The Covid-19 pandemic’s societal impact has undoubtedly extended well beyond the realm of health and wellness, and while it appears that the darkest days of the pandemic are now in the rearview mirror (*knock on wood*), its effects on the global financial system are still being felt. As we have chronicled over the past year, the nature of the mass lockdowns and quarantine orders have given rise to various forms of uniquely sophisticated web-based crimes (including heavy online fraud and new identity theft efforts). However, another form of destabilizing crime that existed long before the start of the pandemic has flourished during this period, with the distractions created by the pandemic further allowing for the already-clandestine nature of this illicit activity to grow at an exponential rate.
Human trafficking is among the most profitable and furthest reaching forms of crime found across the globe today, impacting virtually every region of both the developed and developing world. Altogether, this underground “business” generates over $150 billion on an annual basis, with the International Labor Organization (ILO) estimating that there are currently 25 million victims of human trafficking around the world.2 This illegal and damaging trade revolves around illicit finance, with tens to hundreds of thousands of dollars worth of payments changing hands on a daily basis to back the secretive transport of victims and collection of cash for the services the victims provide, pay for travel and lodging expenses and cover bribes to alleviate pressure from government bodies and law enforcement, as well as providing funding to other coordinated logistic efforts that allow for criminals to cash in while staying undetected by federal and international authorities. Given the shear amount of money moving around, one would surmise that there would subsequently be some form of paper trail for investigators to follow to lead to the apprehension of the organizers of these illicit operations. The problem is that there are many layers to trafficking, with many of the financials being masked by the use of shell companies to further throw authorities off the trail while allowing for the laundering of funds to further propel the vicious cycle. As if the battle was not already tough enough, the pandemic has further complicated efforts to slow the progression of human trafficking in the United States and abroad.
Though statistics examining the true scope of human trafficking-related crimes are few and far between (due in large part to the secretive nature of the business),the pandemic appears to have made certain demographics more vulnerable to falling into this deadly web. The pandemic has once again revealed just how severe the economic and societal disparities between social classes has become, with areas with high populations of marginalized and poverty-stricken individuals in comparison to more affluent areas. The Financial Crimes Enforcement Network (FinCEN) – a bureau of the U.S. Treasury Department that combats domestic and international financial crime – has written that “the global COVID-19 pandemic can exacerbate the conditions that contribute to human trafficking, as the support structures for potential victims collapse, and traffickers target those most impacted and vulnerable.”1 Individuals made desperate by the pandemic’s financial impact – with record layoffs and furlough figures as well as businesses forced to shut their doors seen across the globe over the past 15 months – appear to have become some of the prime targets for human traffickers. This coupled with the fact that Covid has affected the ability of state authorities and non-governmental organizations (NGOs) to commit the same amount of resources as in years previous to thwarting these crimes has created an environment ripe for exploitation. Human traffickers have also capitalized on the fact that more children have been forced to stay home (and in some cases, forced to the streets) given that they were unable to attend their normal schooling secondary to closures – heightening their risk of exploitation. In more developed countries, the traffickers will often use social media to lure unsuspecting children (or even adults) into their ploys. In lesser developed countries, children and young adults seeking forms of income and other basic necessities such as food have been put in compromised positions, making them more likely to fall victim to crimes of this variety given that they have few alternative options for survival – or so the traffickers would make it seem. Altogether the percentage of trafficking victims that were children has tripled over the last decade and a half, with these figures likely rising to new heights since the start of 2020 alone.
As the world begins to return to a “new normal”, attention is once again shifting to addressing this growing form of crime, with global financial institutions at the forefront of the fight against human trafficking. Banking remains a crucial piece of what allows the trafficking cycle to continue. Human trafficking and money laundering are inseparable concepts. In order to continue their business, traffickers need ways to both clean and store all the dirty cash changing hands at the various levels of their respective operations. While banks are subjected to varying (but generally stringent) regulatory compliance standards in 2021, clearing regulators’ checklists for what encompasses an effective AML/BSA program is simply not enough to truly impact this issue on the global scale. A step in the right direction is in examining and identifying all aspects of the beneficial ownership structures of the businesses they provide services for (especially those incorporated in high-risk jurisdictions and/or those in areas heavily associated with human trafficking or organized crime) while monitoring transactions closely. Human traffickers often have ordinary bank accounts just like everyone else, which makes thorough KYC protocols all the more important. All told, human trafficking is a truly disruptive practice from a financial and humanitarian perspective, one that requires the backhanded movement of money to stay alive. No one has more influence over the movement of funds than financial institutions. As such, compliance personnel must remain vigilant with respect to the activity of their clientele and keep in mind that there is more to be lost in this deadly game than money and reputation alone.
- Moss, Simon. “Banking Can’t Turn A Blind Eye To The Human Trafficking-Money Laundering Connection.”International Business Times, 17 June 2021.
- Niethammer, Carmen. “Cracking The $150 Billion Business Of Human Trafficking.”Forbes, Forbes Magazine, 4 Feb. 2020.