Posted by Brian Monroe –
In this first piece in a four-part series by the Anti-Human Trafficking Intelligence Initiative (ATII), a non-profit focused on helping the public and private sectors better fight the soaring scourge of monetizing human misery, slavery and desperation, the group tackles how criminal groups exploit underground banking channels.
Human trafficking is a global issue with tendrils to law enforcement, compliance teams and even whole countries, earning a profit of nearly $150 billion annually, with more than half of the profits coming from sexual exploitation.
That makes the sex and labor trafficking industry second only to drug trafficking as the world’s largest criminal industry, according to industry estimates. In tandem, while crypto and other virtual value steams have meant more banking and remittance opportunities for underserved regions, it has also aided some illicit groups in obfuscating their trafficking transaction trails.
By Mackenzie Martinez
Special contributor, ATII
June 14, 2021
With minor edits by ACFCS VP of Content, Brian Monroe
This story was originally published earlier this month by the Anti-Human Trafficking Intelligence Initiative. Republished with approval and appreciation. To read the original piece, click here.
The rise of the cyber, digital and virtual worlds as a means of communication, payments and international value settlements since 2000 has vastly altered the global financial system, causing a major shift towards online economics.
Sadly, the expansion of web-based economics has enabled a variety of human trafficking tactics that allow crimes to proceed virtually unnoticed. New and developing methods for facilitating trafficking have resulted in the growth of profits and criminal networks.
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. Much of the information from this blog series comes from Louise Shelley’s “Human Trafficking and the International Financial System,” which can be found here (link).
That report was part of prepared statements by many of the top minds in the financial crime investigations and compliance fields discussed during a virtual hearing – “Ending Exploitation: How the Financial System Can Work to Dismantle the Business of Human Trafficking.”
The hearing took place March 25 before the House Committee on Financial Services, subcommittee on National Security, International Development and Monetary Policy.
To read the full list of prepared statements and view a recording of the hearing, click here.
At its heart, human trafficking is described as illegally transporting people from one country or area to another, in many cases for the purposes of forced labor or sexual exploitation, according to analyses and media reports.
According to the U.N.-backed International Labor Organization (ILO), globally it is estimated that some 40 million people have been affected by this industry, both willingly in terms of trying to make a better life for themselves, and in other instances, taken advantage of by illicit organized criminal gangs.
The profits of this crime are also massive.
In a 2014 ILO report, human trafficking earns a profit of nearly $150 billion annually, with more than half of the profits coming from sexual exploitation.
That makes the sex and labor trafficking industry second only to drug trafficking as the world’s largest criminal industry, according to ILO and the nonprofit Polaris Project, key figures not lost on global watchdog groups, domestic and international investigative agencies and international banking groups.
Over the last decade, through a bevy of globe-spanning public-private partnerships, law enforcement agencies and banks have shared broad and specific red flags to help uncover businesses taking advantage of slave or sex labor.
One key tactic to uncover potential ties to trafficking groups in your institution is looking for accounts without standard sources of income and for credit cards, frequent cancellations, according to several fincrime compliance professionals speaking at a conference for the Association of Certified Financial Crime Specialists.
Some examples include:
- Excessive deposits, particularly in round amounts, like $50, $150 and $200.
- Abnormally timed deposits, such as between 10 p.m. and 6 a.m.
- Large denominations of deposits. If normal cash-intensive business, you will have a mix of denominations. Coins. $5 and $10. If human trafficking, you will largely be taking in $50 bills, $20 and $100 dollar bills. Illicit groups thinks banks don’t look for that, but denominations in deposits are recorded at the branch level.
- Deposits in multiple cities, particularly if they are close to each other, over a period of time. Traffickers will take victims from city to city and rotate throughout the country in urban centers in the country. Look for the impossible trip, Halifax and Vancouver in the same day. If you see that as an AML analysts, it means multiple people are using the same account as a funnel account.
Peer to peer payments (EMT, Venmo, etc.)
- Payments in round consistent amounts. An account that is taking in a lot of these have some telltale signs as well. The fact that the payments are in some sort of increment. $150, $300 and $50, means someone is buying something in increments of hours.
- Multiple originators with some repetition. Many different parties paying into the same account over time and repeat customers. Look for customer drift in multiple cities. Look for a single email address associated with multiple bank accounts or the opposite, a single bank account associated with multiple email addresses, and those tied to online advertising or escort sites.
- Funnel accounts and Peer to peer transfers. They know that is a vulnerable area, used accounts to collect the P2P transfer, then immediately hit an ATM and withdraw the money.
- They know the behavior to stick out, so when a P2P transfer hits a bank account, they pull it out immediately, sometimes in as little as 30 minutes. It is a smurfed account. If that is caught and shut down, they won’t lose a lot of value. A key red flag is 5 – 10 email money transfers and then 5-10 withdraws done on that periodically.
- Multiple payroll deposits into one account, which could be tied to slave labor. This would look like multiple government benefit checks to the same account. Clearly intended for more than two or three people, meaning the person is in control of the labor and taking the money and paying it out – but much less to those actually doing the work.
- Multiple deposits from processors for online adult content, such as Fenix, Onlyfans and the like.
Underground banking encompasses all informal banking transactions, and though it is legal in most countries, it is recognized as a suitable mechanism for money laundering.
By definition, it includes money transfers that lack any physical movement of money, called hawala in many countries in the Middle East, which make it extremely difficult to follow.
This form of banking dates back as far as the Tang Dynasty in China (618-907 AD), and its deep historical roots aid in facilitating illegal activity today.
Case Study: Human Smuggling and Trafficking from China
Two decades ago, a large Chinese network engaged in both human smuggling and human trafficking.
The individuals moved by this criminal ring were placed in more than 400 legitimate businesses in the Washington, D.C. area and more in New York City. Their work contributed to the profits of restaurants, take-out operations and other businesses.
The combined smuggling-trafficking ring also made money directly from the people they moved and deposited this money in banks.
After arresting one of the ring members, law enforcement was not able to move quickly enough to freeze the accounts of the traffickers, with some $60 million eventually moving back to China rapidly through underground banking channels.
Other smuggling and trafficking operations involving China also use underground banking to repatriate profits.
Unlike the majority of economic exploitation methods discussed in this blog series, cash movement does not rely on online economics.
Traffickers smuggle bulk cash between countries to be kept off the radar of law enforcement, as harboring such sums of cash could trigger an investigation.
Cash can be smuggled in a variety of ways, and those being trafficked can be employed as “mules” to do the smuggling themselves, as seen in the following case study.
Case Study: Netherlands Trafficking Ring and Turkey
One of the largest Dutch investigations of a trafficking ring operating in the Netherlands found at least 120 women being forced into prostitution.
In addition to being trafficked for sex, the criminals used the victims as couriers of cash back to Turkey to hide the economics of their criminal activity. The money was then invested in nightclubs and bars in the resort community of Antalya, Turkey.
These types of businesses are historically a favorite stash and laundering vehicle for organized criminal gangs as they are cash-intensive and the books can be easily cooked to make the cash being deposited into banks look legitimate.