Loss of freedom - Human trafficking and its impact on Fintechs

Human trafficking has sadly become a widespread and global issue; from the woman forced into prostitution and kept locked up in a house, to the man working on a construction site, stripped of his documents and any salary taken from him. Every 30 seconds, the criminal industry of human trafficking makes more than $30,000; bringing in approximately $32 billion a year.

In the world of financial crime, human trafficking is a predicate offence (the criminal activity and the proceeds money laundering), the revenues of which may touch financial services as the profits are laundered. Financial services may also be used to facilitate these offences, providing the ability to pay subsistence for accommodation, book flights for a trafficked person and other activities traffickers rely on. As the awareness of human trafficking increases and pressure is applied to the criminals that make huge sums from the exploitation of others, the criminals may be forced to look at alternative financial arrangements or exploit new technologies to their advantage.

There are numerous behavioural patterns characterising the organised crime groups involved. Having analysed the most often occurring subtleties, it is evident that tools such as the Internet and other communication devices are utilised expansively. The most intimidating organised crime groups are mainly those capable of governing the entire course of trafficking, from the recruitment of victims to the reinvestment of the criminal proceeds.

Through our industry engagement, FINTRAIL has seen an increase in Fintechs’ awareness of the fight against human trafficking and subsequently, human trafficking was the subject of the October 2017 FinTech Financial Crime Exchange (FFE). Members presented case studies and industry experts provided insights on the changing nature of the threat and industry initiatives to tackle the problem. Many of the FFE members were able to give examples of cases where they had detected indicators of financial crime involving human trafficking or exploitation, demonstrating this is not only an issue that impacts large financial institutions but may also directly impact the Fintech industry. In fact, some of the features common to modern Fintech such as non-face-to-face onboarding and ease of account management/overview may make it potentially attractive to those involved in trafficking and exploitation. As a result, Fintechs are conducting enhanced Know Your Customer (KYC) checks and are scrutinizing onboarding documentation in an attempt to combat human trafficking.

The FFE session identified specific typologies that may be relevant in a Fintech environment and what mitigations and actions industry may be able to apply. Some basic example indicators or red flags are detailed below:

- Customers taking selfies or completing onboarding checks, appear to be under control of someone else. This may appear as someone in close proximity as the images are being taken or controlling what is done or said.

- A customer may not be in possession of their own legal documents and may add unreasonable delay while they get them from someone else.

- Recurring payments being made from one account to multiple accounts for wages at unreasonably low amounts.

- Multiple point-of-sale transactions at car rental agencies, airline ticket purchases and train ticket purchases with no subsequent spend in that destination.

- High expenditure payments at fast food outlets, supermarket outlets, clothing stores, drug stores etc.

The FFE and its members will continue to focus on human trafficking and its negative impact on society and implications for financial services. In addition, FINTRAIL will track the evolution of financial crime typologies associated with human trafficking in order to identify any shift by those criminals to target financial services as a tool to further their illicit and damaging behaviours.

If you would like to discuss human trafficking further, learn more about the FFE and how FINTRAIL can help your organisation identify and combat human trafficking get in touch.