Financial Intelligence Against Human Trafficking: A Guide for Financial Intermediaries

This summary draws upon the “Financial Intelligence against Human Trafficking (FIAHT)” guide, providing key insights into the role of financial intermediaries in combating human trafficking in Switzerland.

Understanding Human Trafficking as a Lucrative Criminal Enterprise

Human trafficking constitutes a highly profitable branch of organized crime, generating an estimated USD 236 billion annually worldwide, rivaling arms and drug trafficking. The illicit profits generated from exploiting victims often flow through the financial system, leaving detectable traces. Switzerland recognizes human trafficking as a predicate offense for money laundering, mandating financial intermediaries and traders to report any suspected involvement of assets in human trafficking to the Money Laundering Reporting Office Switzerland (MROS).

Despite its prevalence, the number of suspicious activity reports (SARs) related to human trafficking remains disproportionately low. Less than 1% of all SARs submitted to MROS between 2020 and 2023 pertained to human trafficking. This discrepancy can be attributed to several factors:

• Low individual transaction amounts: Human trafficking often involves small transactions, making automated monitoring challenging.
• False positives: Seemingly suspicious transactions may be legitimate or linked to other predicate offenses, leading to false positives.
• Fragmented knowledge: A lack of comprehensive understanding regarding human trafficking indicators and typologies hinders effective detection and reporting.

The FIAHT Project: A Collaborative Approach

The FIAHT project, spearheaded by MROS’s Human Trafficking expert group, aims to bridge the knowledge gap and enhance collaboration among stakeholders. It strives to achieve this through two primary objectives:

1. Raising awareness among financial intermediaries by developing a comprehensive guide.
2. Strengthening cooperation and optimizing operational processes between MROS and relevant actors through a multi-stakeholder partnership.

To facilitate these objectives, five strategic working groups were formed, bringing together expertise from various sectors:

• Fedpol Internal Working Group: This group focused on enhancing data exchange and leveraging administrative assistance requests and typologies for improved national-level data flow on human trafficking-related financial activities.
• Financial Intelligence Units Working Group: Given the transnational nature of human trafficking, this group concentrated on international information exchange between Egmont Group Financial Intelligence Units (FIUs), drawing upon experiences from existing public-private partnerships (PPPs).
• Law Enforcement Authorities Working Group: This group aimed to improve the quality of information shared with law enforcement by gathering insights on SAR content and spontaneous disclosures, facilitating targeted communication from MROS.
• Financial Intermediaries Working Group: This group sought to test the practicality of implementing indicators among participating financial institutions and establish regular communication channels with MROS.
• NGO Working Group: In collaboration with the victim support organization Victras, this group focused on gathering firsthand accounts from victims to understand their experiences with financial exploitation and control, enriching the guide with real-world insights.

Understanding the Legal Framework and Exploitation Typologies

The guide delves into the legal aspects of human trafficking in Switzerland, encompassing offenses such as:

1. Human trafficking (Art. 182 CP): This covers exploitation for sexual purposes, labor, or organ removal.
2. Encouraging prostitution (Art. 195 CP): This involves pushing individuals into prostitution, particularly minors or those in vulnerable positions, for financial gain.
3. Child sexual abuse material (CSAM) (Art. 197, al. 4, 2nd sentence, CP): This addresses the production, distribution, acquisition, and possession of CSAM

Additionally, the guide highlights related offenses often linked to human trafficking, including:

• Usury (Art. 157 CP)
• Extortion and blackmail (Art. 156 CP)
• Forgery of securities and certificates (Art. 251 and 252 CP)
• Inducement to illegal entry, exit, or stay (migrant smuggling; Art. 116, al. 3, LEI)

While the most common forms of exploitation in Switzerland are sexual and labor exploitation, the guide underscores that even abstract financial gains derived from exploiting victims, such as cost savings through forced labor, constitute money laundering.

The guide provides an overview of various exploitation typologies prevalent in Switzerland:

1. Sexual Exploitation:

• Primarily affecting women, but increasingly impacting men and transgender individuals.
• Victims often come from disadvantaged backgrounds with limited education and language skills.
• “Loverboy” method: Traffickers manipulate victims emotionally, isolating them from support networks and coercing them into prostitution.
• Sextortion: Victims are blackmailed using intimate images or videos, often obtained through deception or coercion, and forced into prostitution or other exploitative activities.

2. Labor Exploitation:

• Found in sectors employing low-skilled workers and involving repetitive tasks, such as construction, hospitality, domestic work, cleaning, agriculture, beauty salons, and transport companies.
• Victims may be in irregular migration situations, rendering them more vulnerable to exploitation.
• Debt bondage: Traffickers impose exorbitant fees, trapping victims in a cycle of debt and forcing them to work for minimal or no wages.

3. CSAM:

• Global consumption and production of CSAM is on the rise, with Switzerland implicated as both a consumer and production hub.
• The majority of offenders are male.
• Cryptocurrencies, credit cards, and money transfer companies are frequently used to purchase CSAM, often facilitated through online platforms and the darknet.
• The use of cryptocurrencies in human trafficking-related activities, particularly CSAM acquisition, has seen a significant increase.

4. Other Forms of Exploitation:

• Forced marriage or partnerships (Art. 181a CP)
• Forced begging
• Coercion into criminal activities, such as theft, fraud, money laundering, and drug trafficking

Identifying Red Flags: Indicators of Human Trafficking

The guide provides a comprehensive list of indicators, classified into three main groups, to assist financial intermediaries in recognizing potential human trafficking activities:

1. Behavioral Indicators:

• Red flags: A third party controlling the client’s documents or finances, signs of abuse or distress in the client, contradictory statements, and avoidance of personal contact.
• Yellow flags: A third party claiming kinship but lacking knowledge about the client, contradictory explanations for transactions, nervousness, and difficulty reading personal information.

2. Transactional Indicators:

• Red flags: Transactions involving individuals or entities linked to human trafficking, payments suggesting extensive sexual services, small recurring transfers to high-risk countries, and specific CSAM-related transfer patterns.
• Yellow flags: Frequent cash deposits followed by withdrawals in different locations, cash transactions during unusual hours, structuring or smurfing, and inconsistencies between declared income and observed transactions.

3. KYC-Based Indicators:

• Red flags: Client details mentioned in media reports related to human trafficking, connections to individuals with criminal backgrounds, and CSAM-related media exposure for previous sexual offenses.
• Yellow flags: Involvement in high-risk industries, use of aliases or forged documents, lavish lifestyle inconsistent with the client profile, frequent address changes, shared addresses with multiple individuals, and phone numbers associated with sex work advertisements.

Practical Scenarios: Applying the Indicators

The guide presents four practical scenarios to demonstrate how these indicators can be applied in real-world situations:

1. Sexual exploitation (suspected trafficker’s account): A client with seemingly legitimate employment receives large cash deposits, spends significant sums on sex-related items, and engages in suspicious international transactions. ROSO reveals connections to the sex industry.
2. Sexual exploitation (suspected victim’s account): A young woman working in prostitution receives numerous payments, transfers funds to a suspected trafficker in her home country, and lacks typical daily expenses in her account. Her phone number is linked to a brothel, and the beneficiary is flagged for human trafficking.
3. Labor exploitation in hospitality (suspected victim’s account): A foreign national working in a restaurant shares the same address as the establishment, receives irregular wages, transfers funds to unrelated individuals, and lacks typical living expenses in his account. He provides contradictory explanations for the transactions.
4. CSAM consumption (suspected offender’s account): A middle-aged man makes frequent low-value transfers to multiple individuals in high-risk countries, using misleading payment descriptions and making transactions during nighttime hours.

These scenarios highlight the importance of considering multiple indicators in conjunction with the client’s background, transaction patterns, and ROSO to assess the likelihood of human trafficking involvement.

Best Practices for Financial Intermediaries: Ensuring High-Quality SARs

The FIAHT guide emphasizes the significance of prompt and comprehensive SARs to facilitate effective investigation and prosecution:

• Immediate reporting: Swift reporting increases the chances of tracing and freezing illicit assets, aiding investigations and potentially protecting victims.
• Thorough ROSO and World-Check searches: Conducting in-depth ROSO and utilizing World-Check can reveal suspicious connections and confirm client statements, enhancing SAR quality.
• Client inquiries and avoiding tipping off: While conducting client inquiries, it is crucial to avoid tipping off and document all responses, inconsistencies, ad suspicious behavior.
• Detailed transaction analysis: Providing clear, concise, and well-documented transaction analysis enables MROS to quickly grasp the case and assess its relevance.
• Utilizing specific indicators in goAML: Selecting relevant indicators from the provided list ensures accurate statistical recording and efficient processing of human trafficking-related SARs.

The guide concludes with a list of recommended readings to further deepen understanding of the “follow the money” approach and multi-stakeholder partnerships in combating human trafficking and related offenses.56

Conclusion: The Vital Role of Financial Intermediaries

The FIAHT guide serves as a valuable resource for financial intermediaries, empowering them to actively participate in the fight against human trafficking. By understanding the legal framework, recognizing red flags, and implementing best practices for reporting suspicious activities, financial institutions can contribute significantly to disrupting these criminal networks and protecting vulnerable individuals from exploitation.