This Week in AML

Human Smuggling Along the US Southwest Boarder – A FinCEN Alert

The Financial Crimes Enforcement Network (FinCEN) issued an alert focused on human smuggling along the southwest board of the US. John and Elliot review the major elements of the alert – including SAR filing guidance, red flags, and the difference between human smuggling and human trafficking. They also discuss the importance of financial services companies partnering with law enforcement to identify and prevent the terrible global crime.



Human Smuggling Along the US Southwest Boarder – A FinCEN Alert TRANSCRIPT

Elliot Berman: Hi John, how are you this week?

John Byrne: Hi, Elliot. Doing fine. Hope everything's well with you.

Elliot Berman: Yep, things are good. W e're having slightly nicer than normal weather. Cloudy all the day, most of the time, but a little warmer and we haven't had any significant snow, although they're saying we might get an inch or two overnight tonight.

John Byrne: Well, just as long as it's nice when I get there on the on the 4th of February, it'd be great.

Elliot Berman: Yeah. I've reached out to all the meteorologists I know in town, and they're holding some kind of a vigil in advance of that to try to get you some good weather.

John Byrne: So I appreciate that or you send little kids out to throw sand over their shoulder or whatever they do to, well, no, no, that's when they want snow.

Elliot Berman: This week FinCEN issued an alert on human smuggling along the southwest border of the US. Did you have a chance to take a look at that?

John Byrne: Yeah. You know, we'll mention this at the end, we're doing a webinar on human trafficking this month. And in part because it's human trafficking awareness month, but also obviously very important to our clients and to the community.

So I did see that and a couple things struck me right away. And one was it builds on so many other previously issued guidance documents and alerts, which is always valuable. So FinCEN does a number of things in the alert, including for a number of times that they've done this in the past, describing the difference between human smuggling and human trafficking, which is important. And then giving our community some direction on SAR filings.

Elliot Berman: Yes. The FinCEN previous guidance in this space was, some of it was issued in 2014; they updated it in 2020. And they also referenced some resources that FATF has published. They had a report on their website last fall, I think it was last fall.

And the US State Department also issued their global assessment on human trafficking late last year as well. So there are, for those of you who are listening in and are new to this space or just want to do a deeper dive beyond what's in the most recent FinCENand alert there is a large volume of high quality resources out there.

We also have a number of things on our website, which would be useful since we've done a number of webinars and pieces of those webinars are posted with all different kinds of human trafficking perspectives.

John Byrne: Hey Elliot, before we talk more about this just to show folks that when we do this, we're still paying attention to what's going on around us. Literally as you were explaining that FinCEN has just released another alert and they identify a virtual currency exchange called Bitzlato as a primary money laundering concern in connection with Russian illicit finance. So folks this will be posted on Friday. Obviously this'll be around this alert for the next couple of days, but without going into detail, just came out.

Just wanna make sure folks know that FinCEN released another focus on the continuing concerns about primary money, laundering concerns. Going back to this, I think the focus is on the southwest borde and some of the statistics that they highlight are very dramatic. So reading from the description, they say in fiscal year 2020, this was obviously during the height of the pandemic, less than 500,000 encounters occurred at the southwest border. But in 2021 it jumped up to 1.7 million encounters. And in 2022, 2.3 million. And the other thing that's important here that the use of smuggling by organized crime and and other criminals are being done because they're exploiting what's going on in a variety of countries that are impacted by corruption and oppression, countries that we're all very familiar with - Cuba, Nicaragua, Venezuela. So all this leads to the movement of dollars and the movement of people. And as we've said, this is building on previously issued guidance from FinCEN and from law enforcement, State Department, what have you, in previous years.

Elliot Berman: Yes. One of the things that caught my eye about in this alert that was, I think for me, what I thought about it, I realized, I guess I knew this, we tend to associate issues at the southern border, whatever they might be, including human smuggling, to be directly related to the countries immediately adjacent to the southern border. So Mexico and El Salvador and those countries, and maybe the northern part of South America. But it was noted that there's been a steady increase of migrants and people, including those who are being smuggled, who are coming from South America, the Caribbean, Europe, and Asia.

And there were a couple of examples in call outs in the alert about people who are being smuggled through the southern border from places nowhere near the southern border like Bangladesh and others. So I think that, what's the lesson there? I think the lesson for us in the community in terms of detection is the idea that the funds flows that you may see that could be related to this don't necessarily have to flow only from or to entities or individuals that are immediately in the southern border area. And so thinking about the problem more globally is something that we continue to have to do.

John Byrne: Yeah. I know you're gonna talk about some of the red flags. I just wanted to highlight another item that I've seen in the alert that I, thought's worthy of comment. And one is, how this is communicated, meaning how do people victimized hear and they point out that many times smugglers will advertise their services by pretending, basically or posing to be legitimate businesses such as travel agents or work recruiters, that sort of thing.

And much of the solicitation in the past was done by word of mouth, but now social media and other technologies and I will just highlight the fact that I've also seen in the news the January 6th commission report that came out a couple weeks ago, one of the criticisms of that report has been that the focus on social media was minor and that social media played a large part in the recruitment that happened for the attacks on the capitol on January 6th, and they play a large part here in getting victims to think that here is a way of getting out from under repression, out from under cartels, transnational criminal organization. So social media plays a large part in the communication in a variety of places that do touch on our world of that being financial crime.

Elliot Berman: Yes. As you mentioned, the report contains some financial red flag indicators. There are eight of them. I'm not going to read them all to you, but we will link as we always do when we're speaking about a government report or other issuance, we'll link to the to this document in our posting. So you can go right to it if you haven't seen it. You don't have to go do any searching.

But it talks about things like deposits by multiple individuals in multiple locations into a single account. So a funnel account issue there. And those accounts aren't necessarily affiliated with the account holders area of residence or work, and there's no apparent business purpose.

So again, what in a number of these red flags, it's really about, does this make sense? And the transaction is inconsistent with the customer's regular business. Or not having any apparent business purpose are a key element in many of the red flags that are here. I think the other thing, and you mentioned it earlier, there is some information in here about the way to report this activity on a suspicious activity report.

If you're in the US, I think even though this is a US issued document, for those of you in our audience who are in other countries, most countries have a suspicious activity reporting obligation. The form may be called something else, but in having looked at many of them over the years they are much more alike than they are different.

And so I think that, clear narratives and things like that. There's also a specific call out in this document about how to identify that you are sending in a SAR that that is focused on human smuggling. W hen you look at the guidance, you'll see it in a green call out box. That's an update to your processes if you're not already doing that. So that whoever's responsible for finalizing your S RsA picks up that request from FinCEN

John Byrne: Yeah. And one thing, every time we talk about SARs, we should always mention, and it's secluded here in the filing instructions, that filers that want to expedite their report of the SAR can also call a hotline.

So in addition, and sometimes that becomes almost more important depending on the activity that you've identified, and we've obviously encouraged. Since day one of SAR filing in some cases, call local law enforcement, call the FBI, but call this hotline number if you think what you're reporting needs to be expedited.

And there's no list of what is and what is not in that category. But I think certainly our community knows from previous experience with law enforcement and filers what they can pick up the phone and call about and what they can simply send. So I think that's always important to mention that as we said I think I don't think, I believe strongly that our community has been very proactive in the anti-trafficking space for a decade or more.

And s these sort of alerts become pretty, pretty important to add to our tools, our arsenal, if you will, in dealing with these horrific crimes. And I credit FinCEN with doing a lot in this space, I think they've they have clearly added to the private sector's ability to detect, report ,and hopefully prevent human smuggling and human trafficking going forward.

Elliot Berman: Yes. And we would be remiss, I think if we didn't also mention as we do during many of our discussions, that our law enforcement partners, in addition to FinCEN, are actively working in this space, issuing information, looking for support in the public-private partnership where members of the community do identify potential smuggling related activity to really help build investigations and ultimately interdiction and prosecution.

John Byrne: Agree a hundred percent.

Elliot Berman: Yes. So you mentioned earlier, on January 25th we're going to be doing our webinar on human trafficking. For those of you who have seen the the promo for it, if you haven't registered, you can still do that, and you can do it on our website. The promo indicates that John is going to be moderating, but actually if you tune in to the livestream, you're going see me, as John ended up with a conflict.

But we have two experts who are going talk about investigations and other very practical things that I think will be very valuable to those of us and the community to really understand how to see what we're seeing. And understand it.

John Byrne: Yeah, I'd just add that we've obviously hopefully you know this by now, we've rebranded, so go to our website to look at some of the very interesting things that we have put in the rebranding.

Obviously the key being that financial crime issues and compliance never stops evolving, and so neither do we. So you'll find some hopeful. Interesting things. There are solutions, our case studies, and of course all the content that Elliot and I are involved in. The one other thing I'd mentioned is we will be recording at some point next week, an interview with Jim Lee, the IRS CI chief on a variety of issues including the the value proposition of BSA data by our law enforcement partners.

Bunch of other interviews hopefully. We have them on the schedule. We're going to be doing those in the next few weeks, but really appreciate anytime we're going to have a chance to talk to our law enforcement partners. They're just so integral to what we need to do as a community.

Elliot Berman: Sounds Good, John. You have a really good rest of the week and I will talk to you next week.

John Byrne: Take care, Elliot. Stay safe.

Elliot Berman: You too.