On February 24, 2022, Russia started an unprovoked war against Ukraine. The fighting forced millions of Ukrainians out of their homes, causing a steady migration stream of Ukrainians abroad. According to the martial law of Ukraine, men between 18 and 60 years of age are banned from leaving the country. As a result, a vast majority of refugees are women and children.
War alone is a perfect environment for human traffickers to operate, and with such an unprecedented rise in volunteering and non-profit organizations, the risks of predators and criminal networks elevate. In this paper, we discuss at-risk populations, common channels for trafficking, anticipated transactional activity trends, and how to address them. Criminals may attract displaced Ukrainians with promises of free transportation, lodging, employment, or other forms of assistance.
Human trafficking is a lucrative crime that makes more than $30,000 every 30 seconds, and it relies on access to banks and financial institutions for laundering the proceeds of the crimes. According to Jack Williams, a law professor at Georgia State University, “Financing is the lifeblood of [the] trafficking organizations and essential to sustain themselves globally. If you can turn off that spigot, [it] will crumble from the inside.” That is why financial institutions (FIs) should comply with the regulatory requirements and strengthen their human trafficking screening techniques and controls to prevent funds being moved across borders and profits funneled back to gang leaders.
Multiple agencies target human trafficking on the international as well as local levels. These include the United Nations Office on Drugs and Crime, the US Department of Homeland Security, and its Immigration and Customs Enforcement, the US Department of Labor, the Office of the US Attorney General, Polaris, Finance Against Slavery and Trafficking, and others. Banks and financial institutions should be on the lookout for human trafficking, as they are required to detect and report these egregious crimes to law enforcement.
European banks lightened know-your-customer (KYC) and anti-money laundering (AML) checks on Ukrainians due to the recent crisis, so they could open basic bank accounts in the EU. As a result, the European Banking Authority warned banks and FIs to be on the lookout for signs of exploitation or human trafficking. Traffickers may use victims to open bank accounts in their names without going through the regular KYC/AML scrutiny. Unusual transactional activity may include an abrupt increase in funds deposits or withdrawals, high-dollar wire transfers, potentially related to human trafficking, organ trafficking, and “premeditated” adoption of abducted minors. Additionally, the red flag may arise when the same person assists migrant customers to open and manage multiple bank accounts within one or more banks.
To promote enforcement of KYC and AML policies and procedures during this unprecedented crisis, banks and FIs must be aware of the behavioral and financial red flags and be able to identify indicators of potential human trafficking.
Guidehouse financial crime consultants work with financial institutions of all sizes to build effective and efficient risk management and compliance frameworks to help clients protect against legal, fiduciary, shareholder, and reputational risk. In addition, Guidehouse specialists’ experience spans Sanctions and TM systems, Financial Crimes Compliance, Gap Analysis, KYC Support, Transaction Lookbacks, Financial Intelligence Unit Support, Transaction Reviews, and Suspicious Activity Report Alert Processing for banks and FIs. Further, Guidehouse’s experts offer regional, cultural, and linguistic investigative expertise in relation to customers and third parties that pose risks of being tied to Russian oligarchs. Guidehouse professionals include distinguished former prosecutors, regulators, compliance officers, attorneys, and consultants, who leverage their combined experience to help clients conquer their compliance challenges.
Special thanks to Mariya Stetsyna, Ekaterina Koroleva, Kristina Ivanova and Chiedza Mawema for authoring and contributing to this paper.