How Banks Spot Human Trafficking Crimes

Human trafficking is a global problem. This heartbreaking issue involves complex money flows, regulatory implications, and reputational risk for banks. It is also, sadly, one of the most profitable forms of international crime and one of FinCEN’s anti-money laundering priorities.

To better prepare financial institutions, RMA hosted a recent Risk Readiness webinar entitled “Human Trafficking and Banks – Addressing the Hidden Risk.” The panel included David W. Rivkin, a litigation partner lawyer in Debevoise & Plimpton, Aseel Rabie, a counsel in Debevoise & Plimpton’s banking and financial institutions group, and Michelle Rector, vice president and the head of the financial intelligence unit at Raymond James. Here is a brief summary of this important conversation:

 

The scale that is visible. The numbers relating to human trafficking are shocking. The International Labor Organization estimates there are as many as 25 million victims of human trafficking globally at any given time, with total profits of $150 billion per year. In the United States, human trafficking has been identified in all 50 states and the District of Columbia.

According to Rivkin, human trafficking is a modern form of slavery. It is a crime whereby traffickers exploit and profit at the expense of adults or children by compelling them to perform labor or engage in commercial sex.

There are two primary forms of human trafficking: forced labor and sex trafficking. Forced labor examples include debt bondage, in which debt is used as leverage to compel a person's labor by a trafficker. In other cases, a recruiter may exploit an initial debt that a person assumed as a condition of employment. Sex trafficking is when someone is compelled by force, fraud, or coercion to provide commercial sex. Victims are conscripted to take jobs as restaurant workers, factory workers, or work as prostitutes.

The examples that bankers see. For banks, there are two common types of potentially suspicious activities: Know Your Customer disclosures and transactional anomalies. Panelists noted that suspicions may be raised when a banker sees the same information, such as a phone number and address, linked to several accounts under different account holders.

Account holder transactional patterns may also trigger alarms. Financial institutions often see traces of evidence left behind by traffickers’ data. Suspicious account activity may include high payment volumes for living expenses, or a single account paying multiple phone bills. Other examples included frequent payments for rent, hotels, rental cars, airline tickets, or ride shares beyond certain thresholds. “Traffickers can hide in plain sight, and so the absence of these indicators doesn't necessarily rule out that the trafficking is occurring,” said Rector.

Trafficking can be enabled by corruption at many levels of government, including border control officers, local police, or higher government officials. Traffickers typically look for people who are marginalized and vulnerable – those who are suffering from stressors like poverty or health issues.

Situational adversities can also make potential victims vulnerable to human traffickers. The pandemic exposed many households to economic uncertainty, greater isolation, and disruption of their support systems. Similarly, the war in Ukraine may have increased the risk of human trafficking.

Call to action for financial institutions. According to Rabie, human trafficking activity can impact a variety of services offered by financial institutions: Retail and commercial banking, credit card and money transfer, check cashing, and payroll services.

Combating corruption and transnational criminal organizations are among the priorities FinCEN announced in the Anti-Money Laundering and Countering the Financing of Terrorism National Priorities issued on June 30, 2021.

According to FinCEN, “Environmental crimes frequently involve transnational organized crime and corruption and are often associated with a variety of other crimes including money laundering, bribery, theft, forgery, tax evasion, fraud, human trafficking, and drug trafficking.”

How should financial institutions address these priorities? Rivkin recommended creating systems to integrate protection against inadvertent involvement in human trafficking into existing training and compliance programs, as the first step for banks to mitigate the risks and address these priorities in their risk-based AML programs.

Rivkin added that banks should consider updating or tailoring vendor policies through corporate governance procedures. Other steps banks can take include reporting suspicious activities timely and training staff on latest corporate guidelines related to human trafficking.

 

About the speakers:

David W. Rivkin is a litigation partner in Debevoise & Plimpton’s New York and London offices and co-chair of its ESG practice.

Aseel Rabie is a counsel in Debevoise & Plimpton’s banking group and financial institutions group.

Michelle Rector is a vice president and the head of the financial intelligence unit at Raymond James.