Best Practices to Prevent Money Laundering in Human Trafficking

Blog / Best Practices to Prevent Money Laundering in Human Trafficking

Human trafficking is the most common of the 22 predicate offenses in the European Union's sixth anti-money laundering directive(6AMLD). Moreover, 25% of banks have previously reported and investigated financial crimes related to human trafficking. Nonetheless, 61 percent of financial services experts say it's challenging to identify indicators of human trafficking. Imagine how many incidents of human trafficking have gone unnoticed. Thus, recognizing that human trafficking is a serious issue is quite challenging when it comes to financial institutions.

What Exactly is Human Trafficking?

Human trafficking is defined as the act of transferring or detaining someone against their desire. Its objective is to exploit individuals by forcing them to engage in sex work, forced labor, slavery, or organ trafficking. Human trafficking occurs both across borders and within countries, affecting anybody — children, women, and men. A perpetrator may operate alone at times or be a member of an organized criminal organization.

Human trafficking puts individuals' safety and security at risk all around the world. It also poses a danger to the rule of law. Human trafficking not only has a high human cost; it is also one of the most profitable crimes in the world. Forced labor alone is expected to produce more than $150 billion each year.

What is the Connection Between Human Trafficking and Money Laundering?

Human traffickers conduct a massive amount of illegal financial activities. It involves hotel and plane ticket fees, as well as bribes and corruption. Another activity is related to the profits made through exploiting victims for work.

Money laundering or terrorist financing is the movement of money generated by human trafficking. Financial institutions must detect human trafficking through the flow of this money. However, the variety of such financial flows makes it difficult.

The following are common red flags of human trafficking:

  • Large deposits are removed promptly in locations near international boundaries.
  • Patterns of even card purchases between 10 p.m. and 6 a.m.
  • Information about a bank account, such as a phone number or location, is shared by several persons.
  • Anomalies in account activity that occur unexpectedly.
  • To pay bills, anonymous financial tools such as prepaid debit cards are utilized.
  • Structured deposits in a variety of bank branches.

Each form of human trafficking has its own set of red flags. In sexual exploitation, victims' fundamental requirements must be fulfilled, such as food, housing, and transportation. Traffickers may direct financial flows for these requirements through victims or themselves.

 In the instance of money transfers that pass through victims, the following can be seen:

  • High costs for meals, transportation, and housing continue.
  • Excessive transactions are performed in virtual currency or via international email money transfers.
  • Mobile phone numbers that correspond to escort service advertising are utilized.
  • Third-party cash deposits are used to fund bank accounts in an expensive manner that is incongruous with the client's degree of wealth.

In terms of the perpetrators, they could:

  • Spend money on websites that are associated with human trafficking.
  • Make frequent cash deposits at ATMs.
  • Accompany and supervise another individual who is making a cash deposit.

Victims are frequently duped into falling into the clutches of traffickers who promise a better life abroad. Following recruiting, traffickers use violence and intimidation to force their captives to labor. They may even seize the victim's documents or threaten to turn them into immigration officials.

Money laundering connected to forced labor might be identified by:

  • Multiple employee wages are paid into a single account.
  • Salaries are withdrawn or moved to a separate account instantly.
  • While interacting with government or regulatory agencies, someone unconnected to the individual manages their financial affairs and official papers.

Human trafficking for organ trafficking occurs less frequently but has significant consequences for victims. It necessitates a substantial infrastructure, including medical facilities and equipment. People who are involved in the crime, such as surgeons, medical personnel, and victim recruiters, want money. These are generally one-time, substantial payments. If it does not correspond to typical account activity, it raises a red flag.

Best Methods for Preventing Money Laundering in the Context of Human Trafficking

Human trafficking is difficult to detect because the financial activity associated with it appears genuine. As a result, it is critical to incorporate as much contextual information as feasible with the aforementioned signs. It will assist you in making more accurate assessments of seemingly typical conduct. For example, if separate people's bank accounts use the same phone number, you should be cautious.

Customer Due Diligence on an Ongoing Basis

Financial organizations must not just optimize their Customer Due Diligence measures but also monitor their clients on a constant basis, using publicly available information and screening for adverse media and PEP lists. By filtering public information on the internet, mobile phone numbers used in escort service advertising may be easily identified. 

Suspicious Activity Reports (SARs)

One in every three finance professionals complains that there aren't enough SARs that result in injustice. This may change if banks disclose enough comprehensive information in their SARs on context, network, and CDD. Partnerships between the public and commercial sectors can also assist in halting people traffickers in their tracks. Meanwhile, keep in mind that a single SAR may not necessarily include enough evidence to warrant a conviction. However, it might be a component of the puzzle. Your well-structured SAR assists authorities in putting together a compelling case against organized criminals.

AML/CFT programs

Comply with a risk-based strategy for your Anti-Money Laundering and Counter-Terrorist Financing initiatives. It will aid in the identification, assessment, and mitigation of money laundering concerns. It also aids in the implementation of effective risk-mitigation techniques. If you want to comply with the AML/CFT regulations and mitigate risks related to human trafficking, you can contact us and request a demo to find out Sanction Scanner's solutions.

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