Adrianne Clark is an Associate Analyst II at AML RightSource.
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There is arguably no crime worse than child sexual exploitation (CSE). CSE is so heinous that conversations surrounding it are often avoided. But in the setting of anti-money laundering and the effort to fight human trafficking, specific conversations need to be had. Financial institution (FI) employees need to be trained to recognize and report CSE on suspicious activity reports (SAR). There are behavioral and financial red flags of human trafficking that are specific to adults. Some red flags for adult and child sex trafficking overlap, and some red flags are specific to children. The red flags specific to children are unique to CSE and should be mentioned in the SAR when indicated. Language for those red flags should be used appropriately. The good news is that, according to recent SAR filing trends, FIs are reporting more CSE-related suspicious activity. But more can be done to ensure CSE is being detected, and reports are filed timely and accurately.
Detecting Possible CSE
FinCEN has established criteria to help FIs monitor, detect, and report suspicious activity related to human trafficking. Child sex trafficking is a form of human trafficking involving the sexual exploitation of minors.[1] CSE is a type of sexual abuse where a minor is forced to engage in sexual activity by threat, coercion, or other means in exchange for things such as a promise of protection, affection, food, shelter, and money. Victims can be male or female and located within or outside of U.S. borders. In cases of CSE, Child Sexual Abuse Material (CSAM) may or may not be produced. This includes videos, images, and other files. CSAM that is produced is mainly circulated online as a part of online CSE (OCSE). According to FinCEN, there was a 147% increase in OCSE-related SAR filings between 2017 and 2020.[2] FinCEN responded by releasing an advisory in October 2020, supplementing their 2014 Human Trafficking Advisory. The supplemental advisory detailed four new typologies of human traffickers, as well as behavioral and financial red flag indicators for human trafficking victims. As a result, SAR filings that involved suspected human trafficking increased by 32% from 2020 to 2021, then increased again by 42% from 2021 to 2022.[3] The increase in filings showed that FIs were utilizing the advisory and becoming more aware of how to detect and report human trafficking.
Reporting Suspected CSE
In 2021, FinCEN added a keyword to the SAR form for CSE and instructed BSA filers to use CSE-appropriate language when necessary. So, for the most accurate reporting, analysts need a good understanding of CSE terms and to know when and how to use them. FIs must also educate their employees about CSE to facilitate better investigations. For example, 89.9% of CSE cases originate from outside the U.S.[4] This means countries that are high-risk for CSE should be made known to analysts. The number of male victims of CSE is growing each year.[5] So, analysts should be aware of this trend and be mindful of male-to-male transactions. Familial CSE is an ongoing problem. So, analysts should not mitigate suspicion of CSE solely based on the relationship. Federal law enforcement agencies have arrested owners and facilitators of websites dedicated to CSE. Individuals transacted on the sites using convertible virtual currency (CVC), such as cryptocurrency. So, analysts can benefit from CSE-specific training relating to FinTech and CVC.
The Latest Trends in Detection and Reporting
FinCEN’s Financial Trend Analysis February 2024 [6] report sheds some light on SAR reporting specific to CSE. It states there was a dramatic increase in BSA reports related to OCSE that called out CSAM, CSAM with Human Trafficking, or Human Trafficking. However, when compared to statistics published by the National Center for Missing and Exploited Children (NCMEC), there was a significant disparity between the number of SAR–related OCSE reports and the number of new cases of CSE reported by NCMEC for the same reporting period. In 2022 alone, NCMEC’s CyberTipline received 88.3 million images, videos, and other files of CSAM. Of those, 1,141,667 were unique, which means they were not already in NCMEC’s system.[7] The agency also received 18,400 reports of child sex trafficking.[8] Yet, there are under 2,000 CSE-related SARs per year.[9]
Next Steps
Possible causes of under-detection and underreporting include the lack of distinction between human trafficking red flags for adults and minors and the lack of employees trained to recognize CSE-related red flags. FinCEN lists behavioral and financial indicators that are geared toward adults. However, there are red flags unique to CSE that analysts should consider during their investigations. For example, according to Jonathan Dupont, Financial Intelligence Investigator for Western Union, CSE red flags include males who have a prior conviction for sex crimes against children.[10] FinTrac includes purchases at youth-oriented live online chat rooms and online gaming, as well as travel-related expenses to countries that are high-risk for CSE.[11] One red flag doesn’t constitute CSE, but a combination of red flags can result in activity being deemed suspicious for CSE.
CSE detection is complex. However, FIs are in an excellent position to monitor and report such activities and provide law enforcement with quality information to utilize during their investigations.Many of the red flags that signal human trafficking for adults and minors are the same. So, analysts should continue to evaluate their cases for human trafficking red flags as described in FinCEN’s advisory. But also, be mindful of specific red flags about minors. Those red flags should be taught to FI employees so that CSE has a greater chance of being detected and actions can be taken that could save a child from harm.
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[1] NCMEC. “Child Sex Trafficking Overview.” Missingkids, National Center for Missing & Exploited Children, 2024, https://www.missingkids.org/content/dam/missingkids/pdfs/CST-Identification-Resource.pdf.
[2] FinCen. “Use of Convertible Virtual Currency for Suspected Online Child Sexual Exploitation and Human Trafficking: Threat Pattern & Trend Information, January 2020 to December 2021.” Fincen, Financial Crimes Enforcement Network, Feb. 2024, https://www.fincen.gov/sites/default/files/shared/FTA_Human_Trafficking_FINAL508.pdf.
[3] Thomson Reuters. “Suspicious Activity Reports Surge: 2023 Filings Expected to Set Another Record A Deeper Dive into the Data.” Thomsonreuters, Thomson Reuters, 20 June 2023, https://www.reutersagency.com/en/.
[4] CyberTipline Data. National Center for Missing & Exploited Children, https://www.missingkids.org/gethelpnow/cybertipline/cybertiplinedata. Accessed 5 Apr. 2024.
[5] “Missing Male Victims of Child Sex Trafficking.” Missingkids, National Center for Missing and Exploited Children, https://www.missingkids.org/content/dam/missingkids/pdfs/ncmec-analysis/Missing%20Male%20Victims%20of%20Child%20Sex%20Trafficking_EXTERNAL.PDF. Accessed 5 Apr. 2024.
[6] FinCen. FinCEN Sees Increase in BSA Reporting Involving the Use of Convertible Virtual Currency for Online Child Sexual Exploitation and Human Trafficking. 13 February 2024. 5 April 2024.
[7] “CyberTipline Data.” National Center for Missing & Exploited Children, https://www.missingkids.org/gethelpnow/cybertipline/cybertiplinedata. Accessed 5 Apr. 2024.
[8] “CyberTipline Data.” National Center for Missing & Exploited Children, 2024
[9] FinCen. FinCEN Sees Increase in BSA Reporting Involving the Use of Convertible Virtual Currency, 2024
[10] Dupont, Jonathan. Financial Crime Matters: Fighting the Online Exploitation of Children, with Jonathan Dupont and Tiffany Polyak Kieran Beer. 4 January 2024. Podcast. Dupont, Jonathan. Financial Crime Matters: Fighting the Online Exploitation of Children, with Jonathan Dupont and Tiffany Polyak Kieran Beer. 4 January 2024. Podcast.
[11] FINTRAC. “Operational Alert: Laundering of Proceeds from Online Child Sexual Exploitation.” Canada.Ca, Government of Canada, Dec. 2020, https://fintrac-canafe.canada.ca/intel/operation/exploitation-eng.