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January 29, 2015Washington, DC, United StatesHuman Smuggling/Trafficking

Using a financial attack strategy to combat human trafficking

As published in The Bahamas Association of Compliance Officers’ January/February 2015 newsletter

Human trafficking – modern day slavery

Slavery is illegal in every part of the world. Yet the slave trade has not been relegated to the ash heap of history.

Slavery, in the form of human trafficking, is a flourishing criminal enterprise. It’s the second largest crime in the world, with an estimated 27 million people currently enslaved worldwide.

No country, regardless of socio-economic status, history or political structure, is untouched by the exploitation of people for profit. About 600,000 to 800,000 victims are trafficked globally per year; the majority of victims are women and children. Human trafficking is a crime unlike any other in that it involves force, fraud, coercion and sometimes human smuggling, kidnapping and sham marriages. Victims are lured into human trafficking schemes with false promises of well-paying jobs or manipulated by people they trust. Once under the human trafficker’s control, victims are forced into prostitution, domestic servitude or other types of forced labor.

Being a victim of human trafficking has been described as “a life worse than death itself,” 1 not only because the victims are held in captivity, but because they are dehumanized by their captors and often made to suffer horrific physical and emotional abuse, starvation, isolation and other forms of violence, deprivation and torture.

Human trafficking comes in two major categories; labor trafficking and sex trafficking. Approximately 75 to 80 percent of human trafficking is for sex.2  Sadly, an estimated 30,000 victims of sex trafficking die each year from abuse, disease, torture and neglect.

Homeland Security Investigations of U.S. Immigration and Customs Enforcement, a leader in combating human trafficking

U.S. Immigration and Customs Enforcement (ICE), a United States federal law enforcement agency under the Department of Homeland Security (DHS), enforces federal laws governing border control, customs and trade and immigration to promote homeland security and public safety.

ICE Homeland Security Investigations (HSI) is represented in every state in America and in 48 countries. HSI is a global force and a recognized leader in investigating cross-border criminal activity, including money laundering, narcotics and weapons smuggling, transnational gang activity, export enforcement, cybercrimes and transnational gang activity. HSI is also a leader in combating human trafficking. In fiscal year 2013, HSI initiated 1,025 human trafficking cases and made 1,877 criminal arrests of which 816 resulted in convictions.

Two human traffickers receive life sentences in prison

HSI takes human traffickers off the streets and brings them to justice. In May 2014, as a result of an HSI-led investigation, two Mexican nationals, who were not only brothers, but partners in a long-running sex trafficking ring, were sentenced to life in prison.3

Isaias Flores-Mendez, 42, and Bonifacio Flores-Mendez, 35, operated a sprawling network of brothels in and around New York City. Their operation was based on sexually exploiting hundreds of women, forcing each of their victims to have sex with up to 25 men a day.

In addition to the two Flores-Mendez brothers, 15 other defendants in the case pleaded guilty with most of them sentenced to five years in prison.

Some of the victims in the case recounted their experiences. One young woman sent a letter to the Manhattan federal judge who presided in the case. The victim said that she and her child were made to sleep in a windowless, rat-infested basement and deprived of sufficient food or so much as a blanket. She was repeatedly beaten, verbally abused and at one time, the brothers tried to run her over with their car.

Not only were the Flores-Mendez brothers sentenced to life behind bars, but they were each ordered to forfeit about $1.7 million and to pay $84,000 in restitution to one of the victims.

Like most crimes, greed was the prime motivator in this case. Bonifacio Flores-Mendez admitted at the time of his sentencing, through an interpreter, that he had acted out of “greed for money.”

Following the human trafficking money trail

Human trafficking is a huge and thriving business, yielding an estimated $32 billion in illicit profits each year.

HSI’s statutory authority to investigate financial crimes, specifically money laundering and bulk cash smuggling, gives the agency a major ad-vantage in the pursuit of criminals, such as human trafficking organizations.

Among a number of other strategies, HSI pursues the money laundering activity associated with human trafficking and all forms of smuggling, particularly the sophisticated ways smugglers and traffickers exploit the financial system to further their activities. For example, in June 2014, HSI launched Operation Coyote, targeting human smuggling organizations operating along the Southwest Border and internationally. The campaign also targeted human smuggling and trafficking illicit proceeds being moved through interstate funnel accounts. HSI seized more than $950,000 and 608 bank accounts from criminal organizations trying to exploit financial systems.

While the number may not seem that high at first glance, the amounts identified moving through bank accounts are in the millions.

On the lookout for funnel account activity

Following the money often leads to the top of a criminal organization and positions HSI to seize assets, monies and proceeds derived from or used in support of human trafficking operations. This is crucial to shut down entrenched criminal activity.

One of the preferred methods human traffickers and smugglers select to move funds fast, cheaply and anonymously across miles between large geographic areas is through interstate funnel account activity.

Funnel account activity generally involves a straw account holder (usually a friend or family member of a member of the transnational criminal organization) who opens an account in a large U.S. financial institution. The account holder makes deposits in increments of under $10,000, which are not subject to reporting requirements and usually no identification is necessary. The cash is immediately withdrawn by a member of the transnational criminal organization in another state.

Criminal organizations are attracted to interstate funnel accounts because they enable them to exploit the U.S. banking system and move money rapidly across great distances at minimal cost, as well as allow for anonymity of the depositors. Another bonus is that the transnational criminal organizations don’t have to pay transaction fees.

Several major banks enhanced, or are in the process of enhancing, internal controls that have disrupted transnational criminal organizations’ ability to employ interstate funnel accounts to move their proceeds.

On September 11, 2014, the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN), in collaboration with HSI and other law enforcement agencies, non-governmental organizations and members of the financial industry, released an advisory of financial indicators or “red flags” that may indicate financial activity related to human smuggling and trafficking. The advisory also provides common terms that financial institutions may use when reporting activity related specifically to trafficking. Using common terms will assist HSI and other law enforcement in better identifying possible cases of human trafficking reported through Suspicious Activity Reports.

Some of the red flags include:

  • A customer establishing an account or visiting a branch to conduct transactions while always escort-ed by a third party;
  • Cash deposits in cities/states where the customer does not reside or con-duct business;
  • Payments to employment or student recruitment agencies that are not li-censed or registered or that have labor violations; and
  • Frequent payments to online escort services for advertising to companies of online classifieds, as well as higher-end advertising and website hosting companies.

Other transactions that could signal human trafficking is taking place are:

  • Multiple wire transfers and inflows largely received in cash where substantial cash receipts are inconsistent with customer’s line of business;
  • Unexplained or unjustified lifestyle commensurate with employment or business lines;
  • Profits and deposits significantly greater than that of peers in similar professions or businesses;
  • Multiple, apparently unrelated, customers sending wire transfers to the same beneficiary. These wire senders may also use similar transactional information, including common amounts, addresses and phone numbers. When questioned to the extent circumstances allow, the wire senders may have no apparent relation to the recipient of the funds or know the purpose of the wire transfer.

Staying apprised of newer money laundering methods

As transnational criminal organizations become more sophisticated and technically savvy, they are employing new methods, such as online financial systems, Internet technologies and using virtual currency to conceal and move their funds anonymously.

Another trend is for transnational criminals to use pre-paid cards to launder money gained from a wide variety of crimes including; narcotics trafficking, human trafficking and smuggling, prostitution, gambling, tax fraud, cybercrime and cross border telemarketing fraud. This is not surprising, considering the convenience of using pre-paid cards versus bulk cash.

HSI is leveraging the agency’s combined expertise in cybercrime and money laundering to counter these avenues of hiding and moving criminal proceeds.

Partnering to stop human traffickers in their tracks

In an increasingly globalized world, no one agency can address these challenges alone.

“On its face, human trafficking is about as heinous and repugnant as a crime can be,” said Jorge Lopez, HSI section chief in the Illicit Finance and Proceeds of Crime Unit. “The banking and financial industry can be a powerful force in assisting HSI as we combat the horrible crime of human trafficking. We look towards financial institutions to be among our greatest allies in identifying interstate funnel accounts, as well as other money laundering methods used by human traffickers and smugglers.”

It’s important for law enforcement and financial institutions to work collaboratively to develop innovative solutions to disrupt and dismantle human trafficking transnational criminal organizations and their evolving money laundering tactics.

The first step in shutting down a human trafficking organization just might begin with a conscientious financial institution employee who reports odd ac-count activity or suspicious movement of proceeds. You could be the hero behind the scenes who is helping to rescue individuals from the nightmare of human trafficking and bringing their tormentors to justice.

To report crimes to ICE, access and submit the HSI Tip Form or call1-866-DHS-2-ICE.


1  U.S. State Department. 2013 Trafficking in Persons Report
2  U.S. State Department. Global Affairs. Facts about human trafficking
3  Fight Human Trafficking. Social Impacts of Human Trafficking