On January 21, 2021, the ACAMS New York Chapter hosted an online webinar titled The Use of Data to Disrupt Human Trafficking and Forced Labor.
This event was moderated by Susan White (Head of Business Development at kompany and ACAMS New York Chapter Board member), and included the following panelists:
Duncan Jepson - Managing Director, Liberty Shared (pictured top right)
Stephen Gallagher - Deputy Chief of Police, Borough of Fort Lee, NJ (pictured top middle)
Patricia Sullivan - Managing Director, Conduct, Financial Crime and Compliance, Standard Chartered Bank (pictured bottom right)
The panelists discussed that an estimated $150B is generated annually from human trafficking, with less than 2% of these proceeds identified. Members of the financial crimes’ compliance community can truly made a difference in terms of helping to identify human trafficking activity. Even small studies conducted by financial institutions can lead to awareness of the prevalence of this crime. In general, human trafficking activity often includes repeated patterns of behavior (often with low dollar amounts) using the same victims. It can be valuable to look at the supply chain in relation to financial activity as well.
The Philippines/Australia corridor was discussed by panelists as a particular hotspot for on-line child sexual abuse trafficking. It was recommended that financial institutions use data analytics to identify human trafficking activity in this corridor. A review of payments that meet a pattern of recurring and frequent small value transfers such as USD100 or USD200 per transfer with upwards of USD800-USD2700 per month and tagged as “school fees” or “gifts” yielded successful results. Research identified that these sums are exceedingly high based on originator’s profession (public source information) and the stated purpose in Philippines. The use of deep research is often more valuable to human trafficking detection than automated transaction monitoring. The successful data analytics pilot will now be used to assess development of more automated analytics.
From a law enforcement perspective, human trafficking-related SARs are generally well-written, well-researched, and very extensive. Most of the SARs related to this activity are from MSBs and large banks. It was also noted that there are very few enforcement actions related to forced labor and that needs to change to spur corporate reform.
Using Data can disrupt Human Trafficking and Forced Labor, some examples include:
Australia/Philippines on-line child sexual abuse example as noted above.
Forced Labor: Financial institutions that manage payroll for commercial entities should consider multiple employee deposits to one account and repeat patterns of quick transfers out to common account.
ESG and Financial Crime teams at Financial Institutions need to break down silos to established consistent information sharing to increase risk management. For example, ESG teams may be looking at potential and existing client’s compliance with the UK Modern Slavery Act in their supply chain or commitment to sustainability development goals related to the environment but not apply the same level of due diligence financial crimes teams use when evaluating clients’ source of wealth and funding for connections to illicit activity. In the not-too-distant future more predicate crimes will capture social and environmental issues, so called “Green crime”, but at present that is not the case and some issues fall with business ethics but are still not crimes.
Thick Data is fundamentally important to identify risk: Thick data is about context and depth of understanding of the nature of the abuse of individuals and their communities – this leads to a better understanding of the range of predicate offences committed against vulnerable populations and therefore what is structural to your clients revenue generation and/or business value chain and what is “opportunistic”. In addition, this allows you to become anticipatory about your clients’ future revenue streams. REMEMBER there is substantial asymmetry between what is captured in digitized data about abuse and what is actually happening on the ground. Only 50% of the world has internet access, and so much of what happens is simply not searchable because it is not record and absent from the internet. AI cannot search what is not there and most of what happens is not in the current internet. And so this will give you a lot of false negatives – i.e. no red flags when there should be!
Industries that require added scrutiny include:
Palm oil, massage parlors, nail salons, construction, fishing. See too: FinCEN Advisory on Human Trafficking.
Industries that rely on unskilled and semi-skilled labor also 3Ds (dirty, dangerous, and demeaning) such as agriculture, fishing, electronics in Tier 2 & Tier 3 countries, mining/extraction industries/, personal services such as massage and nails but also recruitment agencies in source countries and destination countries
Countries that require added scrutiny include (remember the three key elements to forced labor – people (vulnerable and victims), product and money)
Look at source, intermediate and destination countries. www.freedomcollaborative.org has a map of trafficking routes collected by NGOs around the world – see the routes map
Cross refer the routes map with high-risk industries, labor migration routes, your clients transactions and your clients industry sector focus.
Tips for successful SARs related to Human Trafficking and Forces Labor can be found in the FinCEN Advisory (in the valuable links section below).
When writing SARs regarding Human Trafficking and Forced Labor, I would ask that all involved parties are included in the SAR, and although transactions amounts may be small to look at the cumulative amounts when the transactions and/or people involved can be connected. A good link analysis between persons, accounts and transactions can shed light on what may seem like innocent small transactions. Money launderers in narcotics trafficking specifically go out of their way to micro-structure transactions to avoid detection. Human Trafficking and Forced Labor by their nature are micro-structured in many circumstances, which may draw less suspicion from financial institutions.
Other ways to successfully engage with Law Enforcement includes proactive outreach and establishing POCs between the FI and the Law Enforcement group, mutual training sessions on key threats and best practices.
Opening dialogue between financial institutions and law enforcement on a regular basis much like is already done between financial institutions, will make communications flow easier between financial institutions and law enforcement when information needs to be exchanged. A FI contacting law enforcement about illegal activity that would be of their concern can easily be reciprocated by law enforcement contacting a FI and advising them of illegal activity that they may be unaware of within their FI.
Valuable links, resources, and additional reading:
Mr. Nice: An Autobiography by Howard Marks ISBN-10: 1786890038 ISBN-13 : 978-1786890030
The Cleaner: The True Story of One of the World’s Most Successful Money Launderers by Bruce Aitken ISBN 1945190191, 9781945190193
IMPORTANT: Please take this survey
As discussed on the webinar, Liberty Shared needs your assistance and is requesting you participate in their survey. The aim of the survey is to understand current sources of information about human trafficking used by the banking industry to fight financial crimes and the improvements that can be made to further support disruption of perpetrators' funds.
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Link is here: https://libertyshared.org/acams-survey