Human Trafficking Red Flags: FinCEN FIN-2020-A008

Human trafficking is both a crime and a financial crime problem, because traffickers rely on banks, payment services and money transfers to collect and move their proceeds. In October 2020 the US Financial Crimes Enforcement Network (FinCEN) issued an advisory to help financial institutions spot it. This guide summarises that advisory, FIN-2020-A008. It supports our Human Trafficking and Modern Slavery Financial Indicators course overview and follows our guide to the FATF and APG human trafficking report.

What the advisory is

FinCEN advisory FIN-2020-A008 is dated 15 October 2020. It supplements the 2014 advisory FIN-2014-A008 with new typologies, red flags and two case studies. FinCEN says it identified 20 new financial and behavioural indicators and four additional typologies since 2014. The advisory cites an International Labour Organization estimate that human trafficking generates about $150 billion worldwide per year.

The four typologies

1. Front companies: legitimate-looking businesses, such as massage parlours, bars and restaurants, that mix illicit proceeds with legitimate revenue.
2. Exploitative employment practices: visa fraud, wage retention and excessive recruitment fees, with salaries often routed to traffickers.
3. Funnel accounts: multiple cash deposits in one area, withdrawn quickly in another, often through accounts that victims were forced to open.
4. Alternative payment methods: prepaid cards, virtual currency and third-party payment processors used to pay for or advertise commercial sex and to conceal the parties to transactions.

Behavioural red flags

The advisory lists 10 behavioural indicators aimed at customer-facing staff. Examples include third parties speaking for, controlling or intimidating a customer, third parties using false or other people's identification or trying to open accounts for minors, signs of abuse, neglect or confinement, and a customer who is unsure of their whereabouts or gives inconsistent stories.

Financial red flags

The advisory also lists 10 financial indicators. These include frequent travel across US locations or to conduit countries, and spending that covers living costs but is inconsistent with the customer's profile or business. On accounts and transactions, it points to activity largely outside business hours, mostly cash, deposits larger than the business's size warrants, and frequent cash deposits with no ACH payments. On payment tools, it points to frequent prepaid card use, shared identifiers linked to escort or commercial sex advertising, frequent transactions with foreign online classifieds, darknet-linked cryptocurrency activity, and third-party payment processors that conceal parties. It also lists avoiding identification requirements or transactions that trigger reporting.

Filing a suspicious activity report

According to the advisory, institutions should include the key term "HUMAN TRAFFICKING FIN-2020-A008" in SAR field 2 and in the narrative, and select SAR field 38(h). It tells filers not to report a potential victim as the subject of the report, and to include all available victim information in the narrative. It also asks filers to include behavioural indicators, the staff who observed them, and details such as email addresses, phone numbers and IP addresses where possible. The advisory does not use urgent notification language. It points to SAR filing when an institution knows, suspects or has reason to suspect illicit activity, and mentions the Homeland Security Investigations tip line for reporting to law enforcement. It also encourages section 314(b) information sharing where trafficking-related money laundering is suspected, as our guide to section 314(b) explains.

The two case studies

In a Minnesota case from December 2018, 36 defendants in a Thai sex trafficking ring were found guilty. Each victim incurred a $55,000 debt, law enforcement recovered $1.5 million in cash, and one money launderer alone sent over $40 million to Thailand. In an El Paso, Texas case from 2016, proceeds from purchases of prepaid cards were converted to bitcoin on an exchange and used to buy prostitution advertisements. The leaders received sentences of 180 and 90 months.

Why front-line staff matter

The advisory aims its 10 behavioural indicators at customer-facing staff, which makes sense: a transaction monitoring system cannot see a third party speaking for a customer or a customer who is unsure where they are. The financial indicators, by contrast, are patterns that analysts can look for in data. The advisory treats the two as complementary, and the SAR narrative is where they come together, with the observing staff and the behavioural indicators set out alongside the transaction detail.

Using this in a monitoring role: our suggestions

These steps are our suggestions, not requirements in the advisory.

• Brief branch and call-centre staff on the behavioural indicators, which are visible only to people who meet customers.
• Check that transaction monitoring scenarios cover funnel account patterns across locations.
• Make sure the key term is in the SAR template so it is not forgotten under time pressure.
• Record how a possible victim is described in the narrative, so they are not entered as the subject.

For structured learning, browse our CPD courses.

What we could not confirm

The advisory is from 2020, and FinCEN has issued later notices on trafficking and smuggling which we did not read in full, so check for the current key terms before filing. The statistics come from the advisory, which cites the ILO. This post covers US reporting only; UK and Irish reporting routes differ and are not covered here. It is general information, not legal advice.