Disrupting Human Trafficking (Part 1): Follow the Money

Human trafficking networks depend on an elaborate system of conspiracy and deceit to perpetuate and profit from their insidious crimes. Exposing and halting these conspiracies and the flow of money that supports them is essential to turning the tide on this global tragedy. Advanced financial crime technology provides powerful tools and new hope for those on the front lines of identifying and halting increasingly sophisticated trafficking networks.

In Part 1 of this two-part series, we discuss how governments, law enforcement agencies, financial institutions, and other organizations can help disrupt human trafficking by following the flow of money exchanging hands. In Part 2, we delve into how financial crime technology can help bring down human trafficking.

Human trafficking runs on financial crime

Human trafficking is a broad term encompassing sexual exploitation, modern slavery, debt bondage, and forced criminal activity. The volume and human impact of trafficking are at an all-time high, as is the monetary gain for traffickers and their facilitators. Second, only to drug trafficking, human trafficking is one of the fastest growing transnational crime categories and most profitable financial crimes.

The statistics are staggering, and it’s important to remember that they present only a glimpse into this highly complex and clandestine enterprise and cannot even begin to capture the human impact. According to the International Labour Organization:

• Approximately 50 million people worldwide were living in unlawful servitude in 2021, of which 27.6 million were in forced labor and 22 million in forced marriage
• Approximately one-third (PDF) of all forced labor victims are children, a number that has tripled in the last 15 years
• Globally, human traffickers pocket an estimated $150 billion annually in illicit profits
• The economic cost of trafficking in the European Union (EU) is approximately EUR 2.7 billion annually

The financial activity generated by human trafficking includes transportation, logistics, and the accommodation costs of victims; proceeds generated by their exploitation; and bribery and corrupt dealings amongst the facilitators. Despite the obvious correlation between human trafficking and financial crime, the implicit connection is often overlooked. Identifying and monitoring transaction patterns can detect crimes and be a significant disruptive force to such activities—and financial institutions are uniquely positioned to play a major role in supporting this vital work.

Anatomy of a crime: dissecting the convergence of human trafficking and financial crime

Identifying financial trails and suspicious illicit transactions is key to identifying criminal networks and combating human trafficking. These initiatives are mammoth undertakings that require extensive resources and expertise in the application of advanced technology. The success of these important efforts also depends on the proactive commitment and close collaboration between all critical stakeholders, including governments, law enforcement agencies, financial services institutions, technology providers, non-governmental organizations (NGOs), communities, and survivors.

Let’s look at how organizations and initiatives are converging to apply an anti-financial crime strategy to combat human trafficking:

• Global policy initiatives gain momentum: Over the years, government agencies and law enforcement have created a foundation to combat human trafficking by tracking financial footprints. Their latest area of focus is the money laundering aspect of human trafficking.
• This approach has gained traction and is evident from the engagement of several governing bodies. In the United States, the Financial Crimes Enforcement Network (FinCEN) has included human trafficking in its list of anti-money laundering/countering the financing of terrorism (“AML/CFT”) priorities under the AML Act of 2020. In addition, the inter-governmental Financial Action Task Force (FATF) issued guidance on identifying money laundering transactions involving human trafficking. Similarly, the European Commission published the EU strategy to tackle organized crime for 2021-2025, focusing on human trafficking and its financial proceeds. In addition, the Biden Administration published its National Action Plan to Combat Human Trafficking (PDF), calling for additional measures to combat the facilitation of trafficking through virtual currencies. Combined, these intensified initiatives create awareness and foster expanded participation and cooperation across all stakeholders.
• Financial services organizations strengthen AML programs: Most human trafficking proceeds are concealed by obscuring financial trails, and a significant portion of those funds pass through legitimate financial services institutions and cryptocurrencies. Banks and other financial institutions are well positioned to prevent human trafficking by identifying and monitoring these footprints. As a first step toward improving detection, financial institutions must strengthen their AML programs to increase awareness and understanding of human trafficking networks and how they transact within the legitimate financial system. The AML/ CFT Compliance programs implemented by financial institutions help to create a sharper view of the problem. Training employees on potential red flags, behavioral and financial indicators, related procedures, and policies will ensure that human trafficking doesn’t go undetected and is appropriately highlighted and investigated by financial institutions.
• Technology factors into crimes and prevention: Human traffickers are increasingly using technology to their advantage—including instant and secure communication, remote access to victims, digital management of financial transactions, the use of virtual currencies and assets, and more. These tech-savvy criminals constantly upgrade their tools and technology and develop new techniques with more advanced tactics to avoid detection and prosecution. The illegal and clandestine nature of human trafficking further complicates the collection of complete and accurate information on these illegal activities. Financial institutions face significant hurdles when trying to identify human trafficking, including identifying transactional indicators (red flags), reporting, and updating policies and procedures. And, organizations that are negligent in accurately identifying human trafficking can incur penalties and face significant reputational risk.

Institutions that implement and strengthen innovative AML compliance solutions can leverage big data, advanced analytics, artificial intelligence, network analysis, and other modern technologies to screen customers and entities, monitor transactions, and identify and report suspicious behaviors and transactions.

Unprecedented commitment to disrupting human trafficking

Human trafficking ultimately relies heavily on legitimate financial infrastructures and institutions. Therefore, deploying an anti-financial crime lens and approach offers the best-known opportunity to disrupt human trafficking. The financial footprints, illicit trails in the system, and other transactional data patterns are vital to identifying the source and proceeds of these crimes.

The journey ahead is onerous, but all involved parties—governments, law enforcement, financial institutions, NGOs, and local communities—are more committed and equipped than ever to combat human trafficking in all its forms.

Disclaimer: The information, views, and opinions presented hereof by the authors are solely theirs and are for general information only. These do not constitute legal advice; Oracle disclaims and excludes any liability in respect of the contents or for action taken based on this information.