Written by Mackenzie Martinez
Throughout time, human trafficking networks have taken advantage of the loopholes in the global financial system to facilitate their crimes. As financial options have shifted to include cryptocurrency and shell companies, the economic opportunity for human trafficking has only expanded. The Anti-Human Trafficking Intelligence Initiative (ATII) blog series “How Human Traffickers Exploit International Economics” goes into depth on the major tactics criminals use to finance their trades.
In her statement “Human Trafficking and the International Financial System,” Louise Shelley details a few basic changes that could vastly decrease the opportunity for financial exploitation. This blog summarizes six steps we as a nation can take to address human trafficking in the financial system. Shelley’s full statement can be found here (link).
- The Beneficial Ownership Law: This law has been passed, but it needs to be carefully and comprehensively implemented. The largest detected network of human traffickers involved massage parlors in cities across the U.S., Canada, and Australia. Aside from that, the vast majority of massage parlors hide their owner’s identity, making it difficult for law enforcement to intervene. Traffickers currently hide behind shell companies and anonymous ownership to prevent detection, and the implementation of the beneficial ownership law will eliminate the opportunity for such a shield.
2. Cryptocurrency Oversight: Cryptocurrency is being used to finance human trafficking and many other forms of illicit activity. Greater financial oversight is needed of this fast-growing financial instrument. Similarly, cooperation and the sharing of information between government agencies and the private sector is needed to track and analyze criminal transactions. For example, in the case of Welcome to Video trafficking scandal, the website was shut down by a coordinated effort between IRS-Criminal Investigations, Homeland Security Investigations, and other national and foreign government agencies. They utilized software from the company Chainalysis, which specializes in blockchain analysis.
3. Follow the Money Policies and Training: #FollowTheMoney needs to be a much more central part of investigations of human trafficking. This is difficult as there are a relatively small number of Suspicious Activity Reports (SARs) in the FinCEN data base associated with human trafficking. Training and awareness must be raised to not only increase SARs reporting but to make use of known patterns of suspicious transactions. Training must also ensure that the reports are detailed, including whether the subject is a suspected victim or offender, and the dates of all suspicious transactions.
ATII’s efforts fall heavily under this realm of necessary corporate change. In relation to cryptocurrency, ATII stressed in a December 2020 report that banks must strive to “analyze bitcoin transactions in the context of the account activity as a whole”, identifying suspicious activities in both crypto exchanges and brick and mortar bank accounts. ATII’s #FollowMoneyFightSlavery movement encourages financial institutions to take advantage of our in-depth database, training resources, and partnerships, with the goal of maximizing corporate social responsibility and combating human trafficking wherever possible.
4. Focusing on Supply Chains, Transportation, and Living: In depth regulation of supply chains would contribute to combating human trafficking as forced labor or sex trafficking have been found to reside within chains, either with or without the business’ knowledge. Furthermore, it is important to regulate transport systems, including travel agencies, hotels, rental apartments, ride-share services and short-term rental apartments. According to the Human Trafficking Institute’s analysis of federal trafficking cases in recent years, over 80% of federal cases of sex trafficking involved exploitation at hotel and motels.
5. Enhanced Customer Vetting and Use of SARs: It is necessary to strengthen the regulation and reporting requirements of online businesses to vet customers and report suspicious transactions. More needs to be done by companies such as Uber and Airbnb in monitoring data for suspicious patterns of financial transactions and how their businesses enable human trafficking networks. The role of online businesses in human trafficking is broader than those companies addressed by the FOSTA-SESTA legislation, and it is their responsibility to recognize and rectify any inadvertent support.
6. Enhanced Customer Vetting and Use of SARs: It is necessary to strengthen the regulation and reporting requirements of online businesses to vet customers and report suspicious transactions. More needs to be done by companies such as Uber and Airbnb in monitoring data for suspicious patterns of financial transactions and how their businesses enable human trafficking networks. The role of online businesses in human trafficking is broader than those companies addressed by the FOSTA-SESTA legislation, and it is their responsibility to recognize and rectify any inadvertent support.
Though six suggestions were presented here, it is only a small sample of future efforts that should be taken to address human trafficking in the financial system. We urge you to think deeply on what you can do to combat human trafficking as an organization or as an individual. Financial institutions and other corporations with questions on how they can boost their corporate social responsibility and fight human trafficking can reach out to ATII for more information.