Guidelines Help Credit Unions Identify Indicators of Human Smuggling and Trafficking

FinCEN shares the red flags, common terms, and activities that may indicate crime-related financial activity.

Hand holding the word "compliance."2/26/2019 

Human trafficking has been making the news in the Northwest in recent months. Credit unions can play a role in combatting these crimes, and the Financial Crimes Enforcement Network’s 2014 guidance offers information and advice.  

In 2014, FinCEN released Advisory FIN-2014-A008 on possible 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, 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). 
 
Human smuggling is defined as, “Acts or attempts to bring unauthorized aliens to or into the U.S., 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.” 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 look out for indicators such as the following: 

  • Multiple wire transfers, generally kept below the $3,000 reporting threshold, sent from various locations across the country 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 these 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 
Can a credit union open a share account for someone who only has an Individual Taxpayer Identification number and not a Social Security number? 

Yes. The National Credit Union Administration encourages credit unions to serve individuals who are within the field of membership regardless of citizenship and regardless of whether they have a Social Security number or not. 

An ITIN is a tax processing number issued by the IRS. It is a nine-digit number that always begins with the number 9 and has a 7 or 8 in the fourth digit, for example, 9XX-7X-XXXX.  The IRS issues ITINs to individuals who are required to have a U.S. taxpayer identification number but who do not have and are not eligible to obtain a Social Security number from the Social Security Administration.   

ITINs are issued regardless of immigration status because both resident and nonresident aliens may have U.S. tax return and payment responsibilities under the Internal Revenue Code. Individuals must have a filing requirement and file a valid federal income tax return to receive an ITIN, unless they meet an exception. 

After this person has completed the application process using an ITIN, he or she is entitled to all the services and products available to all other members. 

While an ITIN may serve as an ID number, it is important to obtain other verification documents as part of the credit union’s due diligence process, as ITINs are not valid identification outside the tax system. Beginning on January 1, 2017, ITINs expire if they are not used at least once in a three-year period. 

Legal Briefs 

National Credit Union Administration (NCUA) 

NCUA’s final rule on loans in areas having special flood hazards published in Federal Register. Rule effective date is July 1, 2019. Issued by NCUA on 2/1/2019. 

Notice of proposed rulemaking and request for comment. NCUA proposes to amend its regulations governing the responsibilities of a federally insured credit union to obtain an annual supervisory committee audit of the credit union. Issued on 2/25/2019. 

Consumer Financial Protection Bureau (CFPB) 

The CFPB issued a Small Entity Compliance Guide entitled “Payday, Vehicle Title, and High-Cost Installment Lending Rule; Payment-Related Requirements,” on 2/21/2019. 

Social Security Administration (SSA) 

The SSA issued a final rule making changes to the Representative Payee program published in the Federal Register on 2/15/2019. Background checks will be performed on prospective Rep Payees and those with felony convictions for certain crimes will not be permitted to serve. 

Office of Foreign Assets Control (OFAC) 

OFAC has updated the SDN list as of February 20, 2019. The last update prior to this was February 15, 2019. 

Questions? Contact the Compliance Hotline: 1.800.546.4465, [email protected].