FinCEN advisory: Financial red flags for human smuggling and human trafficking

The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued an advisory Thursday to help financial institutions detect and report suspicious activity that could be related to human smuggling or human trafficking.

“Financial institutions, large and small, can play a critical role in identifying and reporting transactions related to these unlawful activities based on their observations when interacting with customers and their monitoring processes,” FinCEN said.

The advisory starts by helping anyone understand what the terms “human smuggling” and “human trafficking” mean, and how they’re different.

Human Smuggling: 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 Smuggling —

(i) Involves persons choosing to immigrate illegally

(ii) Is limited to illegal migration or the harboring of undocumented aliens

(iii) Involves foreign nationals, and

(iv) The crime involves an illegal border crossing or the harboring of someone that illegally crossed the border.

Human Trafficking: 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.

Human Trafficking —

(i) Involves the use of force or coercion and the exploitation of victims

(ii) Includes, but is not limited to, involuntary servitude, forced labor, debt bondage, peonage and sexual exploitation

(iii) Anyone can be a victim regardless of origin, sex, age or legal status, and

(iv) There is no need for a person to cross a border to be trafficked; individuals can be trafficked within the borders of a country.

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Here’s a sampling of the many red flags for human smuggling listed by FinCEN:

Multiple wire transfers, generally kept below the $3,000 reporting threshold, sent from various locations across the United States to a common beneficiary located in a U.S or Mexican city along the Southwest Border.

A customer’s account appears to function as a funnel account, where cash deposits (often kept below the $10,000 reporting threshold) 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.

Checks deposited from a possible funnel account appear to be pre-signed, bearing different handwriting in the signature and payee fields.

Frequent exchange of small-denomination for larger denomination bills by a customer who is not in a cash intensive industry. This type of activity may occur as smugglers ready proceeds for bulk cash shipments.

Unexplained/unjustified lifestyle incommensurate with employment or business line.

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And a few of FinCEN’s red flags for human trafficking:

Transactions conducted by individuals, escorted by a third party (e.g., under the pretext of requiring an interpreter), to transfer funds (that may seem to be their salaries) to other countries.

Frequent payments to online escort services for advertising, including small posting fees to companies of online classifieds as well as more expensive, higher-end advertising and website hosting companies.

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).

Payments to employment or student recruitment agencies that are not licensed/registered or that have labor violations.

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FinCEN Advisory FIN-2014-A008 dated September 11, 2014 “Guidance on Recognizing Activity that May be Associated with Human Smuggling and Human Trafficking – Financial Red Flags” is here (pdf).

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Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.