“With or Without You”*

It still baffles me that in 2017 some bankers will ask why the financial sector has any role in activities related to law enforcement.

I’ve just finished a lengthy meeting in Washington, D.C., with a number of bankers. Each had volunteered to meet with the staff of Polaris, a leading anti-human-trafficking organization. The subject was how to improve the reporting and detection of this horrific crime.

Bluntly, the critics of financial sector support should be ashamed of themselves.

In my 30-plus years of working with AML professionals, there have been debates and arguments on scope of responsibilities. But not on private-public partnering to protect society from monies being used to harm our communities.

Update on “The Typology Of Modern Slavery”

The main focus of the meeting was to hear details from Polaris from its new report, as well as to learn about the broader aspects of this crime that harm so many victims, such as “labor trafficking.” The report—The Typology Of Modern Slavery: Defining Sex and Labor Trafficking In The United States—should be must reading for the BSA/AML community, at the least.

The report was the result of a yearlong information compilation from the Polaris hotline of 32,208 cases of potential human trafficking and 10,085 potential cases of labor exploitation—all in the United States.

Note that there are estimates that over 43 million individuals being held against their will worldwide.

And that is considered a conservative estimate.

The typology report created 25 classifications of the most common and distinct models in the hopes that participants and stakeholders such as the financial sector can leverage the information to improve processes and policies to further combat human trafficking.

Building response plans on data

The AML community should anticipate more strategies and tactics from last week’s meeting and create workstreams. But for now here are some helpful pieces of information from a survivor survey, staff research, and the previously issued guidance from FinCEN.

An area that receives limited focus appears to be labor trafficking. The key enabler is the so-called “international labor recruitment industry.” This group has used abusive tactics to deliver indebted and vulnerable workers to U.S. employers.

While much more can be said about this area, there are identified recruiter interactions with financial institutions to note. These include wire transfers from multiple low-skilled businesses into accounts for labor brokers/recruiters without parallel payments out of this contractor’s account for payroll of workers.

Other data points reflect common money laundering red flags from other crimes, but are useful to note. Based on survivor focus groups, Polaris learned of the use of pre-paid cards, large quantities of cash deposits, and traffickers accompanying the victims to their banks.

Polaris notes that some of the indicators are similar to those marking elder abuse and benefits fraud.

Disruption is key counter to trafficking

There has certainly been a consensus regarding the importance of beneficial ownership information, but not with reference to human trafficking. Polaris has made a strong case that with the large number of human trafficking rings operating illicit massage businesses take advantage of the current lack of transparency. Clearly, beneficial ownership requirements are needed.

As we AML community members know, there will be a new CDD rule for financial institutions in the U.S. in 2018, but the lack of state-level consistency in incorporation requirements continues to haunt accuracy and efficiency regarding critical information on business ownership. Federal legislation is pending and there may be actual momentum given the renewed attention to shell companies.

(The recent release of the “Paradise Papers” will receive its essential review in the coming weeks and months. This is a leak of millions of documents about how the elite hide their financial dealings. At least one report based on the papers concerns how a U.S. community bank sets up trusts that have been used to hide the ownership of private aircraft.)

For now, Polaris is advocating for change. Specifically in the area of illicit massage businesses, Polaris makes a compelling case: In my own home county of Fairfax, Va., there are 108 illicit businesses connected to 181 different corporations and LLCs; and lack of Virginia law makes it nearly impossible to know the identity of criminals profiting from so many victims.

For those of you using the Polaris information to update your due diligence, Polaris has also noted that there are high concentrations of these illegal business in California, Texas, New York, Florida, and New Jersey.

Many challenges ahead

Does the AML infrastructure need to be updated and approved—of course. And I have been a strong proponent of such change.

However, if you reject what many financial institution professionals have worked so hard to enhance—how to work better with law enforcement and protect our communities— you need to take a long hard look at yourself.

And perhaps make a career switch.

*“With or Without You,” by U2 from “The Joshua Tree” album in 1987 and their first U.S. #1 song.