FinCEN AML/CTF Priorities Part 2: Human Trafficking/Human Smuggling

Joann Millard, CAMS
July 19, 2021
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Key Priority: Human Trafficking and Human Smuggling

Among FinCEN's first list of key priorities for AML/CFT policy is deterring human trafficking/human smuggling.

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As part of the Financial Crimes Enforcement Network’s (FinCEN) first national priorities list for anti-money laundering and countering the financing of terrorism (AML/CFT) policies, one important priority continues to be critical in deterring AML/CFT concerns. Human trafficking and human smuggling, while not technically the same, are both used as a means of moving illicit money, at a tremendous human cost.

According to the National Human Trafficking Hotline, 92% of human trafficking cases intersect with the financial industry. Human smuggling activities also intersect with the financial system at many points during the operation, although the data is less clear since the crime is often undetected. Community financial institutions have become targets for these illicit transactions, as larger banks have more sophisticated monitoring systems for detecting and reporting. However, there are many steps smaller banks and credit unions can use to stop these illicit funds from flowing through our U.S. financial system.   

Financial crime

The cost of human trafficking and human smuggling

As described in the advisories and other US government reports, human trafficking and human smuggling networks use a variety of mechanisms to move illicit proceeds, ranging from cash smuggling by individual victims to sophisticated cash smuggling operations through professional money laundering networks and criminal organizations. The illicit proceeds from human trafficking can include income associated with logistics, such as housing and transportation of victims, as well as earnings from the exploitation of victims. Human traffickers and smugglers often establish shell companies to hide the true nature of their businesses. Human traffickers and human smugglers receive payments in a variety of ways, such as funnel accounts and TBML (trade-based money laundering) schemes.

The U.S. Department of State reports that human trafficking generates an estimated $150 billion worldwide annually, with a significant portion of those funds passing through legitimate financial services. After drug trafficking, human trafficking is the 2nd largest criminal industry in the world. One of the most effective ways to combat this crime is through a “financial crimes approach.” In this approach, financial institutions report potential cases, allowing law enforcement to differentiate the traffickers from the victims, document traffickers’ motives and knowledge, corroborate victims’ statements, and assist in identifying affiliates. According to U.S. Customs and Border Protection, between October 1, 2020 and May 31, 2021, their Office of Field Operations has seized $47,825,514. Globally, human smuggling data is not available as many countries do not track that information. According to the United Nations Office on Drugs & Crime, the minimum number of people smuggled around the world is more than 2.5 million annually. The estimated total of fees generated from smuggling activity worldwide is more than $11 billion per year which makes it a big business with high profits.

Stay up-to-date on the latest FinCEN priorities. See Part I: Implications for Community Financial Institutions.
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Know the red flags

Human trafficking vs. human smuggling:
What's the difference?

As described in FinCEN’s priority release, human trafficking and human smuggling networks can be organized international crime syndicates or smaller, less sophisticated groups. Either method affects the U.S. financial systems, not to mention the human aspect of these crimes. While the FinCEN priorities categorize human trafficking and human smuggling together, there are significant differences. US law defines human trafficking as the use of force, fraud, or coercion to compel a person into commercial sex acts or labor or services against his or her will. The one exception involves minors and commercial sex. Human Smuggling is the illegal importation of people into a country via the deliberate evasion of immigration laws. Unlike human trafficking, human smuggling is always transnational (from one country to another) and with mutual consent between the smugglers and the people who are being imported. However, human smuggling often can lead to human trafficking once the borders are crossed, and the smuggler refuses to free the individual(s).

Here are some other important differences:

Human trafficking

  • Must contain an element of force, fraud, or coercion (actual, perceived, or implied), unless under the age of 18 involved in commercial sex acts
  • Forced labor and/or exploitation
  • Persons trafficked are victims
  • Enslaved, subjected to limited movement or isolation, or had documents confiscated
  • May not involve actual movement of the victim
  • No requirement to cross an international border
  • Person must be involved in labor/services or commercial sex acts (must be "working")

Human smuggling

  • The person being smuggled is generally cooperating
  • There is no actual or implied coercion
  • Persons smuggled are violating the law. They are not victims.
  • Persons are free to leave, change jobs, etc. 
  • Facilitates the illegal entry of person(s) from one country into another
  • Smuggling always crosses an  international border
  • Person must only be in country or attempting entry illegally.

FinCEN previously issued two important advisories, FIN-2014-A008 and FIN-2020-A008, identifying financial and behavioral red flags for human trafficking and human smuggling. For more information on red flags associated with these criminal activities, download the free Human Trafficking Red Flag checklist. This document may be used as a training guide for both front-line and investigative staff. Armed with the tools available, community financial institutions are strong partners with law enforcement to win the fight against human trafficking and smuggling and help save lives.

 

References:

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About the Author

Joann Millard, CAMS

Financial Crimes Investigator
Joann Millard is a Certified Anti-Money Laundering Specialist and a member of ACAMS. She has been with Abrigo since June 2020 when she worked as a contractor and became an employee in March 2021. Prior to that, she spent 25 years in the banking industry working in Jefferson City, MO

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