Human Trafficking Financial Indicators: FATF and APG Report

Human trafficking is a serious crime against people, and it generates money that has to be paid, stored and moved. Financial institutions are sometimes the only organisations that see the financial side of the abuse. In July 2018 the Financial Action Task Force (FATF) and the Asia/Pacific Group on Money Laundering (APG) published a report, Financial Flows from Human Trafficking, which sets out how traffickers use the financial system and what staff might notice. This guide summarises that report for compliance teams and advisers. It supports our human trafficking and modern slavery financial indicators course overview.

A note on approach: the indicators below are signs that may justify a closer look, not proof of trafficking. Any concern should go to your reporting officer and be handled through your firm's escalation route, without confronting the customer.

Scale: what the report says

The report cites estimates from the International Labour Organization and the Walk Free Foundation that 24.9 million people were in forced labour or sexual exploitation at any time in 2016. It also cites an ILO estimate that forced labour generates about 150.2 billion US dollars a year, based on 2012 data published in 2014, of which about 99 billion relates to forced sexual exploitation. The report treats these as estimates and notes that no accepted estimate exists for organ removal.

How the money moves

The report distinguishes three types of exploitation, each with different money flows. For sexual exploitation, victims' living costs such as travel, lodging, food and pharmacy purchases may be paid through accounts, while proceeds are typically cash, third-party deposits, email money transfers and virtual currency. Methods include funnel accounts, nominee accounts, money mules, bulk cash smuggling and hawala. For forced labour, wages may be paid into accounts that the traffickers control, with funds withdrawn quickly through cash machines or sent onward, and methods can include false invoicing through shell companies. For organ removal, the report says the financial trail is limited to infrastructure costs and large one-off payments.

Indicators from the report

Account indicators

• Several customers share a phone number, email address or home address.
• A third party controls or has access to an account opened by someone else.
• A stated address holds far more registered customers than it could plausibly house.
• Income is received and withdrawn almost immediately, or cash moves from many locations to a few accounts.

Transaction indicators

• Wages from the same employer are paid into several accounts, followed by rapid cash withdrawal or transfer.
• Withdrawals on several accounts happen at the same cash machine at the same time.
• Frequent third-party cash deposits or transfers from unrelated people that do not fit the account holder's income.
• Spending is mostly on taxis, motels, pharmacies and fast food, with no rent, utilities or food expenses.
• Payments to adult advertising sites or online escort platforms, or frequent conversion to or from virtual currency.

Customer behaviour indicators

• A companion checks the customer's statements, controls their actions or answers for them.
• A customer relies on an interpreter and seems unable to speak for themselves without a third party's involvement.
• A customer defers to a third party with no apparent relationship and no clear reason.

Trafficking and the wider modern slavery picture

The report is about the financial flows from trafficking, which is only one part of modern slavery risk. Firms also face exposure through supply chains and the businesses they lend to or invest in, which raises different questions about forced labour and due diligence. For that angle, see our guide to modern slavery and forced labour due diligence in financial services. Keeping the two topics apart helps teams decide whether a concern is about a customer's account activity or about the business a customer is financing.

Using indicators responsibly

According to the report, no single indicator is likely to confirm trafficking. It recommends combining broad primary indicators with more specific secondary ones to reduce false positives. It also notes that victim-level activity is often easier to spot and can lead investigators up to the wider network, and that wider context such as identity documents and residency details helps build a fuller picture. The indicators we list come from the body of the report and its case studies, not from the full annex of indicators.

Linking this to your wider controls: our suggestions

These points are our suggestions, not statements in the report. Make sure customer-facing staff know how to raise a concern quietly and quickly, without questioning a customer who may be under someone else's control. Train staff to recognise that a customer who looks like a victim may also be the account holder on paper. Connect this work to your suspicious activity reporting procedure; our guide to SARs and tipping off explains why you must not alert the person concerned. If you want structured training, browse our CPD courses.

What we could not confirm

The text we read stopped before the report's indicator annex, so the lists above may not be complete. The scale figures are the report's citations of ILO estimates and are several years old, so they should not be treated as current. We have not reviewed more recent FATF, Wolfsberg or national guidance on modern slavery, or UK and Irish reporting requirements. This post is general information, not legal advice.