Fighting Human Trafficking With Fraud And AML Detection Systems
What portions of the multi-billions of dollars that are channeled through a range of bank card products are linked to human trafficking transactions? While we aren’t really sure of the answer, there is one thing of which we are certain. And that is financial institutions should focus their anti-money laundering and fraud detection systems on transaction patterns that indicate human trafficking activity if we are going ever going to help eradicate the problem.
Financial institutions are in a privileged position in a market economy. With that privilege, just like the responsibility to prevent money laundering, fraud, and terrorist financing, comes the responsibility to help combat human trafficking. The combination of prototypical AML and fraud detection rules will work to do this. It is encouraging, and strikingly convenient, that the systems designed to detect money laundering and fraud can easily be refocused to detect human trafficking.
[For more from NICE Actimize's Welsey Wilhelm, check out: Is Your Fraud Case Management System Holding You Back?]
For financial institutions, the relevant question is, “How much human trafficking is being supported in your supply chain with your logo on it?” While you may have transferred some of the fraud, credit, and operational risks to an outside vendor, you cannot transfer your brand’s reputation to them.
Human trafficking detection is relevant across a range of card products, including pre-paid and debit as well as on free checking and other low balance accounts and unbanked/under-banked customer acquisition programs. Consider deposit-only ATM cards for “businesses” with frequent patterns of cash deposits at all hours of the day or night. Consider withdrawals at ATMs where the cardholder is always “escorted” or withdrawals, deposits, and transactions made by someone other than the cardholder. All you have to do is start looking at your analytics to see the patterns.
If your institution isn’t currently looking at these patterns, why isn’t it? If you don’t already have one, consider setting up a human trafficking detection function within your existing anti-money laundering or fraud operation. Learn to recognize the suspicious financial transactions and red flags that may indicate human trafficking.
For example, frequent low dollar purchases and load transactions often mean that victims are being given access to necessities, but not enough money to escape their captors. A concentration of spend across certain merchant types, such as beauty salons or car services, can indicate human trafficking. Then, of course, there are repetitive payments on rent, hotels, and related services, and even rent payments for storage lockers, in this cocktail of expenditures. And when you see all of these occurring in harmony, that can add up to potential trouble.
The hallmark of modern fraud (and anti-money laundering) detection systems is the identification of normal and customary behavior signatures. But often, it is what lies between those systems’ gray areas that indicates problems potentially leading to crimes like human trafficking. It is straightforward to refocus those same detection systems to identify human trafficking behavior signatures as well.
But the cost of all this isn’t so gray. Just take a look at some of these statistics. More than 800,000 people are trafficked across international borders every year, according to the Department of State and, as a result, an estimated $32 billion in total yearly profits are generated by the human trafficking industry. An average of $13,000 per year is generated by each “forced laborer” and that number can run as high as $67,200 per victim per year. Obviously the massive strain is on the victims, but clearly spreads to local and global economies as well.
There are some companies, like ours and some of our customers, which are collaborating to set up human trafficking detection best-practices and you can benefit from their vast libraries of detection rules and experiences. While this is a new area, we expect it to grow in the months ahead -- we’ve already seen knowledge-sharing in South Africa, Asia-Pacific, and here in the United States and the list of banks working together on this problem continues to grow.
So please put human trafficking in your cross hairs -- and good hunting!
Wesley Wilhelm (Wes) has more than 30 years of experience in banking and consulting to the financial services industry, with extensive knowledge of fraud management, payments, and retail banking technology and operations. He has held numerous management positions in risk and ... View Full Bio
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