Financial Crimes Enforcement Network

In the last Connection, my ‘Trends and Wins’ column discussed this topic, but very quickly. I wanted to expand on this subject due to its importance. If you’re like me, you’ve heard something about human trafficking. It seemed like a distant problem, not something I’d run up against. I was very surprised to find how prevalent it was even in developed countries. As one might imagine, actual numbers are a bit sketchy but roughly 20-40 million people are estimated to be under some form of slavery/human trafficking. The two biggest segments are forced labor (the largest at appx 68%) and sex trafficking at 22%. There are other forms such as state-imposed labor, forced marriage, and others. It was one of the fastest-growing, very profitable crimes going from about $32 Billion in 2004 to $150 Billion in 2018. Sadly, there is still a lot of money to be made in the slave trade.

The incubation for this involves three areas. First, you need vulnerable people. Vulnerable people have always been around but in today’s environment, we add failing crops, healthcare concerns, wars, pandemics, earthquakes, and famines. One might say apocalyptic worldwide issues. These hit those that are already vulnerable harshly. Next, you need a conducive legal, social and physical environment. Someone may have lost their job or may have needed an expensive medical procedure. Without proper laws in place, or without enforcement of existing laws, people are subject to force, fraud, or coercion. Often, without knowing what is happening, people find themselves in these impossible situations. Finally, there needs to be some exploitation strategies. A way to entangle vulnerable people into situations they cannot voluntarily leave.

In terms of forced labor, traffickers run what appear to be legitimate ads for work. Fishing, babysitting/nanny, hotel work, agriculture, and other decent-sounding jobs for a good wage. People see this as a way out of debt or a way to support a struggling family. These types of jobs will involve relocation. Upon arrival, documents are seized, and a demand for money is based on transportation costs and recruitment fees which were unknown before arrival. Now the individual no longer has their passport or visa, they are unaware of existing laws in the country they find themselves in, and they might not know the language of the country. They are helpless and are told they owe a lot of money. Their slavery begins. One might be lucky to find oneself in a sweatshop versus the horrors of the sex trafficking trade, but the individual feels and may truly have no choice. If fear or coercion fails, then force may be applied. The world becomes a scary and unforgiving space and they are trapped.

There is a chink in the traffickers’ armor. This is where financial services can play a critical role in helping these victims. With $150 Billion in play, they cannot help but leave a number of transaction footprints, to mix metaphors. There are financial patterns to human trafficking that can be ascertained using Anti-Money Laundering (AML) and Know Your Customer (KYC) techniques. There is a USA government document called FinCEN (Financial Crimes Enforcement Network) which lists a number of red flag situations/patterns.  I have copied several here.

Substantial deductions to wages. To the extent a financial institution is able to observe, a customer with a business may deduct large amounts from the wages of its employees alleging extensive charges (e.g., housing and food costs), where the employees only receive a small fraction of their wages; this may occur before or after the payment of wages

The following two red flags may signal anomalous customer activity; however, they should be applied in tandem with other indicators when determining whether transactions are linked to human trafficking.

• Transactional activity (credits and/or debits) inconsistent with a customer’s alleged employment, business, or expected activity, or where transactions lack a business or apparent lawful purpose.
• Cash deposits or wire transfers are kept below $3,000 or $10,000 in apparent efforts to avoid record-keeping requirements or the filing of Currency Transaction Reports (CTRs), respectively

A customer’s account appears to function as a funnel account, where cash deposits occur in cities/states where the customer does not reside or conduct business. Frequently, in the case of funnel accounts, the funds are quickly withdrawn (same day) after the deposits are made.

Frequent transactions, inconsistent with expected activity and/or line of business, carried out by a business customer in apparent efforts to provide sustenance to individuals (e.g., payment for housing, lodging, regular vehicle rentals, purchases of large amounts of food).

Common signer(s)/custodian(s) in apparently unrelated business and/or personal accounts. Similarly, common information (e.g., address, phone number, employment information) used to open multiple accounts with different names

Accounts of foreign workers or students where the employer or employment agency serves as a custodian.

Inflows are largely received in cash where substantial cash receipts are inconsistent with the customer’s line of business. Extensive use of cash to purchase assets and conduct transactions.

Unexplained/unjustified lifestyle is incommensurate with employment or business line. Profits/deposits significantly greater than that of peers in similar professions/ business lines.

These transactions are fairly commonplace. The HPE NonStop platform processes 65% of payment transactions worldwide. Unhappily, one might assume 65% of human trafficking transactions might also pass through these same systems. The good news is these NonStop systems could pass payment transactions easily into AML/KYC systems that could start detecting these patterns. Bypassing the transactional information into HPE HPC platforms running AML/KYC traffickers can be found, prosecuted, convicted, and victims can be freed. Much is being done and the sharing of bank information can be accomplished when these patterns are identified using a Suspicious Activity Report (SAR) which allows banks to share information with each other.

Given the enormous need and magnitude of these crimes, I feel HPE should create a best-in-class AML/KYC system that provides a focus on human trafficking. This can be accomplished by partnering with state-of-the-art AML/KYC companies on our world-class HPC systems. I believe the next logical step would be to create a swarm-learning Human Trafficking model that can be shared amongst the top financial institutions and law enforcement to create more precision in the existing models and to ascertain new patterns suggestive of human trafficking. Additionally, HPE could create and maintain a Blockchain of victims to be shared with banks to provide a list of services such as free checking, low-interest credit cards and loans, and financial education – making the vulnerable less so.

I believe this is a vision that can be uniquely fulfilled using HPE technology, intellectual property, and partnerships. Being a force for good was never more important.