Accountants can play an important role in deterring human trafficking and smuggling.
The United Nations estimated in 2005 that human trafficking generated approximately $32 billion a year in revenue, while the International Labor Organization estimated that 2.4 million people throughout the world are lured into forced labor. The figures are probably even higher now. Financial institutions have played a key role in detecting human trafficking, and accountants working with financial institutions can help them spot some of the telltale patterns to combat human trafficking.
“Human trafficking is often tied to a lot of other types of crime,” said Micah Willbrand, an anti-money laundering and financial crimes expert at the technology company NICE Actimize, where he is global director of product marketing of AML. “When a crime is committed, and law enforcement comes in and requests an investigation of the materials around the money that’s being passed, oftentimes financial institutions and investigators aren’t looking for a human trafficking element. We have the technology and some rules set up that can be used to identify additional follow-on types of activities.”
Victims of human trafficking and smuggling are frequently some of the most vulnerable in society.
“They’re often fairly uneducated and quite poor, and don’t understand what they’re getting into, a lot of the time because they’re tricked,” said Willbrand. “This has a tremendous social impact that criminal elements use to manipulate and guide these individuals to engage in various other types of crimes. There’s often a high correlation between trafficking and smuggling with other crimes. If you can start to identify human trafficking and smuggling rings, it will have a knock-on effect to help eliminate other crimes.”
He pointed to several indicators of human trafficking. “Often you’re looking at anomalies in cash intensive businesses which you wouldn’t expect to be cash intensive businesses,” said Willbrand. “A common one that’s given by a lot of law enforcement investigators is hotels. A hotel often should be a credit card type of business. Most of the receipts should be in credit cards. If you’re seeing the vast majority of deposits coming in cash, then there’s probably something else going on there. It could be prostitution rings. It could be bribery and corruption. There could be lots of other things. But if you’re seeing anomalies in what you would expect in the behavior of a corporation, that’s one simple indicator that you can look at.”
People sharing the same hotel address and mobile phone number can be additional indicators. “Often you will have people who register their addresses at hotels,” said Willbrand. “If you’re seeing that people have common addresses and are sharing mobile phone numbers and things like that, and depositing a lot of cash, then something is going on.”
Human trafficking can also be spotted from a geographic and demographic perspective. “The vast majority of trafficked individuals tend to be young individuals,” said Willbrand. “When you talk about sex trafficking, that tends to be young women between the ages of 18 and 24. When you talk about debt bondage and involuntary servitude—modern-day slavery—that tends to be men working in farm fields or working in manufacturing. Often they come from areas where you would expect people to be trafficked from: India, Eastern Asia, Central America and South America. They’re sending money back from the U.S., back to Guatemala, El Salvador, Venezuela, Peru, wherever. From a geographic perspective, if you’re noticing a lot of cash deposits and the money being sent by 20-year-old women to Bulgaria who have the same address, then that’s probably an indicator of something going wrong there.”
Accountants with a keen eye can spot this type of illicit activity, particularly if they are involved in fraud investigations, forensic accounting and anti-money laundering. Last week, PricewaterhouseCoopers announced a partnership with NICE Actimize to provide consulting services and technology to help organizations deter financial crimes such as money laundering, terrorism financing, rogue trading and fraud.
Willbrand pointed out that the federal government has stepped up its enforcement in recent years of the Foreign Corrupt Practices Act, or FCPA, a law that dates back to 1977. “Part of that is U.S. institutions cannot willfully or naively ignore obvious indicators of human trafficking or smuggling,” he said.
Other types of businesses also have to make sure their suppliers are not exploiting trafficked or smuggled individuals. “It could be an internal accounting red flag, if you’re looking from a procurement perspective and saying this is the lowest bid, but it’s lower by 20 percent over everyone else,” said Willbrand. “Do we have enough information on the labor that they’re using to fulfill this contract? Do we know enough about the supply chain? Are they certifying that the individuals they use are not trafficked and are not smuggled? You have these requirements under FCPA.”
Willbrand has written a blog post about using anti-money technology to combat human trafficking.
The Dodd-Frank Act also has requirements about the sourcing of so-called “conflict minerals,” such as gold and tungsten that could be used to finance warfare in the Democratic Republic of the Congo and other parts of Africa.
“You have to know your supply chain,” said Willbrand. “You have to know who you’re working with. You can’t just go with the lowest bid, especially in countries where you might expect this type of activity to occur.”