Written by Mackenzie Martinez
This blog series dives into the many avenues traffickers follow to hide their crimes and highlights criminal cases that illustrate such efforts. Some methods have long been utilized, while others are just beginning to emerge. Understanding how human traffickers exploit international economics will help inform how we can most effectively follow the money to fight slavery. All the information from his blog series comes from Louise Shelley’s “Human Trafficking and the International Financial System,” which can be found here (link).
Money Laundering into Real Estate
Cases of money laundering into real estate are hard to detect because of the absence of beneficial ownership information. Furthermore, profits are often disguised, which adds complexity to the crime. This is particularly the case with the ownership of ubiquitous massage parlors today that number in the thousands, where only 28% of businesses had registered owners. The need to fully implement the laws on beneficial ownership regarding spas and massage parlors is of even greater currency after the recent tragic killings in Atlanta.
Case Study: The White Lace Case
The White Lace Case consisted of a human trafficking ring that generated approximately $7 million in Los Angeles from 2000 to 2002. It was the first time that money laundering was charged in a prostitution case by the LAPD (Los Angeles Police Department). The small amount of money made by the victims was transferred to their homes in the former Soviet Union through wire transfers. The millions in profits made by the manager of the trafficking ring were invested in real estate in the Los Angeles area and wired to Switzerland.
Establishing Allied Businesses to Facilitate Money Laundering
In some instances, businesses are established and utilized as vehicles through which the profits generated from human trafficking can be laundered. The businesses can seem legitimate and even maintain a physical address, but their main goal is to conceal the economics of trafficking. On the other hand, “shell” companies can be established, which lack a physical location but employ bank accounts and facilitate laundering nonetheless.
Case Study: Southern California Fashion Boutique
A criminal network in Southern California was recently apprehended for opening a fashion boutique to disguise the profits from human trafficking. In order to make the proceeds appear as legitimate and allow perpetrators to utilize the funds themselves, trafficking profit was falsely attributed to the boutique. Multiple other trafficking locations, including massage parlors and skin care businesses, were operated by this network, with the boutique serving as the main profit laundering hub. Fake names and information were utilized in all businesses, making it difficult for law enforcement to piece together the complex trafficking system at hand.
Trade-Based Money Laundering
Trade based money laundering (TBML) exploits existing international trade systems, using the import and export of goods to mask the circulation of human trafficking profits.This form of money laundering is a pervasive phenomenon where fictitious or manipulated invoices are used to justify large flows of money.Businesses utilize a variety of techniques in trade-based laundering, including over and under invoicing, which alter the proclaimed value of a shipment and allow space for laundering to occur.
Case Studies: London Galoshes and Florida Marijuana Farming
In the late 1990s and early 2000s, the London police, who were pioneers in following the money, found that export-import businesses were key to repatriating the profits of human trafficking for sexual exploitation. One brothel in London was filled with galoshes purchased with the profits of human trafficking. The galoshes would be sold in Ukraine to turn the crime profits into a legitimate economy. More traditional commodities were also used, such as cars.
In one of the largest labor trafficking cases identified in the United States, profits from a car theft ring, based in Florida, were laundered into a marijuana farm (a form of real estate). In Operation Dual Identity, trafficked workers were then brought to tend the marijuana, and the proceeds of this trade then entered the illicit drug economy.
This blog post detailed how human traffickers utilize various forms of money laundering to facilitate their crimes. Money laundering crimes far exceed the scope of human trafficking and play a huge role in maintaining trafficking networks and businesses. The next and final post dives into the use of wire transfers and money transfer businesses for trafficking activity.