Reminder of FinCEN’s Guidance on Red Flags to Recognize Human Smuggling and Human Trafficking


Human trafficking has been making the news in the Northwest in recent months. This week we review guidance issued in 2014 by the Financial Crimes Enforcement Network (FinCEN).

Advisory FIN-2014-A008 discusses financial red flags that can be used to spot and help law enforcement agencies.

The advisory provides warning signs that may indicate financial activity related to human smuggling or human trafficking. In addition, 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.

Question of the Week

Do we have the right to refuse to cash an “on-us” check (a check drawn on a credit union member’s account) when the check is presented by a non-member?

No. Oregon, Washington, and Idaho laws say that the credit union cannot refuse to cash this type of check simply because the non-member doesn’t have a relationship with the credit union.

However, a credit union can deny cashing an on-us check presented by a non-member if the non-member fails to comply with the check cashing requirements, such as a valid ID, thumbprint, applicable endorsement, or fee to cash the item. Additionally, if there are not enough funds in the account to cash the check, or the check looks altered or suspicious, the credit union may refer the non-member back to the check writer or try to verify the check with the member before cashing the item.

Related Links:

Legal Briefs

National Credit Union Administration (NCUA)

The NCUA issued a Board Action Bulletin from its most recent board meeting. The bulletin states that the NCUA approved two final rules that reduce the regulatory burden on credit unions with assets of $10 billion or greater by removing current capital planning and stress testing requirements and a rule that revises the agency’s advertising rule by allowing an additional advertising option and expanding exemptions.

Federal Reserve Board (FRB)

The FRB issued Consumer Affairs Letter 18-3, which addresses the revised interagency examination procedures for Reg X and Reg Z.

The FRB has released the April 2018 issue of the Beige Book.

The FRB released the minutes from its most recent Discount Rate meetings.

FRB Supervision Vice Chairman Randal Quarles delivered testimony before the Committee on Financial Services regarding the FRB’s regulation and supervision of financial institutions.

The FRB, jointly with the OCC and FDIC, approved a proposal to revise the regulatory capital rules to provide an option to phase in the effects of CECL.

Federal Housing Finance Agency (FHFA)

Fannie Mae and Freddie Mac announced servicing updates: Fannie Mae Servicing Guide Announcement SVC-2018-03 and Freddie Mach Bulletin 2018-6.

Office of Foreign Assets Control (OFAC)

OFAC has updated the SDN list as of April 18, 2018. The last update prior to this was April 6, 2018.

Questions? Contact the Compliance Hotline: 1.800.546.4465,

Posted in Compliance News.