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Human smuggling: New FinCEN alert puts financial institutions on guard

Terri Luttrell, CAMS-Audit
January 13, 2023
Read Time: 0 min

FinCEN human smuggling alert

Human smuggling is distinctly different from human trafficking, and it's on the rise on the southwestern U.S. border. Know the red flags to watch for.

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On January 13, 2023, FinCEN issued an alert about human smuggling along the southwest border of the U.S., emphasizing the seriousness of the crime and noting the differences between human trafficking and human smuggling. This alert builds upon FinCEN’s previous 2014 and 2020 human smuggling and human trafficking advisories, providing trends and typologies for financial institutions to watch for. 

Defining the crime

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

Human smuggling is the facilitation, for financial or other material gains, of irregular entry into a country where the migrant is not a national or resident, according to the United Nations. The criminals behind this highly lucrative business seize the opportunity created by the need or desire of migrants to escape poverty, lack of employment opportunities, natural disasters, conflict, or persecution.  

Human trafficking, on the other hand, is a crime in which force or coercion is used to compel a person to perform labor, services, or commercial sex. Human trafficking gets much more exposure in the media and with law enforcement than human smuggling, but the latter can be just as deadly. 

Exploitative practices

Human smuggling dangers

Smugglers, or “coyotes,” as they are referred to in the trade, prey on migrants desperate for safe passage. However, safe passage is never guaranteed. Many migrants die of thirst in deserts, perish at sea, or suffocate in containers in desperate search of a better life.  

Although migrants knowingly engage with smugglers wittingly, they can become victims of this crime, as evidenced by the San Antonio, Texas discovery in June 2022 of 53 migrants—including children—who died in a tractor-trailer as they attempted to enter the United States illegally. The smuggler abandoned the locked trailer in sweltering South Texas temperatures with no water.

This example is one of many yearly tragedies along the southwest U.S. border resulting from human smuggling. In 2022, there were more than 2.3 million law enforcement encounters with migrants, up from 1.7 million in 2021. According to the Homeland Security Operational Analysis Center, human smuggling along the southwest border generates an estimated $2-$6 billion in annual revenue.   

Solicitation and transportation

How human smugglers operate

Both transnational criminal organizations, such as drug cartels, and smaller independent operators conduct human smuggling operations. Migrants can choose different levels of “service” to a desired location, from all-inclusive (where migrants pay a hefty fee for complete travel arrangements) to a pay-as-you-go system where money is collected for each leg of a journey. Depending on the situation, individuals may pay up to $10,000 for the opportunity to cross the border. 

The two primary phases of smuggling operations are solicitation and transportation. In the solicitation phase, smugglers advertise their services and build trust with migrants seeking transport. Historically, this was done by word of mouth. But thanks to social media, smugglers are able to reach a broader pool of migrants online. 

During the transportation phase, smuggling networks often use social media platforms with end-to-end encryption to coordinate routes. Smugglers may also use social media to recruit third parties on the southwest border to help with the operation, since this area holds the most significant risk of being detected by law enforcement.  

Human smuggling can quickly become human trafficking when the coyote detains a migrant against their will. This entrapment may happen until an agreed-upon payment is made or when the trafficker increases the fee to an amount the victim cannot make. The migrant may then be enslaved for forced labor or sex trafficking. 

While both human trafficking and human smuggling are extremely serious, understanding the differences between the two is essential to report each crime. The following checklist can help identify human smuggling vs. trafficking:

 

Smuggling

  • Voluntary
  • Crime against a state
  • Transportation-based
  • Requires border crossing
  • Foreign nationals exploited

Trafficking

  • Involuntary
  • Crime against an individual
  • Exploitation-based
  • No border crossing required
  • Foreign nationals or U.S. citizens exploited
Report suspicious transactions

Human smuggling: Red flags for financial institutions

Human smuggling red flags for financial institutions 

Human smuggling and human trafficking are often confused and used interchangeably, but they are very different crimes. FinCEN has added both to its list of eight national priorities that came out of the Anti-Money Laundering Act of 2020 (AMLA). Understanding the signs of suspicious activity can help financial institutions detect and report human smuggling.

The 2023 alert follows two FinCEN advisories previously released in 2014 and 2020 on this topic, and provides the following red flags:  

  • Transactions involving multiple wire transfers, cash deposits, or P2P payments from multiple originators from different geographic locations with no apparent business purpose 
  • Deposits made by multiple individuals in multiple locations into a single account with no apparent business purpose 
  • Currency deposits into U.S. accounts without explanation, followed by rapid wire transfers to countries with high migrant flows  
  • A “funnel account” in one geographic area that receives multiple cash deposits, often in amounts below the cash reporting threshold, from which the funds are withdrawn in a different geographic area with little time elapsing between the deposits and withdrawals. 
  •  Frequent exchange of small-denomination for larger-denomination bills by a customer who is not in a cash-intensive industry.  
  • Multiple customers sending wire transfers to the same beneficiary inconsistent with the customer’s usual business activity and reported occupation.  
  • A customer making significantly greater deposits—including cash deposits—than those of peers in similar professions or lines of business. 
  • A customer making cash deposits that are inconsistent with the customer’s line of business.  
  • Extensive use of cash to purchase assets, such as real estate, and to conduct transactions. 

The advisory reminds financial institutions of their Suspicious Activity Report (SAR) filing responsibilities and requests that, if activity that could be indicative of human smuggling is detected, filers use the key term “FIN-2023-HumanSmuggling” in the body of the narrative as well as SAR field 2 (Filing Institution Note to FinCEN). When filing a SAR, a financial institution does not need to know without a doubt that the crime falls into the category of human smuggling. If you suspect a crime is taking place, report and thoroughly describe in the SAR narrative why you believe the activity is suspicious.  

Identify human trafficking behavioral indicators with this checklist: "Human Trafficking Red Flags."

Read now
About the Author

Terri Luttrell, CAMS-Audit

Compliance and Engagement Director
Terri Luttrell is a seasoned AML professional and former director and AML/OFAC officer with over 20 years in the banking industry, working both in medium and large community and commercial banks ranging from $2 billion to $330 billion in asset size.

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