FinCEN Issues Supplemental Advisory on Identifying and Reporting Human Trafficking
When filing a Suspicious Activity Report for suspected human trafficking, credit unions should provide all pertinent available information in the SAR narrative.
The Financial Crimes Enforcement Network released FinCEN Advisory FIN-2020-A008 to supplement the 2014 FinCEN guidance on recognizing activity that may be associated with human smuggling and human trafficking. Since the 2014 Advisory, FinCEN collaborated with law enforcement to identify 20 new financial and behavioral indicators of labor and sex trafficking, and four additional typologies. This advisory provides new information to assist in identifying and reporting human trafficking, and aid the global effort to combat this crime; as well as two illustrative recent case studies. The 2014 Advisory remains relevant and provides information related to human smuggling.
Human traffickers and their facilitators exploit adults and children in the United States, and around the world, for financial gain, among other reasons. Victims are placed into forced labor, slavery, involuntary servitude, and peonage, and/or forced to engage in commercial sex acts. Anyone can be a victim regardless of origin, sex, age, or legal status. And anyone can be a trafficker, from a single individual, such as a family member, to a criminal network, terrorist organization, or corrupt government regime.
The new typologies of human trafficking identified in the advisory include:
- Front companies – businesses that combine illicit proceeds with those gained from legitimate business operations;
- Exploitative employment practices – seemingly legitimate businesses that use employment schemes such as vise fraud and wage retention;
- Funnel accounts – individual or business accounts in one geographic area that receive multiple cash deposits, often below CTR reporting thresholds, from which the funds are withdrawn in different geographic areas with little time elapsing between deposit and withdrawal and
- Alternative Payment Methods – in addition to payment via cash, traffickers also have accepted payment via credit cards, prepaid cards, mobile payment applications, and convertible virtual currency.
Some of the red flags identified in the supplemental advisory include:
- Customers frequently appear to move through, and transact from, different geographic locations in the United States. These transactions can be combined with travel and transactions in and to foreign countries that are significant conduits for human trafficking.
- Transactions are inconsistent with a customer’s expected activity and/or line of business in an apparent effort to cover trafficking victims’ living costs, including housing (e.g., hotel, motel, short-term rentals, or residential accommodations); transportation (e.g., airplane, taxi, limousine, or rideshare services); medical expenses; pharmacies; clothing; grocery stores; and restaurants, including fast food eateries.
- Transactional activity largely occurs outside of normal business operating hours (e.g., an establishment that operates during the day has a large number of transactions at night), is almost always made in cash, and deposits are larger than what is expected for the business and the size of its operations.
- A customer frequently makes cash deposits with no Automated Clearing House (ACH) payments.
- An individual frequently purchases and uses prepaid access cards.
- A customer’s account shares common identifiers, such as a telephone number, email, and social media handle, or address, associated with escort agency websites and commercial sex advertisements.
- Frequent transactions with online classified sites that are based in foreign jurisdictions.
- A customer frequently sends or receives funds via cryptocurrency to or from darknet markets or services known to be associated with illicit activity. This may include services that host advertising content for illicit services, sell illicit content, or financial institutions that allow prepaid cards to pay for cryptocurrencies without appropriate risk mitigation controls.
When filing a Suspicious Activity Report (SAR) for suspected human trafficking, FinCEN requests that credit unions provide all pertinent available information in the SAR narrative. A potential victim of human trafficking should not be reported as the subject of the SAR, rather all the available information about the victim should be included in the narrative. FinCEN also requests that credit unions reference this advisory by including the key term: “HUMAN TRAFFICKING FIN-2020-A008”
Question of the Week
Q. The credit union has funds held for a share-secured Visa, and we now have received a tax lien on the member. Do we have to send the funds securing the member’s debt?
A. No, you do not have to send the funds securing the debt. The credit union would have priority over an IRS levy or other lien if the member signs a security agreement pledging a specific dollar amount and the funds are not available to the member until the loan is paid off. The security agreement must be signed before the credit union receives the levy.
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Questions? Contact the Compliance Hotline: 1.800.546.4465; [email protected].