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How The Right AML Compliance Can Help Deter Human Trafficking


Technology is a double-edged sword. On the one hand, it's making our lives and our infrastructure better, but it’s also making crime and malicious activities more sophisticated and difficult to counter. This, unfortunately, includes human trafficking.


According to some estimates, about 24.9 million adults and children are currently trapped in human trafficking. About 64% of these people are trafficked for forced labor or modern slavery, and about one in every five individuals are trafficked for sexual exploitation. Our civilization has yet to rid itself of this abhorrent crime.


Human Trafficking: Still Relevant

Human trafficking isn’t just still relevant but has also become more complex over the past few decades. Decaying economies, natural disasters, and forced displacements make more people vulnerable to individuals and groups that take part in these abhorrent practices. Over the years, their methods of entrapment have matured.


In 2016, UNICEF declared it the second most profitable illegal industry, because unlike drugs that are sold and used in one transaction, human beings can be sold and bought multiple times. It’s estimated that the industry makes about $150 billion every year.


If any of these numbers seem unusually high, it’s because you may be associating human trafficking with people transported in small shipping containers, which only accounts for a relatively small portion of what human trafficking is. It's a broad umbrella that covers recruiting, obtaining, abducting, or compelling a person into doing your bidding.

And it’s through that broader definition that human trafficking overlaps with Anti Money Laundering (AML).


Human Trafficking And AML

While many crimes overlap with money laundering one way or another, human trafficking has a relatively more substantial overlap. Money laundering is the process of "legitimizing" the money gathered from predicated criminal activities. Still, unlike most isolated illicit transactions, human trafficking usually has consistent streams of cash going in and coming out of the activities that are a result of human trafficking.


Take forced labor as an example. The instance when trafficked people change hands from seller to buyer would be an isolated transaction and difficult for financial institutions to track, and it might not raise any AML flags. But when those people are forced into labor, the money coming out from their exploitation and going into their primary sustenance and needs might be relatively easier to track.


With the right AML measures in place, AML can play an essential role in tracking and preventing human trafficking activities. With that in mind, FinCEN issued an advisory for detecting and deterring human trafficking.


Four human trafficking financial aspects that compliance professionals should know about (so they can take appropriate AML measures):

  • Trafficker relies on front companies, i.e., legitimate businesses, to hide the cash flow from illegal activities.

  • Employment practices entrap and exploit employees using false contracts and leveraging financial dependence.

  • Funnel accounts to spoof the money trail.

  • Multiple and alternative payment methods. It's challenging to launder cash, but online payments, as long as they are spread out and well-managed, might be challenging to tie to human trafficking activities. Cryptocurrencies have made things even more complicated.

In addition to these, FinCEN also provided guidelines to financial institutions regarding red flags and signs that they should look for in order to sniff out money laundering attempts by human traffickers.


How ComplyGenics Can Help

Many Fintech companies do not have the resources at hand to properly navigate an environment of increasingly complex regulations and compliance measures. ComplyGenics is here to help. We provide such services as compliance audit and program remediation, AML rule tuning, and model validation, helping you mitigate risks and keep up with the best industry KYC and FCP standards. We also specialize in staffing for the niche, helping you connect the right talent for your firm within the industry. For more information, visit our site or contact us.



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