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Suspicious activity monitoring and human trafficking

Dec 17, 2019

The Financial Crimes Enforcement Network (FinCEN) defines human trafficking as: “The act of recruiting, harboring, transporting, providing or obtaining a person for forced labor or commercial sex acts through the use of force, fraud or coercion.” 

With instances of human trafficking on the rise, it is important to also define the role financial institutions play in assisting law enforcement in detecting this type of crime.

The June 2019 U.S. Department of State’s Trafficking in Persons Report (TIP) revealed that during the 2018 fiscal year, the U.S. Department of Justice (DOJ) convicted 526 traffickers. 

Of those convictions, 501 cases involved predominately sex trafficking, and 25 of the cases were predominately labor trafficking. Sentences were as severe as life in prison.

Recently the human trafficking case that has received the most media attention is the case involving the late Jeffrey Epstein. While Epstein’s case is heinous and appears to involve a litany of high-profile offenders, it is also not the norm. Most human traffickers are not multimillionaires. One of the main commonalities between Epstein’s victims and every other trafficking victim is that they were vulnerable in some respect. 

In the following paragraphs, the three stages associated with human trafficking will be introduced as well as ways financial institutions can identify red flags associated with this type of crime as part of their regular suspicious activity monitoring program. 

Recruitment or abduction. In this stage traffickers typically obtain their victims through various forms of deception or even force. Examples of how traffickers may recruit their victims include techniques such as kidnapping, false marriages, or advertisements for employment or programs for studying abroad. Human traffickers may prey on the weak and vulnerable; therefore, areas affected by natural disasters, economic hardship, or armed conflict may be especially attractive to traffickers.

Transportation. Once the victims have been taken, the traffickers will transport them to locations where they will be exploited or sold to other traffickers. Victims may come from international or domestic locations and may be transported by air, sea, and/or land. Transportation could be to foreign locations or locations within the United States.

Exploitation. Human traffickers make their profits by exploiting their victims through forced labor, sexual exploitation, and/or involuntary participations in crimes. Businesses frequently used to facilitate human trafficking include, but are not limited to massage parlors, nail salons, restaurants, farms, construction companies, manufacturing companies, household services (housekeeping and au pair programs), and bars.

For governments (foreign or domestic) to be able to prosecute and establish that the crime of human trafficking has occurred, three elements must be identified: the trafficker’s action, the means used for force, fraud, or coercion and the purpose of the exploitation. Some of these elements may be identified through financial institution suspicious activity monitoring. FinCEN recommends that the most effective manner in which to evaluate transactional activity is to consider reviewing transactions at a relationship level rather than only at the account level. This method allows financial institutions to perform a more comprehensive analysis of a customer’s total relationship, including both their behavior and their activity. It is also important to remember that direct interactions by branch personnel with customers can also alert financial institutions to potential human trafficking. Suspicious Activity Reports (SARs) are a valuable method for financial institutions to report potential trafficking activity. However, the potential victims should not be reported as a subject on the SAR.

Some potential transactional-based red flags identified by FinCEN include:

  • A business customer who does not exhibit normal payroll expenditures. For instance, payroll costs could be nonexistent or extremely low for their stated business (exploitation stage).
  • Debits/credits inconsistent with the customer’s expected activity or occupation. These transactions may lack a business or apparent lawful purpose (recruitment, transportation, exploitation stages).
  • Cash deposits or wire transfers kept below $3,000 or $10,000 in an effort to avoid recordkeeping requirements or to evade Currency Transaction Reports (CTRs) (recruitment, transportation, exploitation stages).
  • Frequent outbound wire transfers, with no apparent business or lawful purpose, directed to countries with a higher risk for human trafficking or to countries inconsistent with the customer’s expected activity (recruitment, transportation, exploitation stages).
  • Cash deposits occurring in cities/states where the customer does not reside or conduct business. Typically, in these instances, the funds are quickly withdrawn (same day) after the deposits are made (exploitation stage).
  • Frequent payments to online escort services for advertising (exploitation stage).
  • Frequent transactions inconsistent with expected activity and/or line of business such as payments for housing, lodging, regular vehicle rentals, and/or purchases of large amounts of food (transportation, exploitation stages).

Some potential customer interaction-based red flags identified by FinCEN include:

  • A customer establishes an account or conducts transactions while always escorted by a third party under the pretext of requiring an interpreter (exploitation stage).
  • Accounts of foreign workers or students where the employer or employment agency serves as a custodian (exploitation stage).
  • Extensive use of cash to purchase assets and to conduct transactions (recruitment, transportation, exploitation stages).
  • Common information (address, phone number, employment information) used to open multiple accounts in different names (exploitation stage).

Most of the aforementioned red flags may appear suspicious on their own; however, a single red flag would not be a clear indicator of potential human trafficking activity. A combination of these red flags, in addition to the customer’s expected activity and profile, may be indicative of a potential human trafficking operation.

Financial institutions play a critical role in reporting activity commonly associated with human trafficking. A solid suspicious activity monitoring program, a part of all institutions’ internal controls, and regular training of financial institution staff on the detection of both transactional and behavioral red flags could aid law enforcement in the identification of human traffickers. If your financial institution suspects human trafficking is occurring, in addition to filing a SAR, you should report it to the National Human Trafficking Hotline at 1-888-373-7888 or report it directly through their website at www.humantraffickinghotline.com.


Kristen J. Ferwerda, CRCM
Manager, Compliance
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