In 2014 FinCEN published Advisory FIN-2014-A008, Guidance on Recognizing Activity that May be Associated with Human Smuggling and Human Trafficking — Financial Red Flags. On October 15, 2020 FinCEN published a supplement to the 2014 Advisory, FIN-2020-A008, Supplemental Advisory on Identifying and Reporting Human Trafficking and Related Activity.
Since the 2014 Advisory, FinCEN identified 20 new financial and behavioral indicators of labor and sex trafficking, and four additional typologies. The Advisory provides: (i) new information to assist in identifying and reporting human trafficking, and to aid the global effort to combat this crime; and (ii) two illustrative recent case studies.
The Advisory defines human smuggling as “Acts or attempts to bring unauthorized aliens to or into the United States, transport them within the U.S., harbor unlawful aliens, encourage entry of illegal aliens, or conspire to commit these violations, knowingly or in reckless disregard of illegal status.”
Human trafficking is defined as “The act of recruiting, harboring, transporting, providing or obtaining a person for forced labor or commercial sex acts through the use of force, fraud, or coercion.”
The new typologies of human trafficking identified are: front companies, businesses that combine illicit proceeds with those gained from legitimate business operations; exploitive employment practices, employment schemes such as visa fraud, wage retention, and “recruitment” fees; funnel accounts, involve an individual or business account in one geographic area that receives multiple cash deposits, often in amounts below the cash reporting threshold, from which the funds are withdrawn in a different geographic area with little time elapsing between the deposits and withdrawals; and alternative payment methods, such as prepaid cards, mobile payments, or virtual currency.
Red flag behavioral Indicators include:
- A third party speaks on behalf of the customer (a third party may insist on being present and/or translating).
- A third party insists on being present for every aspect of the transaction.
- A third party attempts to fill out paperwork without consulting the customer.
- A third party maintains possession and/or control of all documents or money.
- A third party claims to be related to the customer, but does not know critical details.
- A prospective customer uses, or attempts to use, third-party identification (of someone who is not present) to open an account.
- A third party attempts to open an account for an unqualified minor.
- A third party commits acts of physical aggression or intimidation toward the customer.
- A customer shows signs of poor hygiene, malnourishment, fatigue, signs of physical and/or sexual abuse, physical restraint, confinement, or torture.
- A customer shows lack of knowledge of their whereabouts, cannot clarify where they live or where they are staying, or provides scripted, confusing, or inconsistent stories in response to inquiry.
Financial red flag indicators include:
- Customers frequently appear to move through, and transact from, different geographic locations in the United States. These transactions can be combined with travel and transactions in and to foreign countries that are significant conduits for human trafficking.
- Transactions are inconsistent with a customer’s expected activity and/or line of business in an apparent effort to cover trafficking victims’ living costs, including housing (e.g., hotel, motel, short-term rentals, or residential accommodations), transportation (e.g., airplane, taxi, limousine, or rideshare services), medical expenses, pharmacies, clothing, grocery stores, and restaurants, to include fast food eateries.
- Transactional activity largely occurs outside of normal business operating hours (e.g., an establishment that operates during the day has a large number of transactions at night), is almost always made in cash, and deposits are larger than what is expected for the business and the size of its operations.
- A customer frequently makes cash deposits with no Automated Clearing House (ACH) payments.
- An individual frequently purchases and uses prepaid access cards.
- A customer’s account shares common identifiers, such as a telephone number, email, and social media handle, or address, associated with escort agency websites and commercial sex advertisements.
- Frequent transactions with online classified sites that are based in foreign jurisdictions.
- A customer frequently sends or receives funds via cryptocurrency to or from darknet markets or services known to be associated with illicit activity. This may include services that host advertising content for illicit services, sell illicit content, or financial institutions that allow prepaid cards to pay for cryptocurrencies without appropriate risk mitigation controls.
- Frequent transactions using third-party payment processors that conceal the originators and/ or beneficiaries of the transactions.
- A customer avoids transactions that require identification documents or that trigger reporting requirements.
The Advisory also includes two case studies and instructions on completing Suspicious Activity Reports. These Advisories should be shared with all areas of the financial institution.
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