Stage 1 | Collaboration
Understand Finance’s Role in Stopping Human Trafficking
Human trafficking is rampant, and financial institutions (FIs) are uniquely positioned to address it. Human trafficking is on the rise. In the U.S., more than 8,500 cases were reported nationwide in 2017, which is a 13% increase from the year prior. As a business, this is an immensely profitable industry. So, let’s be clear: Traffickers are in the business to make money. With the industry bringing in an estimated $150 billion annually, they must rely on the banking system. Furthermore, prosecuting financial crimes does not require victim testimony. As a result, it is an essential route for obtaining justice against traffickers when victims are not available or emotionally incapable of testifying.
The law requires financial institutions to investigate and report activity, which they can build upon to disrupting trafficking specifically. In the U.S., the Bank Secrecy Act (BSA) and USA PATRIOT Act require FIs to monitor and investigate a set of suspicious individuals and activities to capture the spectrum of financial crimes. As such, institutions already have the mandate to execute the monitoring, reporting, and investigating that is required when addressing trafficking related-activity. To avoid abuse of their businesses and to catch traffickers specifically, FIs must put to use a broader and deeper range of identity, activity, and relationship indicators than is mandated by these Acts.
FIs, NGOs, and governmental actors are already invested in identifying a broader and deeper set of trafficking-related indicators, and building classification typologies. Today, the industry is aware of long-standing indicators, which are individual attributes associated with trafficking. Indicators can be demographics: Countries such as Thailand and the Philippines are common victim origins ; industries like massage, health and beauty, and agriculture more often employ trafficked individuals. Indicators can also be activities: late-at-night card transactions, numerous accounts tied to the same individual and location, and large deposits and withdrawals in short periods of time, for example, can be connected more frequently to traffickers. The opportunity for working groups today lies in sharing more in-depth learnings to build out typologies. Typologies are patterns proven to be very strong indicators of trafficking. They are often comprised of a string of individual indicators. For example, a nail salon making late-night card transactions, post-business closure, and multiple money transfers, might be one example of a human trafficking financial typology.
Despite their commitment, institutions struggle to catch trafficking because the criminals are experts in deception and keeping crimes undetected. The challenge in identifying and acting on typologies is that traffickers often adjust their financial patterns. They hide under shell companies and avoid moving flag-generating sums of money all at once. They open a variety of accounts tied to different people and locations to avoid detection, and they take advantage of the independence of U.S. banks by distributing money and activities across them. Even in retail settings, traffickers manipulate victims in the presence of bank staff, and succeed in creating joint-ownership bank accounts to withhold any opportunity for financial autonomy of their victims.
Collaboration to address trafficking is at an all-time high. Over the years, U.S.-based bank, government, and non-profit groups have formed multi-sector partnerships. Some examples include ACAMS and Polaris, Thomson Reuters and the US Bankers Alliance, New York County District Attorney’s office and FIs, and federal law enforcement task forces and FIs. The collaborative approach means these groups that have a common mission to end trafficking can tap into a breadth of expertise and resources. Many of these partnerships are welcoming other institutions into their networks.
Collaboration between FIs, as well as across industries, can make a measurable positive impact. One example of a collaboration making measurable impact is Canada’s Project Protect, which was established in 2016. That year institutions submitted more than 2,000 reports of suspicious transactions – five times the numbers of reports from the year prior. In the U.S. collaborations are also improving the speed and accuracy at catching traffickers.
The focus for groups must shift towards higher quality data and the technology infrastructure needed to quickly and deeply monitor people and activities. In working groups, the focus has been on sharing data and typologies amongst institutions. The emphasis has not been on operationalizing those findings by each institution. Institutions have individually struggled to do this because working group output is not digitalized into a usable format, and because institutions face outdated and cumbersome investigation systems. This stops institutions from building working group output into their processes. Institutions continue to delay or even miss identifying some criminal activities, and experience time lags and resources wasted due to investigating false positives and lower-risk flags. Institutions must invest in data management infrastructure that incorporates external data (third party and public) into their analyses. Moreover, working groups must work in cohesion with one another, and focus on improving the output of their learnings so they feed more easily into institutions’ workflows.
A limited anti-human trafficking program poses compliance risk. The risk of not combating trafficking also has legal repercussions. In the last five years, numerous global FIs have made headlines for facing fines of millions and even billions of U.S. dollars, as a result of weaknesses in their anti-money laundering (AML) processes. These fines have been imposed in large part due to their neglect to monitor or act on trafficking-related suspicious activity across their services.
To put an end to this rampant global crime, FIs must invest in their anti-trafficking programs. Their focus today should be on educating about typologies, deeply collaborating with peer organizations, and investing in technical infrastructure to make stronger use of relevant data. Doing so is both morally and legally imperative – millions of lives depend on it.