Compliance Center: FinCEN Issues Guidance on Human Smuggling and Human Trafficking

The Financial Crimes Enforcement Network (FinCEN) has released Advisory FIN-2014-A008 on possibly financial red flags that can be used to spot and help law enforcement’s efforts to fight human smuggling and trafficking. 

The advisory provides a number of red flags that may indicate financial activity related to human smuggling or human trafficking. In addition to identifying red flags, the advisory provides common terms that credit unions may use when reporting activity related to these crimes. The use of common terms will assist law enforcement in better identifying possible cases of human smuggling or human trafficking reported through Suspicious Activity Reports (SARs).

The advisory defines Human Smuggling as, “Acts or attempts to bring unauthorized aliens to or into the United States, transport them within the U.S., harbor unlawful aliens, encourage entry of illegal aliens, or conspire to commit these violations, knowingly or in reckless disregard of illegal status.”

And Human Trafficking is defined as, “The act of recruiting, harboring, transporting, providing or obtaining a person for forced labor or commercial sex acts through the use of force, fraud, or coercion.”

The advisory acknowledges similarities between legitimate financial activities and those that could be supporting human trafficking. It recommends evaluating indicators of human smuggling or trafficking in combinations with other red flags and factors.

The advisory tells credit unions to be on the lookout for such things as:

  • Multiple wire transfers, generally kept below the $3,000 reporting threshold, sent from various locations across the United States to a common beneficiary located in a U.S. or Mexican city along the Southwest border;
  • Multiple, apparently unrelated, customers sending wire transfers to the same beneficiary. These wire senders may also use similar transactional information including common amounts, addresses and phone numbers. When questioned to the extent circumstances allow, the wire senders may have no apparent relation to the recipient of the funds or know the purpose of the wire transfers;
  • Frequent exchange of small-denomination for larger-denomination bills by a customer who is not in a cash-intensive industry; and
  • A customer’s or member’s account appears to function as a funnel account, where cash deposits occur in cities or states where the customer does not reside or conduct business. Frequently, in the case of funnel accounts, the funds are quickly withdrawn the same day after the deposits are made.

To report suspicions of human smuggling and trafficking, FinCEN requests credit unions include one or both of the key terms in the Narrative and the Suspicious Activity Information: “Advisory Human Trafficking” and/or “Advisory Human Smuggling.”

The narrative should also include an explanation of why the credit union suspects or has reason to suspect that the activity is suspicious.

Compliance Question of the Week

Are there any tools out there for detecting and reporting fraud or misuse of funds by a representative payee?

Yes. The Office of the Inspector General for Social Security has both of these tools.

You can find the fraud report here: Report fraud, waste, or abuse.

You can find information on misuse here: Misuse of Benefits by a Rep Payee.

These are great resources for the credit union and for any of your members that may inquire about what they can and can’t do with Social Security funds if they are a fiduciary for someone else. 

Legal Briefs

National Credit Union Administration (NCUA)

The NCUA issued a Board Action Bulletin detailing the actions of last week’s NCUA Board Meeting.

The NCUA announced that Board Member Rick Metsger has been designated as Vice Chairman of the NCUA.

The NCUA has posted two new YouTube videos, Scams Targeting Seniors and Reporting Elder Financial Abuse or Exploitation.

Larry Fazio, NCUA’s Director of the Office of Examination and Insurance, testified at the Senate Banking Committee and discussed the NCUA’s efforts to provide regulatory relief to small credit unions.

Consumer Financial Protection Bureau (CFPB)

The CFPB issued a save the date to attend the Credit Union Advisory Council Meeting being held on October 1, 2014 in Washington D.C. The CFPB also released the agenda for the October meeting. For credit unions that cannot attend, a recording of the meeting will be available at a later date.

CFPB Director Cordray delivered prepared remarks at the Auto Finance Field Hearing.

The CFPB announced a proposed rule that would give them oversight of nonbank auto finance companies.

The CFPB published a story on the effects of predatory auto lending.

The CFPB announced that it will be holding a forum regarding access to checking accounts. The forum is open to the public and will be held in Washington, D.C. on October 8th.

Federal Reserve Board (FRB)

The FRB released a report titled “2013 Interchange Fee Revenue, Covered Issuer Costs, and Covered Issuer and Merchant Fraud Losses Related to Debit Card Transactions.”

FRB Chair Yellen delivered a presentation at the 2014 Assets Learning Conference of the Corporation for Enterprise Development in Washington, D.C., focusing on the importance of asset building for low and middle income households.

The FRB has released the Federal Open Market Committee’s economic projections, statement, and policy normalization principles and plans, which was discussed during the Committee’s most recent meeting.

The September edition of FedFlash is now available.

Federal Financial Institutions Examination Council (FFIEC)

The FFIEC announced that 2013 HMDA information is now available.

Office of Foreign Assets Control (OFAC)

OFAC has updated the SDN list as of September 18, 2014. The last update prior to this was September 16, 2014.

Questions? Contact the Compliance Hotline: 1.800.546.4465,

Posted in Compliance News, NCUA.