With updated U.S. Action Plan, key pillar of National AML priorities, Human Trafficking Awareness and Prevention Month commands more attention, focus from fincrime compliance teams

• January is Human Trafficking Prevention Month with Tuesday, January 11, being designated as National Human Trafficking Awareness Day, a somber remembrance, but a necessary one done to focus more attention on a growing problem with tethers to financial crime compliance teams and law enforcement agencies at every level.
• Despite increasing understanding of geographic trafficking routes, resources and more liberal 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 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.

By Brian Monroe
bmonroe@acfcs.org
January 3, 2022

January is Human Trafficking Prevention Month with Tuesday, January 11 being National Human Trafficking Awareness Day – a somber time devoted to a crime increasingly interwoven with international organized criminal and terror groups.

But the persistent challenge of uncovering and prosecuting those tied to trafficking networks and identifying and seizing the laundered assets supporting traffickers large and small is also commanding more attention from governments and watchdog groups – and analytical and investigative resources from fincrime compliance teams.

Despite an increasing understanding of the geographic trafficking routes, resources 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.

That is why it is more important than ever during events like National Day of Human Trafficking Awareness, to review what global investigative, financial institution and watchdog groups have done in terms of progress and refocus the lens to see what more can be done.

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.

In high-profile sex trafficking verdicts, questions, lessons for AML teams

Last week, the British socialite Ghislaine Maxwell was convicted of luring teenage girls to be sexually abused by the American millionaire Jeffrey Epstein, in essence, acting as a human trafficking network to serve one person, according to media reports.

The verdict capped a monthlong trial featuring “sordid accounts of the sexual exploitation of girls as young as 14,” told by four women who described being abused as teens in the 1990s and early 2000s at Epstein’s palatial homes in Florida, New York and New Mexico, as reported by the AP.

Jurors deliberated for five full days before finding Maxwell guilty of five of six counts.

With the maximum prison terms for each charge ranging from five to 40 years in prison, Maxwell faces the likelihood of years behind bars.

That is an outcome long sought by women who spent years fighting in civil courts to hold her accountable for her role in recruiting and grooming Epstein’s teenage victims and sometimes joining in the sexual abuse, according to media reports.

That case and verdict has many parallels with the September conviction of once high-flying rhythm and blues star R. Kelly on charges he exploited his celebrity status for decades to lure women – many of them underage girls – into his clutches to manipulate and sexually assault them.

In all, an embarrassing fall from grace for a singer whose biggest hit was “I believe I can fly.”

But for the universe of financial crime and compliance professionals watching Kelly’s case – and other cases of celebrities taking advantage of their power and influence to dupe, deceive and denigrate for skin and sin – they saw through the glitz and glamour to the black heart of the allegations.

His lies, payoffs and physical and mental abuse were just a cover to act as a human trafficker running a criminal enterprise.

Jurors in Brooklyn federal court deliberated for a little more than a day before voting to convict the 54-year-old Kelly on all of the nine counts he faced, after a 5-1/2 week trial, according to media reports.

The message in the aftermath of such a high-profile case was not lost on AML compliance teams: don’t view famous singers, movie stars, sports personalities and the like through the lens of the halo effect.

Why?

These individuals are just as fallible, weak and prone to more vice than virtue as all of us – with the contextual caveat that they have access to more money, frothing fans and can feel like the normal rules of human behavior and decorum and even laws don’t apply to them.

Kelly had been charged with one count of racketeering and eight counts of violating the Mann Act, which prohibits transporting people across state lines for prostitution.

The racketeering charge gave prosecutors leeway to offer evidence that might otherwise be too old to prosecute. Kelly faces a mandatory minimum of 10 years behind bars and could face up to life in prison at his May 4, 2022, sentencing, according to Reuters

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.”

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 just-released and retuned National Action Plan to Combat Human Trafficking.

To read the full 66-page action plan, click here.

“Human trafficking is an evil practice that contradicts who we are as Americans and the rights we cherish,” said Assistant to the President and Homeland Security Advisor Dr. Liz Sherwood-Randall, in a statement.

The action plan reaffirms the country’s “commitment to preventing and punishing human trafficking in all its forms and to addressing the social and economic conditions that can create greater vulnerabilities for marginalized groups.”

Originally released in 2020, the updated action plan includes extensive collaboration among federal antitrafficking experts from across the United States government and 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.

• Enhance education and outreach efforts, including for at-risk populations.
• Enhance community-coordinated responses to human trafficking.
• Strengthen efforts to identify, prevent, and address human trafficking in global supply chains.
• Build capacity to prevent the importation of goods produced with forced labor.

Address aspects of nonimmigrant visa programs that may facilitate the exploitation of visa applicants and visa holders.

Protection: Protection encompasses the interventions, services, and supports needed to protect and assist victims of human trafficking.

Protection starts with robust outreach and proactive identification efforts, and includes providing comprehensive victim services and applying victim-centered, trauma-informed strategies.

• Identify and engage with victims in a victim-centered, trauma-informed, and culturally competent manner.
• Support survivor-informed interventions, in which survivors of trafficking are essential partners and help to improve service delivery and inform victim assistance policy decisions.
• Seek to protect victims of human trafficking from incarceration, fines, or penalties for unlawful acts committed as a direct result of being subjected to trafficking.
• Improve access to immigration benefits to help provide assistance to victims of human trafficking.
• Expand and improve assistance to victims of human trafficking encountered by law enforcement agencies.
• Seek financial remedies for victims of human trafficking.
• Increase access to social services for victims of human trafficking to increase short- and long-term stability.

Prosecution: Prosecution involves holding individuals and entities engaged in human trafficking accountable and dismantling human trafficking networks.

• Improve coordination among law enforcement to increase accountability for human trafficking.
• Build capacity of Federal, state, local, Tribal and territorial law enforcement to investigate and prosecute human trafficking and its illicit proceeds using a trauma-informed, victim-centered approach.
• Enhance efforts to bring traffickers to justice by deploying a broad range of tools, including, where appropriate, financial sanctions, federal contracting suspension and debarment, and travel restrictions.
• Increase efforts to investigate and prosecute forced labor.

Partnerships: Effectively combating human trafficking requires collaboration to complement and support the other pillars of prevention, protection, and prosecution.

• Deepen our understanding of human trafficking networks that primarily impact or operate in the United States.
• Enhance information sharing to inform a strategic outcome.
• Strengthen Federal anti-trafficking efforts through external partnerships, including with the private sector, civil society organizations, and survivor input.
• Cooperate with allies, including trade partners, bilaterally and in regional and multilateral fora to address and combat human trafficking and forced labor.
• Continuously reevaluate the authorities and resources of the U.S. Government to combat human trafficking.

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.

In 2020, 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, foreign corrupt practices, production of counterfeit goods, prostitution, drug trafficking, money laundering, document fraud, visa fraud, immigration-related crimes, and public corruption.

Some examples include:

• The Zhao Wei drug trafficking organization engages in human trafficking to generate funds to further its other criminal activities.
• MS-13 engages in human trafficking both domestically and transnationally.
• Mexican origin transnational criminal organizations engage in sex trafficking to facilitate other illicit activity.
• Multiple European countries have documented transnational organized crime operations that exploit both European 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.

“Human traffickers establish front companies to hide the true nature of a business, its illicit activities and its owners and associates,” according to investigators. “There are strong indicators of the use of anonymous companies for money laundering and human trafficking.”

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 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 of the U.S. Treasury’s Financial Crimes Enforcement Network (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 recieve 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.

“Human trafficking is a stain on our society’s conscience and an affront to the ideals that form the basis of our national strength: liberty, justice, equality, and opportunity,” President Biden said in a statement.