trafficking training must stretch from tellers to top management, frontline to board

For banks, the understanding of red flags, human behaviors and what sectors and regions are at a higher risk for human trafficking is something that must be shared with AML teams, including lower-ranking individuals engaged in getting to know customers, risk ranking them and investigators reviewing and dispositioning alerts.

Beyond dedicated fincrime compliance roles, guidance from the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) over the last decade has required banks to expand training to better detect human trafficking down to the teller level.

The tacit meaning: when it comes to what roles a bank staffer plays, if they are on the front line – whether they are a teller, wire room worker, a branch manager opening business accounts or a business line revenue-producing big wig – they need to understand when a customer could be moving money tied to trafficking.

Putting the spotlight on roles, some considerations to counter human trafficking along bank roles and dedicated AML prongs, including customer engagement, risk scoring and data analytics and investigations:

For AML professionals responsible for crafting, updating policies and procedures:

Have you updated your policies and procedures to include extra scrutiny of businesses historically tied to sex and labor trafficking, including:

Sex trafficking

• Massage parlors
• nail and hair salons
• Entertainment, such as exotic dancing.
• Sex industry
• Domestic services, including cleaning services, which can be cover for escorts

Labor Trafficking

• Agriculture or horticulture
• Construction
• Factories
• The garment and textile industries
• Catering and restaurants
• Domestic work, maids and other house cleaning services
• Child care services
• Elder care services
• Hotels

Source: United Nations.

For AML professionals responsible for customer onboarding/ customer due diligence/ know-your-customer duties:

Front line: In some cases, traffickers take a victim to a branch to open an account in their name, only to use that account to move and launder funds as a tributary to a funnel account – one at that bank or in a foreign correspondent with weak AML rules.
Business line: Human traffickers, like other criminal groups, like to work as anonymously as possible. So if a person wants to open an personal account in the name of someone else, and he doesn’t let the person speak, that is a big red flag.

For compliance professionals responsible for risk assessments:

Similarly, trafficking groups like to work through shell companies with anonymous beneficial ownership structures.

So if a person comes into the branch to open a corporate account, but doesn’t have information on the owners, or highlights the transactions will touch regions that are known originating destinations for trafficking, like Africa, Mexico, Thailand and the Philippines, that might be an account flagged as high-risk – or even not opened in the first place.

For compliance professionals responsible for Dispositioning alerts/investigations/filing SARs:

A look at regional, transnational trafficking routes and potential intersections with a bonus through the lens of crypto exchanges

Human trafficking groups are typically savvy when it comes to obfuscating the financial trail.

In some cases, they will buy prepaid cards at retailers below ID transaction thresholds, use those cards to buy virtual currencies, then use those funds to purchase classifieds and ads on escort and darknet prostitution sites.

Banks should also, as part of their due diligence on direct virtual exchange customers or even exchanges depositing and withdrawing from customer and corporate accounts, risk rate those exchanges through the vantage point of human trafficking regional hubs, including source countries, transit routes and destination jurisdictions.

That could help an institution understand when a virtual exchange could be – wittingly or unwittingly – heavily transacting with regions and entities at a higher risk for human trafficking or displaying related red flags.

A recent FATF report highlighted how and where traffickers are ensnaring victims in a given region and international funding and corporeal flows. Here is a snapshot:

Regional trafficking

Transnational trafficking flows are increasingly complex – victims are exploited within and between regions.

While many countries are source and destination countries, most countries tend to be either predominantly a source or predominantly a destination of trafficking victims.

The United Nations Office on Drugs and Crime (UNODC) found most victims detected were trafficked within the same geographical region.

For the majority of detected victims of transnational trafficking identified in the UNODC’s study, the origin country was in the same geographical region as the destination, which includes domestic trafficking.

Common regional trafficking flows include victims trafficked from South Eastern Europe to Western Europe, from the Andean countries to the Southern Cone in South America, from East Asia to the Pacific, or victims trafficked across a single international border into neighboring countries.

Trans-regional trafficking

In trans-regional trafficking, countries with developed economies remain key destinations, while victims tend to originate from countries with less developed economies.

The UNODC found that the Middle East, as well as most countries in Western and Southern Europe and North America, reported being destinations for trans-regional and long-distance trafficking.

In particular, they found that the wealthier the country of destination, the greater the number of detected victims from outside the immediate region.

In Western and Southern Europe, detected victims held 137 different citizenships, particularly from Central and South-Eastern Europe (47%), Sub-Saharan Africa (16%) and East Asia (7%).

Similarly, North American countries detected victims from more than 90 countries of origin.

The most prominent transregional trafficking flow in the study was from East Asia, as 16% of the detected victims in North America are citizens of East-Asian countries.

Trafficking victims from countries in Sub-Saharan Africa and East Asia are trafficked to the widest range of destinations. The UNODC found that 69 countries reported to have detected victims from Sub-Saharan Africa between 2012 and 2014.

To read the full FATF report, click here.

For professionals responsible for transaction monitoring tuning, data analytics:

One key tactic to uncover potential ties to trafficking groups in your institution is looking for accounts without standard sources of income and for credit cards, frequent cancellations, some consider updating scenario-based, algorithm-based or AI-based systems to look for certain patterns.

Some examples include:

Cash Deposits

• Excessive deposits, particularly in round amounts, like $50, $150 and $200.
• Abnormally timed deposits, such as between 10 p.m. and 6 a.m.
• Large denominations of deposits. If normal cash-intensive business, you will have a mix of denominations. Coins. $5 and $10. If human trafficking, you will largely be taking in $50 bills, $20 and $100 dollar bills. Illicit groups thinks banks don’t look for that, but denominations in deposits are recorded at the branch level.
• Deposits in multiple cities, particularly if they are close to each other, over a period of time. Traffickers will take victims from city to city and rotate throughout the country in urban centers in the country. Look for the the impossible trip, Halifax and Vancouver in the same day. If you see that as an AML analysts, it means multiple people are using the same account as a funnel account.

Peer to peer payments (EMT, Venmo, etc.)

• Payments in round consistent amounts. An account that is taking in a lot of these have some telltale signs as well. The fact that the payments are in some sort of increment. $150, $300 and $50, means someone is buying something in increments of hours.
• Multiple originators with some repetition. Many different parties paying into the same account over time and repeat customers. Look for customer drift in multiple cities. Look for a single email address associated with multiple bank accounts or the opposite, a single bank account associated with multiple email addresses, and those tied to online advertising or escort sites.
• Funnel accounts and Peer to peer transfers. They know that is a vulnerable area, used accounts to collect the P2P transfer, then immediately hit an ATM and withdraw the money.
• They know the behavior to stick out, so when a P2P transfer hits a bank account, they pull it out immediately, sometimes in as little as 30 minutes. It is a smurfed account. If that is caught and shut down, they won’t lose a lot of value. A key red flag is 5 – 10 email money transfers and then 5-10 withdraws done on that periodically.

Payroll

• Multiple payroll deposits into one account, which could be tied to slave labor. This would look like multiple government benefit checks to the same account. Clearly intended for more than two or three people, meaning the person is in control of the labor and taking the money and paying it out – but much less to those actually doing the work.
• Multiple deposits from processors for online adult content, such as Fenix, Onlyfans and the like.

Human trafficking red flags in accounts: Income oddities, account aberrations

One key to uncover trafficking ties: frequent card cancellations

But AML analytics teams also uncovered what many consider the “Number One indicator” that the bank sees for human trafficking: frequent cancelations.

What is an example of that?

When a trafficker, for instance, makes a reservation for five hotel nights, putting $500 on the credit card. But then shows up at the hotel and asks to cancel the card transaction so the person can pay the $500 in cash.

Fincrime transaction analysts should also look for income inconsistencies, such as money coming in in regular increments, but not through known companies, human resources firms or payment processors typically tied to ACH and related transactions.

Here are some further red flags for AML teams to better parse out potential trafficking networks:

• Atypical sources of income: For instance, credit cards, gift cards and virtual currency, rather than ACH and wires. The source of the funds is illicit, so you won’t see normal paychecks.
• Unusual activity and product use in the account: For instance, why is a personal account getting deposits from places all over region through ATMs, then wiring the money to Thailand or the Philippines? The customers are less secretive than the perpetrators. The average person cancels their credit card once a year. A trafficker, nearly eight times a year.
• Personal accounts: As well, why is the personal account spending so much money on online advertising. Human traffickers used to buy ads on Backpage, now they are using generically named sites. They are now buying ads on Tinder and Facebook Dating. These transactions could be seen through a perpetrator or victim account. The traffickers are not also always men, many are women.
• Careless customers: A male customer might use their credit card to pay for services at a nail salon at 2 a.m. Men don’t need to do their nails, or get massages, at 2 a.m.
• Connections to known entities: Massage parlors, escort agencies or others who have been caught before and are at it again. These could also be tied to advertising sites or high risk jurisdictions.

Credit card transaction tales: why rent a car – in your own city?

Suspicious credit card use

Taxi/ride share/car rental: Car rental in the city you live in. Why? They tend to use the same locations, and they don’t want to have the same car and plate sitting in the same place day after day.

Pharmacies and fast food

Basic needs still have to be taken care of, but they tend to do it on the cheap.

The frequency of pharmacy and fast food is at the same rate as normal customers. But the average person spends about $12, but the average person suspected of human trafficking spends about $97.

The same is true at fast food, spending as if they are feeding a large family.

Lodgings

Hotel or more recently longer stay Airbnb: This used to be almost exclusively hotel and motel locations. But instead of using hotels and changing every few days, now they are getting an Airbnb and rented for a longer period of time, but moving in different girls.

A lot less scrutiny on it. Just one large transaction rather than a lot of transactions during the month.

One thing that really stands out are cancellations at hotels. Human traffickers really want to consume their cash. So, as we mentioned above, they get a booking on a credit card, then cancel it and use the cash, to pay for hotel stays and car rentals.

Airline/travel

Bookings with credit card to and from human trafficking source countries, like Thailand, China, and other places in Asia to regions like the U.S., EU, and Canada. Also related cancelations and payments with cash.

Mobile phones

Cell phone or multiple cell phone bills. Everyone has a cell phone, but these guys have three or four. Bills can be in excess of $4,000. They are also constantly switching out the sim chip, rather than buying and dumping burner phones.

Fincrime sector responses: What are other ways to fight back?

Machine learning approaches: Feature engineering, customer attribute data, transaction connections. In short, merge client, transactional and network views.

Vigilance in the first line: Many of the best reports and tips to uncover human trafficking networks, even in the era of AI, automation and machine learning, come from the intuition of a teller or business line professional.

Public-private partnerships: In many countries, like the U.S., Canada and other regions, banks and law enforcement have teamed up to better understand the nuances transactional red flags of trafficking groups to update AML monitoring systems and human training, in and out of dedicated compliance functions, to better find ties to traffickers and rescue victims.

As well, some third-party software vendors and technology companies have created free algorithms and scenarios, developed with current and former investigators, with the goal of sharing these scenarios with banks of all sizes.