You may think human trafficking couldn’t possibly be happening in your community, but in reality, it’s happening in all 50 U.S. states. And your financial institution has an obligation to develop and maintain systems to detect and report activity that could be indicative of human trafficking. Are your employees appropriately trained to identify human trafficking?
Understanding Human Trafficking
Human trafficking is growing at a higher rate than any other illegal activity — generating approximately $150 billion globally each year, second only to drug trafficking. Human trafficking is a form of modern-day slavery and can include sex, labor and organ trafficking.
There are an estimated 40.3 million human trafficking victims globally. Trafficking victims can be any gender, age, nationality, or race; however, they are mainly women and children, some as young as three months old. Sometimes children, particularly those in institutional care, are sold by their family members into slavery. The Taliban has even purchased children to act as suicide bombers.
The U.S. is not immune from human trafficking issues either. Between December 2007 and June 2018, the National Human Trafficking Hotline received 195,215 calls, web outreach, and emails, resulting in over 45,000 cases being opened. Trafficking also has been reported in all 50 states, and there are no places immune to this horror. Trafficking victims have been found in places such as massage parlors, restaurants, farms, hotels, manufacturing facilities, hair and nail salons, construction businesses, health and elder care institutions, adult entertainment businesses and more.
Laws Combatting Human Trafficking
As devastating as this crime is, there are several laws that have been established to combat human trafficking, resulting in an increased awareness of this growing epidemic. Knowledge is power, and there are things financial institutions can do to identify and combat modern-day slavery. Monique Villa, Thomson Reuters Foundation CEO, said, “Follow the money and you will get to the traffickers. Financial institutions have a crucial role to play in the fight against modern slavery.”
First, let’s start with the impact trafficking can have on financial institutions. The Victims of Trafficking and Violence Protection Act (TVPA) is a federal law that creates significant corporate liability for financial institutions that benefit from human trafficking if they know, or should have known, about the exploitation. Under the TVPA, institutions could face Bank Secrecy Act (BSA) enforcement actions, as well as criminal or civil litigation. The act also grants victims the right to file civil lawsuits in federal court against institutions for failing to provide adequate training and develop appropriate processes to identify and report human trafficking red flags. The financial damages and negative publicity resulting from such action could have significant and long-term impacts on a financial institution.
Identifying and Reporting Human Trafficking
Now that you know the impact a failed system could have on your financial institution, and the devastation human trafficking brings to its victims, let’s discuss methods for identifying and reporting human trafficking. Identifying and helping these victims can be difficult since they are often brainwashed, threatened and coerced to comply and stay quiet. As with other illegitimate businesses, the activity is often intermingled with what appears to be legal activity. This could include legitimate businesses, particularly cash-intensive businesses.
FinCEN published guidance on human trafficking red flags and how to handle reportable transactions (FIN-2014-A008, Appendix B). The guidance emphasizes the importance of reporting suspected human trafficking. It also explains the importance of being aware that no single red flag is a clear indication of human trafficking; rather, your institution needs to view the relationship and activity holistically.
Here are some signs to help your institution identify a trafficking victim:
- Frequent payments to escort agencies for advertising
- A customer coming into a branch to conduct transactions escorted by another individual; the third party may state they need to interpret for the customer or are a care provider for the customer, and they may be holding the customer’s identification documentation
- A large volume of cash deposits, often at various branches, especially when the cash activity is not in line with the customer’s occupation, or deposits are structured to avoid reporting
- Cash deposits taking place in multiple cities or states, often followed by outgoing wires (e.g., smurf activity, funnel accounts)
- Several wires being sent by multiple customers, apparently unrelated, to one beneficiary, often internationally
- Regular outgoing wires with no apparent business purpose, particularly to higher-risk countries or countries known for human trafficking
- Multiple hotel transactions in an evening (this could be for housing victims)
- Multiple movie rental kiosk purchases or related entertainment transactions (entertaining victims)
- Large fast food purchases, sometimes multiple times a day (e.g., $100 purchases to feed victims)
- Income and/or spending apparently not commensurate with the customer’s line of business and anticipated income
- Common signers or contact information for apparently unrelated business and/or personal accounts
- Substantial wage deductions by the employer, leaving employees with little to no money (e.g., housing and food costs)
Employee training to identify potentially suspicious transactions related to human trafficking and the proper method for reporting this information is vital. An effective transaction-monitoring process or system can also assist your financial institution in the identification of suspicious transactions.
When reporting suspected human trafficking, FinCEN requests that financial institutions include “ADVISORY HUMAN TRAFFICKING” in the narrative and suspicious activity information (this may include relevant key terms in the “Other” fields, as applicable, of Part II of the Suspicious Activity Report [SAR]). If institutions follow this guidance, FinCEN is able to more easily identify potential human trafficking crimes and either begin or enhance ongoing investigations with the additional information. 31 USC 5318 (g)(3) provides protection from civil liability for reporting suspicious transactions to appropriate authorities. For additional information related to the safe harbor rule, see the Federal Financial Institutions Examination Council’s (FFIEC’s) BSA/AML manual.
The following resources include additional information related to human trafficking: National Human Trafficking Hotline (humantraffickinghotline.org), Polaris Project website (polarisproject.org), the Trafficking in Persons Report 2018, anti-money laundering organizations, FinCEN, case studies, and certainly many other resources. If you have any questions or need help ensuring you’re taking appropriate action to identify the signs of human trafficking, please reach out to Wipfli’s BSA team.