With flurry of passed bills, sharpened U.S. Action Plan, link to AML priorities, Human Trafficking Awareness and Prevention Month renews focus on compliance connections, red flags of illicit financial networks

By Brian Monroe
bmonroe@acfcs.org
Jan 11, 2023

January is Human Trafficking Prevention Month with Wednesday, January 11, being designated as National Human Trafficking Awareness Day, a dour dedication designed to annually refocus the fincrime fighting lens on a crime with rising human and financial dimensions.

Despite more countries working together at the public and private sector levels, sharing patterns on geographic trafficking routes, updates on financial red flags and crafting campaigns geared toward prevention and protection of victims, the trafficking of persons – including sex trafficking, forced labor and more – remains a multi-billion-dollar challenge.

“Human trafficking devastates families and communities and preys on the most vulnerable members of our society,” said Natalie Wight, U.S. Attorney for the District of Oregon, in a statement tied to Human Trafficking Awareness Day.

“As a federal prosecutor, I’ve seen the extraordinary suffering survivors have endured and the incredible strength, courage, and resolve they demonstrate as they rebuild their lives. Today is a day we honor these survivors.”

The crime has also more forcefully commanded attention from bank anti-money laundering (AML) teams for a bevy of reasons, including recent updates at the Congressional, federal investigative and regulatory levels – key details that could be woven into AML compliance risk assessments.

In tandem, human trafficking allegations and convictions for serial predators have made headlines, from social media influencers using their fame to dupe and denigrate women to former power brokers in the music and movie industries facing their accusers, such as R. Kelly and Harvey Weinstein – and justice.

One recent arrest of a controversial influencer could prompt fincrime compliance teams to look at more than the following and finances of social media personalities – but how close the messaging of those individuals hews toward illegal acts generating tainted revenues.

That is the case of proudly misogynist influencer Andrew Tate, who “once said he moved from the UK to Romania because ‘rape laws are more lenient there,’” being arrested by Romanian officials on December 29 on charges of rape and human trafficking, according to media reports.

The country’s Directorate for Investigating Organized Crime and Terrorism, or DIICOT, stated that Tate and his brother, Tristan, were suspected of having recruited mostly female victims for a criminal online porn scam, according to Vox.

The Tates recruited victims by making them believe they were seeking genuine connections and substantive relationships, only then to do the exact opposite, transporting them to live in houses where they were “under constant surveillance and forced to act in porn videos under threats of violence,” officials said.  

The videos would then be sold online, according to a translated press release.

Tate has proudly admitted to some version of this already: The self-proclaimed “king of toxic masculinity” told the Daily Mirror that he once operated a “total scam” business in which 75 women were paid to talk to men for $4 per minute – but he pocketed the bulk of the funds, as cited by Vox.

Such behavior to debase women and elevate men was “central to Tate’s personal brand,” according to Vox.

The report highlighted that Tate has carefully crafted his image as a “straight-talking” hustler surrounded by exotic sports cars, alluring models, wearing bathrobes and smoking cigars, “implying that by following his advice, you too could live such a lifestyle.”

The latest criminal wrinkle: trafficking groups, illicit sex sellers turning to virtual value

Apart from obvious online braggarts and loathsome lotharios, most groups engaged in human trafficking work to stay off anyone’s radar – including law enforcement, in some cases by using cryptocurrency.

That is the conclusion of a Feb. 2022 U.S. Government Accountability Office (GAO) report noting that “virtual currencies—for example cryptocurrencies—are increasingly being used in illegal activities, such as human and drug trafficking.”

For example, virtual currencies are “being used more often on platforms that could facilitate sex trafficking,” according to the report.

To read the full GAO report, click here.

Specifically, in a June 2021 report, analysts uncovered that 15 of the 27 online commercial sex marketplaces they reviewed accepted virtual currencies.

In that same vein, virtual currency ATMs – stand-alone machines that facilitate buying, selling, and exchange of virtual currencies – could “be used for illegal activities such as laundering drug trafficking proceeds.”  

Online marketplaces were also increasingly being used for sex and illegal goods trafficking.

These marketplaces were sometimes located on the “dark web,” a hidden part of the internet where users access sites using specialized software (e.g. Tor) to connect to buyers and sellers, GAO analysts stated.  

In all, the dark web can “provide some anonymity and limit the risk of detection by law enforcement,” the report concluded. “The use of virtual currencies has added to the challenges federal law enforcement face when trying to prevent and discover these crimes.”

AML compliance teams working to adjust, adapt and overcome duplicity, tenacity of trafficking groups

Human trafficking, also referred to as trafficking in persons or modern slavery, is a “serious federal crime involving the exploitation of individuals for labor, services, or commercial sex through force, fraud, or coercion,” according to a statement released a statement released Tuesday by the U.S. Department of Justice (DOJ).

This coercion can be “subtle or overt, physical or psychological. Exploitation of a minor for commercial sex is human trafficking, regardless of whether any form of force, fraud, or coercion was used.”

Moreover, even though there is no single defining characteristic that all human trafficking victims share, traffickers around the globe “frequently prey on individuals who are poor, vulnerable, living in unsafe or unstable environments, or are in search of a better life,” according to DOJ.

More aggressively targeting and tackling human trafficking and reporting on the illicit networks supporting the organized criminal groups involved are also part and parcel of recent updates to broader national countercrime and compliance priorities – some under the overarching auspices of desired national security objectives.

Even before these historic updates, the compliance industry has responded – and been responding.

Over the last decade, U.S. and international banking groups have engaged in customer and transaction data deep dives, uncovering red flags to businesses that were not on risk radars as being tied to trafficking groups.

More recently, they have devoted more resources, forged partnerships and updated bespoke and vendor-driven transaction monitoring systems, including the use of artificial intelligence.

As well, some large AML technology vendors are engaging in what is called federated learning – looking across multiple banks and their data stores, sharing back trends with the institutions and law enforcement.

New bills add more resources to key government agency tracking traffickers, promotion of helping hotline

But even the best investigations by AML teams face a very real hurdle: regardless of how detailed and timely their suspicious activity reports (SARs) are, they can’t force an investigation by government agencies already straining under tight budgets and multiple investigative priorities.

Some recently signed bills, however, may help change that – at least in part. 

Just days before the New Year, the White House signed two new human trafficking-related bills into law:

H.R. 7181, the Human Trafficking Prevention Act of 2022:

The bill promotes posting of contact information for the National Human Trafficking Hotline.

In 2020, the National Human Trafficking Hotline received a total of 51,667 substantive phone calls, text, Webchats, emails, or online tip reports nationwide, according to its website.

Here is a snapshot of the hotline:

• Phone Number: 1 (888) 373-7888
• SMS: 233733 (Text "HELP" or "INFO")
•  Hours: 24 hours, 7 days a week
• Languages: English, Spanish and 200 more languages

For more information, click here.

The second bill: S. 2991, the Countering Human Trafficking Act of 2021:

The bill authorizes the Department of Homeland Security’s (DHS) “Center for Countering Human Trafficking (CCHT),” as a dedicated, full-fledged operation. The center coordinates the Department’s efforts to combat human trafficking and the importation of goods produced with forced labor.

The bill also authorizes $14 million to carry out the Act and ensures that the CCHT is staffed with at least 45 employees to carry out the Department’s critical work to combat human trafficking, according to administration officials.

“This is a seminal moment in our fight against the scourge of human trafficking,” said Secretary of Homeland Security Alejandro Mayorkas, in a statement.  

“With the increased funding and additional personnel dedicated to our leading DHS Center for Countering Human Trafficking, we will advance our work to identify and support victims, conduct operations that hold the traffickers accountable, and strengthen our partnerships with non-governmental organizations.”

The added funding will also further develop department’s the Blue Campaign, a national initiative designed to educate individuals and business writ large about the signs of trafficking, ways they can victims and attack traffickers.

The center is the first unified, inter-component coordination center for countering human trafficking and the importation of goods produced with forced labor, spanning more than 16 supporting DHS offices and agencies.

In FY22, the work of the CCHT helped secure more than 3,600 arrests and 600 convictions.

This represents an increase of more than 50 percent in human trafficking arrests and an increase of more than 75 percent in human trafficking-related convictions over the previous fiscal year.

More broadly, at the Summit of the Americas in June, twenty countries signed the U.S.-led Los Angeles Declaration on Migration and Protection.

The initiative included a commitment to collaborate on saving lives and combating migrant smuggling and criminal human trafficking organizations as well as their facilitators and money laundering networks, according to DHS.

But those increased efforts, domestically and internationally, have collided with near-biblical level obstacles: war, plague and famine.

The COVID-19 pandemic and other crises, such as the Ukraine conflict, have “heightened international trafficking risks,” according to a GAO report, published in Sept. 2022.

Global supply chain snags and rising inflation has also contributed to soaring food prices, making poor countries more fiscally and physically desperate, causing groups to seek food and shelter elsewhere – and making them prime targets for traffickers.

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.

This special set of skills includes teaching red flags and investigative techniques to lower-ranking individuals engaged in getting to know customers, risk ranking them and transaction monitoring analysts 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 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.

To read a special ACFCS Training Corner sidebar story detailing many of the complex and nuanced red flags of human trafficking, please click here.

How costly can it be for a bank to miss the red flags of human trafficking?

Banks have also realized in recent years how costly it can be to deal with a powerful figure tied to human trafficking allegations – and even a conviction – and deciding to keep their business.

In July 2020 the New York Department of Financial Services (DFS) hit Deutsche Bank with a $150 million penalty, stemming in part from the bank’s failures to monitor and report millions of dollars of transactions through accounts the bank held for convicted sex offender Jeffrey Epstein.

The enforcement action capped off the shocking and sordid Epstein case.

The disgraced financier with ties to the rich and powerful was charged with trafficking underage girls for sex in 2019, after nearly 15 years of previous criminal investigations, a conviction, and numerous civil cases tied to human trafficking.

Epstein’s high-profile arrest and ultimate demise drew lots of media attention, but less well-attended were the lessons for financial institutions from the twisted saga.

What lessons?

The need for proper business line oversight of rich and risky clients, stringent ongoing due diligence and negative news dives on accounts and clearer bright line boundaries on when rising red flags require an account closure.

Deutsche “failed to properly monitor account activity conducted on behalf of the registered sex offender despite ample information that was publicly available concerning the circumstances surrounding Mr. Epstein’s earlier criminal misconduct,” the regulator stated in penalty documents.

The result was that the institution “processed hundreds of transactions totaling millions of dollars that, at the very least, should have prompted additional scrutiny in light of Mr. Epstein’s history.”

More recently, in November, several women who accused Jeffrey Epstein of sexual abuse sued embattled Deutsche Bank and JPMorgan Chase. saying the banks “facilitated Epstein’s alleged sex-trafficking operation and ignored red flags about their wealthy client,” according to media reports.

The two lawsuits filed in New York federal court seek class-action status and a yet unknown figure tied to financial damages, according to the Wall Street Journal.

The Deutsche Bank suit cites many of the same findings from an investigation by New York state’s financial regulator into that bank’s relationship with Epstein, according to the newspaper.

The JPMorgan suit cites the “relationship between Epstein and a former top JPMorgan executive that was investigated by U.K. regulators.”

The unnamed woman suing JPMorgan is a former ballet dancer in New York who was recruited by another young female and sexually assaulted by Epstein and his friends and associates from 2006 through 2013, according to her suit, cited by the WSJ.  

The action highlights that hefty sums of money were withdrawn from JPMorgan to make cash payments to her and other women, with Epstein using the funds to pay for sexual services, the suit says.

Retuned National Action Plan seeks to counter rising scourge of trafficking

In the future, the hope is that banks will be more aware of sexual predators in their midst and report those individuals to law enforcement – one of the tacit goals of the retuned National Action Plan to Combat Human Trafficking.

To read the full 66-page action plan, updated in late 2021, click here.

Originally released in 2020, the updated action plan includes expansive collaboration between a host of federal antitrafficking experts from across the United States government.

The plan was also informed by the expertise of survivors, who “generously contributed their insights and wisdom to strengthen the U.S. response to human trafficking.”

Since the enactment of the Trafficking Victims Protection Act in 2000, the Department of Justice has charged nearly 5,000 traffickers and has funded victim assistance programs to stabilize and empower survivors, an official said, according to media reports.

The updated strategy rests on four foundational pillars: prevention, protection, prosecution, and partnerships.

Here is a snapshot of what those pillars mean in practice:

• Prevention: Strategic prevention programs are wide-ranging, from educating vulnerable populations and mitigating risk factors to seeking to prevent goods produced with forced labor from entering U.S. markets.
• Protection: Protection encompasses the interventions, services, and supports needed to protect and assist victims of human trafficking.
• Prosecution: Prosecution involves holding individuals and entities engaged in human trafficking accountable and dismantling human trafficking networks.
• Partnerships: Effectively combating human trafficking requires collaboration to complement and support the other pillars of prevention, protection, and prosecution.

The crime of trafficking is ‘more pervasive’ than previously thought

One reason for the updated action plan is that as banks and investigators have come to better understand the red flags and transaction tells of human trafficking, they have realized it is a much bigger issue than first thought.

“Our Nation’s understanding of human trafficking, an underreported crime, has grown, and we have learned that this crime is far more pervasive than previously understood,” according to the action plan.

In 2020, 11,193 situations of human trafficking were identified through the United States National Human Trafficking Hotline.

Globally, the figures are much higher, with an estimated 24.9 million people subjected to human trafficking, generating an estimated $150 billion annually in illicit profits.

Victims in the United States originated from “almost every region of the world. The top three countries of origin of federally identified victims were the United States, Mexico, and Honduras.”

The action plan also detailed the role for bank AML teams in following the money, with money laundering charges at times taking down more traffickers and putting them away for longer than the originating crime.

“Many times, prosecutors obtain convictions of human traffickers and their associates for crimes other than human trafficking, such as money laundering or fraud,” according to the plan.

Human trafficking networks are also increasingly interlinked with other criminal, activities, such as kidnapping, extortion, racketeering, counterfeiting, prostitution, drug trafficking, money laundering, document fraud, visa fraud, immigration-related crimes and public corruption.

Some examples include:

• The Zhao Wei drug trafficking organization, MS-13 and many Mexican organized criminal groups use human trafficking to generate funds to further its other
• Multiple European countries have noted transnational organized crime groups (TNOCs) exploiting EU nationals and migrants in sex and labor trafficking, including forced criminality such as pickpocketing and the distribution of narcotics.
• Terrorist organizations – including Islamic State in Iraq and Syria, Boko Haram, and Al-Shabaab – engage in human trafficking crimes.
• State actors such as Afghanistan, Burma, Cuba, the Democratic People’s Republic of Korea, Eritrea, Iran, the People’s Republic of China, Russia, South Sudan, Syria, and Turkmenistan engage in state-sponsored forced labor or sex trafficking.

Similar to other organized criminal groups, corrupt kleptocrats and scammers and spammers, trafficking groups try to obfuscate the money trail by creating companies with impenetrable ownership structures.

For example, in a recent NGO study, only 21 percent of the 6,000 business records found for illicit massage businesses name the owner, and even in those cases, the information may not have been legitimate, according to the plan.

A lack of insight and transparency can also aid groups engaged in labor trafficking abuses.

The United States Department of Labor (DOL) has identified 156 goods from 77 countries that are produced with child labor or forced labor globally, some of which are connected to products imported into the United States.

“When insufficient controls are in place, human traffickers benefit from ready access to financial systems to maintain their enterprises,” according to the action plan.

“Meanwhile, human traffickers benefit most from complex and nontransparent supply chains as well as permissive regulatory environments abroad.”

In historic U.S. fincrime, compliance update, human trafficking now a ‘national AML priority’

Effective approaches to fighting human trafficking and its financial support networks is also on the mind FinCEN, which made the crime one of its eight national anti-money laundering and countering the financing of terrorism (AML/CFT) priorities.

The priorities include a collection of historic foils like organized criminal groups and other rising risks, like record ransomware attacks and crypto-fueled paydays.

The widely-watched and highly anticipated AML priorities are the first concrete update to implement the U.S. Anti-Money Laundering Act (AML Act) – the most significant upgrade to the country’s fincrime framework since the 2001 U.S.A. Patriot Act.

The AMLA is an expansive package of updates to break open beneficial ownership bastions, bolster public-private information sharing, usher in a new era of innovation and focus on effectiveness – with the threat of higher penalties for violations, and serial scofflaws.

To read ACFCS coverage of the AML Act, which Congress enacted into law in January after overriding a presidential veto, click here.

Human trafficking and human smuggling networks “use a variety of mechanisms to move illicit proceeds, ranging from cash smuggling by individual victims to sophisticated cash smuggling operations through professional money laundering networks and criminal organizations,” according to FinCEN, in detailing this priority.

The tainted profits of human trafficking can include “income associated with logistics, such as housing and transportation of victims, as well as earnings from the exploitation of victims.”

These groups also look to game the formal financial system’s AML defenses by hiding behind shell companies with opaque ownership structures.

They also choose to send and receive payments in a panoply of ways, such as funnel accounts, trade-based money laundering schemes and transactions into and out of virtual currency exchanges, in some cases using prepaid cards bought under identity thresholds.

To read the full list of AML priorities and related interagency statements, click here.

To read ACFCS coverage of the FinCEN AML priorities and a related statement by the Wolfsberg Group, an influential alliance of more than a dozen of the world’s largest banks, including Citi, JPMorgan, Barclays, Credit Suisse and others, click here.

“Around the world, human trafficking has stripped nearly 25 million people of their safety, dignity, and liberty — disproportionately affecting historically underserved and marginalized communities,” President Biden said in a statement on Dec. 30.  

“During National Human Trafficking Prevention Month, we reaffirm our commitment to ending this inhumane and immoral practice in all its forms. And as we bring perpetrators to justice, we renew our pledge to help survivors recover and rebuild their lives.”

Human trafficking Resources:

Department of Homeland Security

• Defining Human Trafficking
• Indicators of Human Trafficking

FATF

• Financial Flows from Human Trafficking
• Money Laundering Risks Arising from Trafficking in Human Beings and Smuggling of Migrants

US Department of Justice

National Strategy to Combat Human Trafficking

ACFCS stories:

• Special ATII Report: Crypto transactions and human trafficking – A non-traditional investigation perspective for traditional financial institutions
• Special ACFCS Contributor Report: Banks Have a Moral Obligation to Fight Human Trafficking
• Regional Report: Canada has done ‘amazing things’ to fight crime through public-private partnerships, but still hampered by stringent privacy rules, lack of AML safe harbors
• After months of court battles, Westpac settles with Austrac, agrees to pay $1.3 billion for millions of AML failings, ties to child exploitation network

Additional Online Resources

• The Online National Human Trafficking Referral Directory
• The National Sexual Violence Resource Center

Money Mules and the link to human trafficking

DOJ, FBI Money Mule Awareness Booklet

Federal investigators reveal the profile of money mules to better help compliance professionals and frontline staff, including parsing out those acting in unwitting, witting and complicit capacities.

Some trafficking groups to help launder funds tied to their illicit operations use trafficked individuals to act as money mules, both moving money, depositing cash and opening accounts tied to victims to shield the names and companies tied to the larger network.

Red flags include opening multiple accounts in their own names, likely warned previously about being part of fraudulent activity and may receive funds from unknown or third-party entities.

To read the full report, click here.