By Alexandra Helminski, intelligence expert, ATII, The Data Initiative and Lizz Morse, expert, ATII
May 12, 2020
With editing and minor content additions by ACFCS VP of Content, Brian Monroe
As COVID-19 has evolved into a global health crisis, it has plunged much of the world, and financial sector, into an economic downturn, as well as created new opportunities for criminals to infiltrate institutions and exploit those who have suffered from this pandemic.
As the Office of Trafficking in Persons stated, “As in times of disaster response, we recognize that disruptions to local services, housing and economic stability, and social disconnection can further increase risk for victimization and exploitation.”
The relentless march of the pandemic since its rise in Wuhan, China in December has been the very definition of disruption to society, jumping borders and targeting rich and poor countries alike.
The coronavirus is affecting 212 countries and territories around the world, with some 4.3 million active cases and more than 290,000 deaths, according to Worldometers.
COVID-19 has also affected financial crime fighters at all levels, including compliance officers, regulators, investigators and auditors – the four key pillars of the worldwide counter-crime citadel.
In tandem, with individuals and families losing jobs, losing income and potentially even losing their homes or apartments, you can even argue that COVID-19 has created certain problems specific to human trafficking – opening the door for criminals to create a new class of victims because all some people have left to generate value is their corporeal forms.
These disruptions have affected human trafficking, human slavery and prostitution across the spectrum of such crimes and even potentially put young people at risk of being taken advantage of by online predators because schooling across the country and at nearly all grade levels has gone digital.
That means large, international trafficking groups will have to adapt to keep filing their massive global coffers.
Human trafficking is one of the most profitable crimes in the world, generating an estimated $150 billion annually. There are estimated to be more than 40 million victims of human trafficking globally.
With so much of a population “sheltering in place” due to forced quarantines and state-wide – and even countrywide – lockdowns, that has hampered one area of trafficking but conversely caused a second facet of the crime, human smuggling, to surge.
For human traffickers, they have seen, in some cases, illicit funds from sex work dry up as customers stay home – choosing not to visit seedy motels or go to massage parlors with blacked out windows.
The response: some trafficking groups and individuals have started cam shows – paid for by crypto coins and credit and prepaid cards.
In an inversely proportional dynamic to human traffickers, human smugglers are seeing demand for their services skyrocket.
Because in some parts of the world that are already impoverished, the COVID-19 pandemic has made an already difficult life unbearable due to a lack of capacity, healthcare workers, equipment and support services – pushing fearful and anxious masses to leave places like Africa and the Americas to Europe and the United States.
But these transactional changes could also give clues to anti-money laundering (AML) compliance professionals to better understand when a human trafficking group, victims or others – when out of desperation have turned to prostitution – have started moving illicit funds through their institutions.
Desperation, eviction, evolution, devolution
Here are some tips to help better understand the more nuanced financial trails of human trafficking operations during the COVID-19 pandemic:
Prostitution: Desperate times call for desperate measures
While likely rare, there could be some individuals unable to work, due to being laid off as entire sectors – including travel, tourism and entertainment – have evaporated who decide that the only option to keep a roof over their head or provide for their family is prostitution.
But how would this look through the lens of a bank transaction monitoring system?
Examine for an evolution to a darker path. For instance, someone who had been getting ACH deposits, or had been depositing roughly similar amounts on a regular basis, all of a sudden has a gap. There is also a corresponding gap in typical payments for rent, mortgage, water and electric bills.
The account might get some deposits from state unemployment or no help from government assistance at all. Then, all of a sudden, the person starts depositing large amounts of cash at irregular intervals – a potential red flag for prostitution.
Some further details to strengthen reasonable grounds for suspicion and to file a suspicious activity report (SAR) is if the account suddenly starts sending credit card or debit payments to known online escort or adult websites – clear evidence a person is advertising their services.
As well, closing the illicit loop, is if the account exhibiting the above signs also, for the first time, starts receiving payments from sketchy virtual currency exchanges, which is how the person is accepting payment from clients, attempting to keep the ties anonymous.
Human trafficking: As full sectors implode, traffickers raise their scythe
Similar to the above scenario, but this time, the person isn’t making the choice to engage in sex work of their own accord: they were recruited by a human trafficker bent on exploiting individuals who are scared, desperate and worried about losing it all.
Traffickers have an array of tactics to recruit people, promising easy or quick money, modeling gigs, or stable hospitality work in a foreign locale.
But the goal is always the same: get these people out of an environment, or region, where they have money, choices and a support system to make them dependent on the trafficker.
But again, that begs the question: How would that look in a transaction monitoring system?
One key that could help fincrime professionals risk assess what accounts could, or are, could be at risk being infiltrated by trafficking groups is to keep abreast of what sectors in what regions have been the most decimated by the coronavirus.
For instance, in South Florida, a typically teeming mecca of sun, sand and sin for tourists, many hotel workers, cruise workers and entertainers have lost their jobs. The tourism industry alone in Florida supports some 1.5 million jobs, according to Visit Florida.
So it might behoove compliance teams to tighten the transactional alert thresholds for customers in these sectors to get a better sense of when, or if, a trafficker has co-opted an out-of-work server, bartender or dancer.
Likely, in a case like that, the transactions would change considerably, again, from a person’s account having regular deposits from known companies, banks and HR companies in the thousands of dollars, to smaller cash transactions in the hundreds of dollars – in particular below thresholds where someone has to produce on ID.
As well, the account could start seeing deposits at different ATMs for the same bank, or many ATMs, from different banks that rotate around a given region within driving distance of a few hours.
The account could also then start seeing deposits out of state, with a corresponding larger transaction later wired to foreign destinations known to be trafficking and smuggling hubs – such as Asia Pacific and Africa – in classic funnel account form.
The trafficker also might take a person’s credit and debit cards and start using them to pay for items like hotels, takeout food and Netflix or Redbox – to keep trafficking individuals occupied during their downtime.
Another red flag: the trafficked person’s social media accounts disappear or go dormant.
This trafficker, now handler, may essentially take over the person’s bank account – even walking into banks with them while not allowing an obviously nervous individual to speak – or refer to the person as an “employee” who is moving money overseas to help family members, even if the victim is not from that country and the handler is clearly not family.
Other red flags for human trafficking that could be viewed by AML teams are ATM/credit card transactions in even, hundred dollar amounts, between 11 p.m. and 3 a.m. and using anonymous cashier’s checks and the like to pay for things, even bills, instead of ACH or personal checks.
Human smuggling: As countries lock down, smugglers get creative, expensive
Human smuggling during COVID-19 has gotten more dangerous, more expensive and more difficult.
The crime is defined by the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) as involving foreign nationals choosing to immigrate illegally by paying a smuggler to help them cross the border.
So how does this crime look in an AML transaction monitoring system?
One key red flag: “Frequent exchange of small-denomination for larger denomination bills by a customer who is not in a cash intensive industry,” according to FinCEN. “This type of activity may occur as smugglers ready proceeds for bulk cash shipments.”
But to better understand the details of when smuggling could touch your institution, it’s vital to put the transactions into proper context, including what regions already struggling financially, with lack of rule of law or basic services, could have their migrant exodus numbers accelerate.
AML professionals must also be cognizant that human smuggling has three segments: Solicitation, transportation and payment.
Payments from families to smugglers could be in advance, a partial payment or be paid in full on arrival – giving opportunities to be identified by AML teams. But to best understand where the payments could be coming from and going, you need to analyze where migrants are moving.
Historically, the United States is the country that is the largest destination for migrants – legal and illegal, according to an analysis by Pew Research.
The decline in the unauthorized immigrant population is due largely to a fall in the number from Mexico – the single largest group of unauthorized immigrants in the U.S. Between 2007 and 2017, this group decreased by 2 million.
Meanwhile, there was a rise in the number from Central America and Asia.
As more migrants move, depending on their wealth and influence, they could be calling on the services of human smugglers – some that are just trying to provide a service to those seeking a better life, and others part of organized criminal gangs.
These past immigration patterns now must also be overlaid with what is happening globally as a result of the coronavirus.
Even while the United States and Europe have the most COVID-19 cases – the U.S has more than 1.4 million cases while Spain, Italy, France and Germany are in the top 10 – other countries that are already struggling with poverty, corruption or a lack of rule of law could be hit even harder during the pandemic.
Some current global coronavirus hotspots that could spur immigration include: Brazil with nearly 180,000 cases, Peru with some 72,000, Mexico at just more than 38,000 and Philippines and South Africa at 11,350 each, according to Worldometers.
Illegal immigration is also big business – with some reports stating that the human smugglers, or “coyotes” are charging more for their services.
According to experts, coyotes gross more than $5 billion a year. Crossing fees can range from $1,500 to $2,500 in Mexico. Police note that on a “good day” large coyote organizations can transport 500 people into the United States, according to Time.
That means, as an example, an institution might see a customer, or their family, in these regions withdraw thousands of dollars, let’s say $1,000, in Mexico, and then have a similar amount pulled out at or near ATMs in the southwest border to pay the other half of a coyote’s fee.
FATF weighs in on COVID-19 and tendrils to financial crime
The Paris-based Financial Action Task Force (FATF) touched on the human trafficking and smuggling ties to the pandemic in a just-released report, its first major statement on COVID-19. To read the full, 34-page report, click here.
“Criminals may take advantage of the pandemic to exploit vulnerable groups,” according to FATF, the global standard bearer for fincrime compliance best practices. “This may lead to an increase in the exploitation of workers and human trafficking.”
What’s worse, investigators may not uncover the rise of some trafficking groups until things start going back to normal.
“The suspension or reduced activity of government agencies regularly engaged in detecting human trafficking cases and identifying victims of trafficking (including workplace inspectors and social and health care workers) means that cases may go undetected.”
There are also more potential victims for traffickers to target.
“The shutdown of workplaces, slowdown in the economy, rising unemployment, and financial insecurity are factors that could result in an increase in human exploitation,” according to FATF.
Aggressive compliance focus on trafficking can help prevent infections
A critical reason why fincrime compliance professionals must adapt and overcome quickly – many teams are dealing with scattered workers and even layoffs and a significant surge in alert volumes – during the pandemic is helping law enforcement identify and shut down trafficking rings can save lives.
One problem COVID-19 poses to human trafficking victims concerns the health and well-being of such victims and the individuals exploiting these victims, such as clients purchasing their services and the traffickers themselves.
Because this virus is highly contagious, human trafficking increases the risk of exposure for all parties involved, potentially leading to becoming infected and suffering health-related symptoms.
This not only poses an issue for both the trafficker and client, but also for the trafficking victim.
The trafficker could expose him or herself, as well as business partners and clients, to the virus. If a victim were to contract the virus, seeking medical care for the victim could risk exposure of the business operations.
However, if the trafficker chooses not to seek medical care for the victim, the victim could succumb to the illness, risk exposure to the general public and anyone who comes into contact with him or her, and/or the trafficker could end up releasing the victim leaving the victim to fend for him or herself.
Additionally, border closures and restrictions can pose a risk for exposure and lack of medical care.
Potential risk of financial crime resulting from human trafficking during this pandemic has not only increased, but has resulted in red flags in some banking transactions and activity noticed by AML professionals working behind the scenes.
In a move to adapt to an inability to actually meet individuals for sex, trafficking groups and individuals have started offering online cam shows and moving payments to credit cards, prepaid cards, and virtual currencies for such activities.
Ironically, video voyeurism may even technically be considered legal, said Brian Monroe, Vice President of Content for the Association of Certified Financial Crime Specialists (ACFCS), in the article, “Fincrime Compliance Professionals Highlight Longer Hours, Shifting Illicit Patterns of Finance, Training Challenges in First ACFCS ‘Virtual Happy Half-Hour.”
To read the full story, click here.
However, Monroe further explains that with hotel room or massage parlor access becoming limited, human trafficking patterns have adapted.
As the landscape of the financial industry has since changed course due to COVID-19, it has also impacted the way criminals operate their business.
It is critical for financial industry professionals to remain diligent in their efforts to flag and prevent future financial crimes, specifically those related to human trafficking, as well as continue mitigating and deterring these bad actors.
As children spend more time online, they become more of a target
Another problem COVID-19 poses to human trafficking stems from the amount of time kids are spending at home, specifically time spent online.
Schools have since switched to online learning from home. Predators utilize the internet to exploit vulnerable individuals, including children.
Children’s increased time spent online playing games with friends, social media outlets, and websites may increase their risk and exposure to potential predators that lurk in such online sources.
“There are reports from some members of a rise in the production and distribution of online child exploitation material, often for profit,” FATF stated in its COVID-19 and fincrime report.
“With the closure of schools, children are increasingly using the internet during “lockdown” periods, which could lead to an increase in online child exploitation,” the group said, citing U.S. and Australian authorities. “There are also reports that “lockdowns” and travel bans are increasing demand for this material.”
While the old tactic of “trust, but verify,” was once effective, we live in an age where technology has evolved and is more prominent in everyday life than it was just five to ten years ago.
A few tips for parents looking to monitor their children’s online activities without alienating their children include:
Be present: Find out what tools and apps they are actively using, check in on what content they post and receive, and conduct open, honest dialogues with them about what they see, how they respond, and your concerns over what you prefer they did or did not see or partake in.
Share passwords: Many parents will require their children to share passwords with any apps they use across all their devices. From smartphones to tablets to gaming systems, it is a good idea to have access to your children’s devices.
Install monitoring software: Monitoring apps and software can limit children’s activities and posts. There are plenty of reviews on the pros and cons of different monitoring software programs. Many monitoring software programs are reasonably priced as well.
Before considering sex work, reach out for help
Financial strain has impacted many families during this pandemic.
With unemployment, layoffs, and companies closing their doors completely, many families are facing the economic hardships as a result. This may cause individuals to look for alternative ways to earn money to support their families or simply themselves.
Prostitution is oftentimes the alternative method for “easy” money, especially for individuals in a desperate situation who need to survive or provide for their families.
However, there are other alternatives to maintaining financial stability during this crisis.
The Polaris Project points out that “policies like rent moratoria that stabilize existing housing and vouchers to provide emergency access to short term housing will alleviate tremendous pressure for potential victims and their families.
Job incentives for employers to hire in vulnerable communities at living wages will allow people to safely access the resources they need.” In addition, the federal government has since instituted an Economic Payment Impact, which is currently issuing stimulus checks to those who qualify.
COVID-19 has impacted our lives at social, economic, financial, and mental levels.
While human trafficking is exacerbated during this time of crisis, there are valuable solutions to combatting it.
“Information sharing, intelligence, and ultimately awareness is at the center of countering issues like human trafficking,” said Vic Maculaitis, Founder and Chief Executive of The Data Initiative. “Sharing our data products and applications with non-profits, such as ATII, is a way of aiding and multiplying the force.”
Human trafficking victims have resources and services available to assist them during this global health crisis.
These resources include the National Human Trafficking Hotline (NHTH), The Domestic Victims of Human Trafficking Program (DVHT), Trafficking Victim Assistance Program (TVAP), as well as other state and local resources.
Other resources to address challenges related to COVID-19 include caregiver and household resources, shelters and transitional living programs, child care alternatives, substance use treatment and support programs, food assistance, economic impact payments, and many more.
Please do not hesitate to reach out to Anti-Human Trafficking Intelligence Initiative (ATII) and our partners at Association for Certified Financial Crime Specialists (ACFCS) to learn more about following the money and joining the fight against modern slavery.