This Week in AML
The US Department of State has issued its 2023 Trafficking in Persons report. The theme of this year’s report is partnerships. John and Elliot discuss key elements of the report and its value to the financial crime prevention community.
Partnering to Fight Human Trafficking - TRANSCRIPT
Elliot Berman: John, how are you today?
John Byrne: I'm good, Elliot. How are things with you?
Elliot Berman: Things are good. We've had a nice stretch of weather and, it's the beginning of post school summertime, so our granddaughters are out and about doing summer things, and we're just enjoying every day. And you?
John Byrne: Yeah we're dealing with some fun stuff. My son's impending wedding in September, and because he doesn't like to do things early, the invitations just came out. Fortunately, everybody that we know already knew this was happening in the date. But, let's just say some people don't have the same time sensitivities as others.
But that's obviously good news. A lot of things going on this week and late last week. FATF is meeting with its plenary. So we'll obviously be commenting on that next week, but more importantly, we're going to be doing a webinar on the themes coming out of this June plenary in July. A lot there.
I also want to say, I just saw this morning, but House Financial Services on the Democratic side, Ranking Member Waters and several others from that side of the aisle have introduced a series of bills dealing with the fallout from Silicon Valley Bank and Silvergate to clawback bonuses for those that were running these institutions and amplifying the ban from banking if they can show, some involvement in the failure. It may be that these proposals don't go very far, given that the Democrats don't control the House, but five or six bills today that I thought were pretty interesting. And some of them potentially could get bipartisan support. So we'll be watching that and see if it's worthy of us commenting later on in the year.
Elliot Berman: Yes, I think there's also some bipartisan effort on similar themes going on in the Senate. So this might have a little bit of legs.
John Byrne: I think so. I know what we want to talk about today is the 2023 Trafficking in Persons Report from the State Department, close to 100 page document.
Obviously, it's an annual report. And as our community well knows, human trafficking and human smuggling and forced labour are all issues that have financial components. When these reports get issued it's important to not only see what the priorities are in a particular year, but look for some elements in the report that could conceivably be used as training.
I know you took a look at that and read through it and you may actually write a blog on this going forward.
Elliot Berman: Yes. And we posted a blog last year for the 2022 report. And one of the themes there was including victims in the conversation. And this year the theme is partnerships, but one of the elements of partnership, is to bring victims in and recognize them as experts who have inside understanding that's useful to the overall conversation is part of the partnership discussion in this year's report.
John Byrne: Right. And I think referencing another aspect of partnership which is partnerships to further investigations, which I'll reference in a second. Polaris has done a really good job that's obviously the U. S. based NGO that we've worked with, and we've interviewed folks from there.
They have been utilizing several survivors as experts at Polaris, both from a training perspective, but also to work with their own FIU. I think that having this report identify value that survivors have to improving deterrence and due diligence, I think, makes a lot of sense
Elliot Berman: Agreed.
John Byrne: Just quickly then, the section on that part of partnership and everybody should obviously read the report. There's a whole host of partnering organizations and entities that they reference, but going back to one that we're very familiar with is the ones that financial investigations are enabled through partnering. And they talk about, several things, but they say, financial activities that support trafficking operations, payments associated with hotels and plane tickets. And obviously. The hotel industry and the airline industry have also been active in the anti-trafficking space.
Collection of proceeds when you exploit a trafficking victim, sale of goods, all those sorts of things. And they mentioned specifically something that we've talked about a couple of years that Polaris that I just mentioned, they partnered with PayPal and they did create that FIU.
And that takes the AML banking and law enforcement communities together to figure out ways to interrupt traffickers' cash flows. They have meetings, they do reports. And so this is a really good example of partnership in our industry, which again we're very familiar with, but I think it's good.
And then just quickly the other one that struck me, they offered recommendations on partnering to advance technology and innovation. And that can be done with multidiscipline stakeholders, private sector, cyber experts there in the government and all that. And again it's, I think, an important identifying factor, which we're generally aware of, but they talk about something called the Tech Against Trafficking Initiative that was formed in 2018.
And that's a coalition of tech companies that work with non-profits and colleges and international groups to do advance d knowledge sharing or information sharing. So leveraging innovation. Gets called out in this report, and as you mentioned, a whole host of other items there.
The other thing I just wanted to highlight is we've seen this in the general fraud space, but in the report itself, midway through, they talk about human trafficking and cyber scam operations. So they talk about how that occurs. And, where have they seen evidence of that in the various countries?
So again, there's a lot in here that's going to be valuable to any analyst that's at least tangentially involved in looking for human trafficking, smuggling and forced labour. But certainly in general, investigators in our communities, financial investigations, sections of various institutions.
Elliot Berman: Yes. Another one that I thought that was really interesting that they called out is interagency coordination. So they noted that adopting a, as they call it, whole of government approach where you break down the siloed barriers of the various elements of a federal government to get all the right people talking to one another.
Because as we all know, in the US, as with many countries federal law enforcement can be in one or more siloed channels, human services in another, financial service regulation in another And they called out in one section an important discussion about thinking about how do you get all of those folks together in a room. I think that was an interesting call out because when we talk about partnership, it's often public private or getting the NGOs involved or things like that, but not necessarily the government really needs to partner across its own agencies.
John Byrne: And toward the end of the report, they update their list. There is a 3 tier system numbered tier 1, 2 tier 2 there's a watch list. And this is a determination whether these countries in these various tiers where they rank from the metrics regarding a whole series of assessments. And just a couple of those - enactment of laws that prohibit forms of trafficking, criminal penalties by that, victim protection efforts, the extent to which government ensures repatriation and reintegration of victims.
There's a whole series of them there. And as I say, there's three tiers, they don't say that if you're in tier 1 is the highest ranking, but tier 1 doesn't mean you've accomplished everything. But obviously it's as they characterize it they've made efforts to address the problem to meet some of those standards.
So they do have those rankings in the report. So take a look at that. US is in the 1st tier. You'll see where people sit in terms of that, but also there's a list of countries that are not part of any of this. So I, I think that's important to take a look at it. It certainly doesn't mean anything in terms of quote, suspicious activity or what have you, but it does definitely tell you countries that are just simply not part of the collaboration. So I thought that was that continues to be an interesting and important metric.
Elliot Berman: Yes. As with the earlier editions of the report, there is a section called topics of special interest. You mentioned one of them, which is human trafficking and cyber scam operations, but the other three in that section are all, of course, interesting - deceiving the watchdogs, how unscrupulous manufacturers conceal forced labour.
With the increasing focus on third party risk management and supply chain risk management. That's an interesting section to look at. Another section in there is overlooked for too long, boys and human trafficking. A discussion about the fact that often people stereotype human trafficking victims as women, but that globally men and boys are also trafficked, and to really understand the scope of the problem we need to change those historical viewpoints. They talk about how online recruitment is being used to attack vulnerable populations for forced labour. And the last one is protecting victims, the non-punishment principle. And that is a strong case being made for the idea that where trafficked individuals are breaking laws because they're being forced through the trafficking process to do that, that governments find ways to release them from the culpability they would have if they were doing it voluntarily.
John Byrne: So definitions are in here. They did define human trafficking. They defined a concept that I think people will understand, but maybe not by its term. Debt bondage. Debt bondage is focused on human trafficking crimes, which the traffickers primary means of coercion is debt manipulation. So in our laws perpetrators are prohibited from using debts as part of the scheme to compel somebody to engage in commercial sex.
The traffickers will target some individuals with an initial debt that they assumed willingly because they think they're going to have future employment. And then obviously they don't get paid the rate that they anticipated. And then the victim has to assume debts for expenses like food, housing, transportation.
Again, we're well, aware of this area, but the term debt bondage, at least to me, is a new term, but it certainly makes sense. And we've heard a lot from our friends at Polaris that this happens quite frequently.
Elliot Berman: Yes. So we'll link to the report in our posting on our website. And we strongly recommend that you, read through it, as John mentioned, it is a lengthy, but a lot of good resources in there. By the time you hear this podcast on Friday you'll be able to register for the webinar that John mentioned, which will be July 27th, starting at 1 pm Eastern time. So we'd encourage you to do that.
And John, I know you've got a couple of speakers lined up for things that we're going to be posting on the website. One of which is you and Terry Pesce having a conversation about the third party risk management guidance that came out recently. That'll be posted by the time listeners hear this as well.
John Byrne: And I'm doing some pre interviews with some folks, sanctions experts, antiquities, protectors, and then next week, somebody who we've interviewed before, Gary Schiffman, who's a Giant Oak. He's written a very compelling article that I want to drill down with him on the ethics of AI adoption for compliance officers.
Really interesting thought piece in something called the Journal of Financial Compliance. We're going to do that interview on Monday and get posted in the following few weeks. So that's coming up too. And I have a few other irons in the fire as it were. And as always, if you have folks you'd like us to interview topics you'd like us to cover, please feel free to send Elliot and I emails or contact us in any way you can.
Elliot Berman: Thanks, John. You have a great weekend and I will talk to you next week.
John Byrne: All right. Take care, Elliot. See ya.
Elliot Berman: Bye bye.