Human Trafficking money Red Flags

Law enforcement is failing to connect migrant smuggling with the generation and distribution of criminal money. This is despite the fact organised criminal gangs are known to target what is an increasingly lucrative criminal trade.

Gabor Sztankovics, a senior specialist at Europol's European Migrant Smuggling Centre, told a recent Association of Certified Anti-Money Laundering Specialists (ACAMS) webinar that there was a "huge intelligence gap" between investigations related to migrant smuggling and intelligence reports. 

Lack of data

He said Europol had received 6,000 notifications of migrant smuggling during the last three years, but in only 25 cases had the reporter notified the authorities of a money laundering element. Smuggling featured equally rarely in money laundering investigations; of 3,600 notifications, migrant smuggling was found to be a factor in just 17. 

Europol's critical conclusion is supported by a report from the Migration Policy Centre, which noted in 2015: "EU countries, including the UK, are not following the money of trafficking cases, and facts regarding prevention, protection and prosecution remain discouraging due to the chronic shortfall in data." 

The report said a number of things had contributed to this situation:

• the transnational nature of the crime and traffickers' ability to move both money and victims around quickly and easily;
• differences in the enforcement of laws and data protection regulations between various countries;
• lack of victim cooperation; and
• the fluidity of the smuggling groups, which enables them to respond quickly to changes in the law and to adapt to fluctuations in supply and demand.

Third-largest source of criminal money

Human trafficking is the third-largest source of criminal money internationally, netting an estimated $31.6 billion in 2011 (the last year with a reliable record). Europol has said that the business of migrant smuggling is growing even more quickly than human trafficking as a result of mass movements of individuals between Syria and Europe and between Africa and the Europe. 

Human smuggling is estimated by Europol to have generated between $3 and $6 billion in 2015. Migrant smuggling is defined as the illegal movement of individuals across borders, while human trafficking is the criminal exploitation of an individual using force or deception.

Despite the large sums of money generated, police agencies report low levels of suspicious activity reports citing migrant smuggling. Giuseppe Lombardo, a strategic adviser with the International Institute of Higher Studies in Criminal Sciences, said that less than 10 percent of investigations into migrant smuggling produced a suspicious activity report.

Investigators face many barriers

Problems faced by investigators of migrant smuggling include the use of trust-based systems to move money, the wide range of systems set up to receive criminal money, the fluidity of the criminal gangs involved and the frequent connivance of political agencies in the protection of smugglers. 

Smugglers moving criminal proceeds to the West typically use hawala, the money movement system used in the Indian subcontinent, Sztankovics said. "There is rarely a paper trail in the transaction so they are extremely difficult to investigate."

Legitimate remitting companies, including Western Union and MoneyGram, have also been abused by smugglers seeking to move money across borders. Both have taken leading roles in clamping down on smuggling and are cooperating with the authorities' efforts to prevent illicit use of their international money remitting systems. A depositor who makes a single transaction to move money internationally is asked to supply minimal evidence of identity. 

This contrasts with an account holder who seeks a longer-term relationship with the institution. 

"Smugglers work with cash and steer well clear of the legitimate banking system," Sztankovics said.

Multiple recipients of criminal money located in a number of different destinations presents another challenge to those investigating migrant smuggling, Europol said. Victims will be required to pay in stages and at different points along the journey. Some migrants have been held in smuggler-controlled houses and only released on payment. 

Identification of the smuggling organisation is complicated by the fact that many are "opportunistic". Europol has some 4,000 smuggling organisations on its books and around 10,000 identified members of the groups. 

Europol said smuggler groups hired the services of criminals with skills in forgery and scouting. Others were be recruited because they had vehicles adapted to hiding victims. 

"That is all they need to move helpless people across many borders," Sztankovics said. 

Some smugglers have been using transportation companies to move both people and money from the source country to a destination where the gang leader can deposit the migrants and launder the money, he said. 

Interpol found that one smuggling group in Afghanistan had accumulated $800,000 and remitted it to their source country, where law enforcers were unwilling to assist with the retrieval of the money. 

"We have been able to work with Turkey in retrieving funds, but elsewhere it is a challenge to enforce the intelligence because we don't have the jurisdiction to do so," Sztankovics said.

Scale of proceeds

Analysis of human smuggling from Turkey to Europe may help to give an indication of the scale of proceeds netted by criminal gangs. Investigators have found that smugglers who hired a ship loaded with 768 migrants netted $3.2 million from a single journey. 

Prices for journeys range from $800 for victims coming from Sub-Saharan African countries such as Somalia and Eritrea to $2,500 for those coming from Syria. The families of children smuggled from Africa to France have been found to have paid smugglers as much as 10,000 euros per person. Europol has estimated that smugglers taking migrants from Libya to Europe made $320 million in a single year. 

Sztankovics said the prices charged to victims were determined by the distance they must travel, so that the cost of the journey from Central Asia to Europe would greatly exceed that from Turkey or Libya to Europe. 

The means of travel was also a factor, he said; a migrant who is smuggled by land across a border will pay a lot less than one who is taken across the Mediterranean by boat. Recent events have shown that some victims taking the latter route have, tragically, paid the ultimate price.

Travel by air is most expensive. This is not only because of the need to buy tickets but also because the smuggler will need to forge passports and visas and this may necessitate bribing officials. Interpol has said that obtaining or forging biometric passports presents criminals with their greatest challenge. 

Smugglers who obtain original documents charge the greatest premium, although profits are limited by the bribes paid to corrupt administrators in immigration offices to obtain such documents.

Smugglers require victims to pay cash to the organisation in their source country before they are allowed to embark on the journey. Smuggling organisations have set up fronts posing as travel agencies to receive the funds and supply criminal documents. Such fronts may also be used to promote the smugglers' illegal transportation service. 

Smuggler gangs gain additional revenue by working with traffickers in destination countries. They will exploit migrants by holding their passport to keep them under their control and prevent them from leaving the country. Fees are deducted by the trafficker from the migrants' pay, while the trafficker will also maximise victims' capacity to bring in revenue by using them as a front to collect social security benefits. 

"Once they have agreed to be smuggled, they expose themselves also to being trafficked and held in debt bondage," Sztankovics said.

"Proceeds from trafficking derive from multiple sources: money from services provided by the trafficked person as well as the food, housing, recruitment and travel costs paid by them, or the sale of victims to other gangs," a forthcoming report from the Centre for Financial Crime and Security Studies at the Royal United Services Institute entitled, "Human Trafficking and Financial Institutions", has noted.

The physical movement of migrants across borders presents the riskiest part of a smuggling operations and Europol has said that drivers who carry migrants to and across borders receive the largest share of the proceeds. 

Red flags

Financial institutions should be alert to cases where multiple small payments are made to a single address or a single account, said Anne-Marie Barry of the Stop the Traffik, a non-governmental organisation. Banks should also scrutinise those accounts which receive funds from multiple addresses. 

Barry said financial institutions should be alert to money transfers below 3,000 euros from multiple locations in one jurisdiction to a common beneficiary overseas. Multiple money transfers paid into separate branches or banks along a geographical border on the same or consecutive days may also indicate that the institution may be being used by smugglers. 

Other red flags include:

• unusual cash deposits followed by money transfers to typical migrant countries;
• the use of pre-signed cheques bearing different handwriting in the signature and payee fields;
• frequent currency exchanges by customers who are not involved in a high-cash industry;
• a company showing incongruously low payroll expenses given its alleged size;
• cashing of payroll cheques where the employer keeps the majority or all of the funds;
• transactions at a branch where a customer is escorted by a third-party "interpreter"; and

• transferring funds to high-risk countries.

"Of all the AML and [foreign corrupt practice] activities financial institutions conduct, identifying incidences of human trafficking is perhaps the most challenging and disturbing," said Angela Salter of ACAMS. 

The urgency of the fight against the profits of human trafficking has been identified by the UK government, which said in a Report of the Inter-Departmental Ministerial Group on Modern Slavery that it was determined to "attack the profits of traffickers and slave drivers through greater use of asset recovery and financial investigation in the future". 

The report also said financial institutions had both "a moral and practical responsibility" to increase efforts and ensure that they were neither financing companies connected with modern slavery nor unwittingly facilitating the movement of its proceeds.

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