The Tribune

By DEREK SMITH

As the world’s greatest economy approaches June 19, a date that marks news of the abolition of slavery reaching Texas, financial crime professionals across the US and the world are grappling with a different but uncomfortably similar problem. It is modern slavery and human trafficking, and how it is connected to the financial sector through feeder industries. The Association of Certified Anti-Money Laundering Specialists (CAMS), through its virtual training platform, defines modern slavery and human trafficking as “an umbrella term that covers a set of specific legal concepts including forced labour, debt bondage, chattel slavery and other slavery-like practices, as well as human trafficking into one of those conditions of exploitation”.

The Financial Action Task Force (FATF), in its financial flows from human trafficking report, noted that aggregated criminal proceeds from this trade reached $150bn in 2018. This makes human trafficking, globally, a predicate crime for money laundering. Simply put, the motive of traffickers is money, and where money is involved there must be a financial instrument or institution that willingly or unknowingly facilitates the “laundering” or cleaning of these dirty proceeds to make them seem legitimate.

Therefore, against the backdrop of the COVID-19 pandemic and the response by governments around the world to “lockdown” their economies, several risks will arise. Financial crimes professionals and others must remain vigilant. Polaris, a non-profit, non-governmental organisation that works to combat and prevent modern-day slavery and human trafficking, notes that traffickers use banks to launder money, period. Persons or institutions involved in trafficking must convert their proceeds from crime into legitimate funds through money laundering.

Financial institutions should review and evaluate their “risk-based approach” and “due diligence” regimes to minimise risks associated with modern-day slavery and human trafficking, as financial flows from such crimes are extremely diverse, presenting a problem in detection. They are in prime positions to fight this menacing crime. According to Nancy D Lake, of CAMS-Audit: “It is imperative that they must ACT (Be aware, communicate and take action).”

I submit that there are hundreds of red flags across various industries. Here are a few to consider as economies restart and human trafficking potentially increases.

Red flags in hotels

As major hotels prepare to reopen in The Bahamas, please dispel the myth that traffickers only use cheap hotels, as suggested by many movies. Research by Polaris has revealed that they consider other variables when choosing locations such as convenience, buyer comfort, hotel policies and procedures. Therefore, a hotel’s strong collaboration with law enforcement is often very unattractive to traffickers. Hotel staff should pay special attention to extended stays by customers with little luggage. Also, rooms that are booked with business cards but, on arrival, the customer prefers paying in cash. Moreover, sex paraphernalia, condoms and large amounts of cash may be left during and after a stay in the room. Sadly, hotels with no human trafficking awareness training are even more susceptible to unwillingly facilitating modern-day slavery.

Red flags in financial institutions

Traffickers sometimes use payments to employment or student recruitment agencies that are not licensed/registered, or have labour violations, because they are not regulated or governed by any oversight body. Institutions should also pay careful attention to customers with an excessive number of accounts, and ensure proper transition monitoring controls are active. Moreover, a red flag would be third parties accompanying customers when they open accounts or conduct transactions. The third party escorting the customer might be withholding the customerr’s passport and other documents.

Red flags in health care

Because of the nature of certain types of modern-day slavery, victims are experiencing issues that make the need for a hospital visit an unwanted trip by the trafficker. Against this backdrop, the health care industry can play a major role in identifying, treating and responding appropriately to at-risk individuals. Health care professionals must be vigilant for patients where their clinical presentation and oral history do not align. Also, patients with a fear or concern with being arrested or jailed, is another warning sign. Again, as with financial institutions, there is a third party that exerts an unusual amount of control over the visit.

In conclusion, the fight against modern-day slavery and human trafficking, and their connections to money, are not only a financial institution’s problem but a business issue that requires all parties to play their part in combating these dangerous crimes. Companies must assess their current policies and training programmes, and adapt to changes where necessary and act.

NB: Derek Smith Jr is a compliance officer at a leading law firm in The Bahamas, and a former assistant vice-president, compliance and money laundering reporting officer (MLRO), at local private bank. His professional career started at a ‘Big Four’ accounting firm and has spanned over 15 years, including business risk management, compliance, internal audit, external audit and other accounting services. He is also a CAMS member of the Association of Certified Anti-Money Laundering Specialists (ACAMS).