How to Recognize Human Trafficking in Transaction Monitoring

Out of the 22 predicate crimes that the European Union’s sixth anti-money laundering directive describes, human trafficking is the most prevalent. 25% of banks already reported and investigated financial crime linked to human trafficking. Yet, 61% of financial service professionals find spotting signs of human trafficking hard. Imagine how many cases of human trafficking have slipped through the cracks. Financial institutions that struggle to recognize human trafficking is genuinely a problem.

What is human trafficking?

Human trafficking is the act of transporting or holding persons against their will. It aims to exploit people by forcing them into sex work, forced labor, slavery, or organ removal. Human trafficking happens across borders as well as nationally. Anyone – children, women, and men – can become victim of human trafficking. Sometimes a perpetrator acts solo, or the perpetrator can be part of an organized crime group.

Human trafficking endangers citizens’ safety and security worldwide. And it’s a threat to the rule of law. There’s not only a great human cost to human trafficking; it’s also one of the most profitable crimes globally. It’s estimated that forced labor alone generates over 150 billion USD per year.

How does human trafficking relate to money laundering?

Human traffickers develop an enormous amount of illicit financial activity. It includes payments for hotels, plane tickets, bribery, and corruption. Other activity relates to proceeds derived from exploiting victims for labor.

Moving funds generated through human trafficking is money laundering or terrorist financing. Through the movement of those funds, financial institutions must detect human trafficking. But the diversity of those financial flows makes it hard…

General red flags of human trafficking are:

      • Large deposits are immediately withdrawn in places close to international borders.
      • Patterns of even transactions by card between 10 pm and 6 am.
      • Multiple people share bank account information, such as phone number or address.
      • Sudden anomalies in account activity.
      • Anonymous financial instruments, such as prepaid debit cards, are used to pay bills.
      • Structured deposits across many bank shops.

Each type of human trafficking also has its specific red flags. In the case of sexual exploitation, the basic needs of victims need to be met. Such as food, shelter, and transport. Traffickers may direct financial flows for these needs through the victims or themselves. In the case of financial flows going through victims, you will see that:

      • Excessive expenses for food, transport, and accommodation are ongoing.
      • Transactions are made in virtual currencies or via international email money transfers in excess.
      • Mobile phone numbers are used that match escort service advertisements.
      • Bank accounts are funded extravagantly by third-party cash deposits inconsistent with the client’s level of wealth.

Looking at the perpetrators, they may:

      • Spend money on websites linked to human trafficking.
      • Make cash deposits through ATMs regularly.
      • Accompany and control another person making cash deposits.

Victims often fall into the hands of traffickers promising a better life overseas. After recruitment, traffickers force their victims to work through violence and intimidation. They may also take the victim’s papers or threaten to expose them to immigration officials.

You may recognize money laundering linked to forced labor via:

      • Single accounts receiving salaries of multiple employees.
      • Salaries immediately withdrawn or transferred to a different account.
      • Someone unrelated to an individual controls their financial affairs and official documents while interacting with government or regulatory authorities.

Human trafficking for organ removal happens less often but seriously harms victims. It needs extensive infrastructure, including medical facilities and equipment. People in on the crime, such as surgeons, medical staff, and victim recruiters, need payment. These are usually large, one-time payments. A red flag if it doesn’t match regular account activity.

Best practices to prevent money laundering related to human trafficking

Adopt a risk-based approach to your AML/CFT programs. It will help identify, assess, and mitigate money laundering risks. It also helps in taking appropriate measures to mitigate those risks effectively. When it comes to transaction monitoring, there are a couple of best practices to adopt.

Contextual information

Human trafficking is hard to recognize because financial activity tied to it seems legitimate. That’s why it’s important to combine as much contextual information as possible with the indicators mentioned above. It will help you to be more accurate in your assessment of seemingly normal behavior. For example, if various bank accounts of different people use the same phone number, you should be suspicious.

Information sharing

We’re seeing more public-private partnerships coming from the ground. For example, the UK’s Joint Money Laundering Intelligence Taskforce (JMLIT). And Europe’s Europol Financial Intelligence Public Private Partnership (EFIPPP). In these partnerships, investigative services, financial intelligence units, and banking institutions work together to get insight into financial crime and money laundering. By sharing information between these parties, it becomes harder for human traffickers to get away with their crimes. They can’t simply open another account with another bank without being noticed. Something that happened far too often in the past.

Continuous Customer Due Diligence

Not only do financial institutions need to optimize their Customer Due Diligence measures. They also need to continuously monitor their clients by using publicly available resources and screening for adverse media and PEP-lists. Mobile phone numbers used in escort service advertisements can easily be found by screening public information on the internet. If something like that comes up, you should immediately start an investigation as it’s a red flag for forced prostitution.

Network information

Monitoring individual accounts often doesn’t provide the full picture. By looking at who is in contact with who, connections between parties become visible.

Suspicious Activity Reports

One in three finance professionals complain that not enough SARs result in justice. If banks include enough detailed information in their SARs around context, network, and CDD, this can hopefully change. Public-private partnerships also help to stop human traffickers in their tracks. In the meantime, keep in mind that a single SAR might not always hold enough evidence for a conviction. But it might be a piece of the puzzle. Your well-structured SAR helps authorities build a credible case against human traffickers.


Team BusinessForensics

The team at BusinessForensics consists of hard-working financial crime fighting professionals. Based in The Hague, The Netherlands, BusinessForensics is on a mission to help banks and insurance companies combat and prevent financial crime.