Disrupting Human Trafficking – The Role of Financial Institutions

Disrupting Human Trafficking – The Role of Financial Institutions

Disrupting Human Trafficking – The Role of Financial Institutions

It is estimated that each year, across the globe, 20.9 million people are trafficked for forced labour and sexual exploitation. In the EU and developed countries, trafficking in human beings (THB) reaps annual profits of $46.9 billion. In the UK alone, thousands of people are exploited, not just in illegal operations, but also within legitimate business settings ranging from agriculture and factories to nail bars and car washes.

Compared with other industry sectors whose long and complex supply chains are at risk of being touched by labour exploitation, the financial services industry in the UK and around the world has thus far been relatively less engaged in efforts to disrupt THB. Nevertheless, as this report will reveal, banks and other financial service providers are increasingly seeking to address this gap by assessing the services they source and the clients they fund, and attempting to apply their transaction monitoring and data analytic capabilities to support the pressing need for improved evidence that could boost THB-related prosecutions. As entities with potential access to the financial data of both traffickers and their victims, the financial industry has the ability to play a vital role in the fight against this crime.

Law enforcement and regulators in the UK and the US are increasingly seeking to harness the ability of banks and money service businesses to monitor financial activity that might assist in identifying and disrupting criminality, including identifying suspicious transactions indicative of THB. The Bankers’ Alliance Against Trafficking in the US and, more recently, the UK’s Joint Money Laundering Intelligence Taskforce (JMLIT) have raised the profile of the financial sector’s potential role in disrupting human trafficking crimes. Interviews with personnel from financial institutions have revealed that many are introducing a range of measures, including: training front line staff; building typologies; undertaking proactive transaction database investigations; and working with other financial institutions and law enforcement agencies. Interviewees claimed that a number of finance-led anti-human trafficking measures have contributed to the successful uncovering of gangs engaged, in particular, in sexual exploitation.

However, financial institutions face many challenges in their attempt to detect and disrupt human trafficking, such as the often unremarkable nature of transactions related to the crime, the difficulty in automating risk-factor screening and the consequent resource needed to investigate transaction data manually, as well as the level of collaboration needed with other actors – including those from law enforcement agencies and THB-focused NGOs. As a result, while those financial institutions interviewed for this report are unanimously willing to contribute to the disruption of human trafficking, developing an effective response is far from easy and requires considerable effort, coordination and investment of time.

With these challenges in mind, and against the background of the perceived success of the US financial sector’s anti-trafficking efforts, the introduction of the Modern Slavery Act in the UK in 2015, and the work of JMLIT’s anti-human trafficking experts’ group, this report seeks to identify ways in which the current enthusiastic but nascent engagement with this issue by the financial sector in the UK can be maintained. It thus offers the following recommendations for future action:

  1. Financial institutions must continually seek knowledge from law enforcement and THB- focused NGOs to ensure that staff training and investigation approaches reflect expert insight and guidance on:

    a. The changing nature of human trafficking, including typologies (for example, enabling a more balanced focus between sexual and labour exploitation; the former currently receives a disproportionate degree of focus).

    b. High-risk industries and countries of origin, destination and transit for THB.

    c. Financial crime trends, such as greater use of online payments and use of prepaid cards, as well as increased diversification in the use of trafficking victims beyond sexual and labour exploitation, such as for theft, organised property crime, benefit fraud and drug production.

    d. The changing nature of trafficking business models, which react to legislation, disruption and the emergence of new ‘markets’.

  2. More generally, engagement with NGO groups that support victims of human trafficking can provide both an insight into the methodologies used by traffickers and also a victim- focused perspective, which will help create more precise profiles and red flags for trafficking-related financial transactions.
  3. Financial institutions should interpret law enforcement, NGO and other guidance sources to ensure these are relevant for, and applicable to, both staff in branches and internal financial intelligence and investigation teams. Human trafficking should feature as a specific element of all financial crime-related staff training, including the introduction of mandatory tests to ensure that front line and investigative staff have sufficient awareness and understanding of how to detect the crime.
  4. Financial institutions and law enforcement agencies must continue to build and maintain collaborative and supportive relationships in which there is sharing of information and typologies. Public–private partnership forums, such as JMLIT, should act as fusion cells and disseminators of human trafficking-related indicators and intelligence gathered from court cases and convictions.
  5. Forums such as JMLIT or the US Bank Secrecy Act Advisory Group (using Section 314(a) of the USA PATRIOT Act) should be used by law enforcement agencies to provide regular and detailed feedback or specific, anonymised guidance to financial institutions based on human trafficking-related suspicious activity reports so that financial institutions can fine-tune monitoring and investigations.
  6. Law enforcement agencies and policymakers should ensure the regular participation of NGOs who have specific expertise or front line experience in the field of anti-trafficking in such public–private sector forums.
  7. Recognising the reliance placed on private sector compliance tools by financial institutions, greater investment should be made in compiling human trafficking-related negative media content, such as that provided to Thomson Reuters by Liberty Asia, to improve the effectiveness of financial institutions’ automatic transaction and client screening.
  8. Financial institutions should ensure that their Know Your Customer (KYC) and ongoing due diligence processes consider the extent to which their clients are exposed to human trafficking in their business or supply chains.

Despite the challenges faced by the financial sector in detecting and disrupting human trafficking, there is clearly a strong willingness on the part of the industry to engage with law enforcement and the anti-THB NGO community to develop ways to deploy the industry’s considerable troves of transaction data and investigation and analysis capabilities. As this report reveals, human trafficking is a crime that touches many different agencies and sectors and, as such, requires joined-up thinking. The involvement of financial institutions in recent successes in disrupting human trafficking suggest that the argument for engagement is overwhelming, especially since little is known about the workings or the finances of the perpetrators behind the crimes. However, this engagement will ultimately falter unless partnership and information sharing among all those seeking to address this crime is assured.

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