Understanding How Human Smuggling and Human
Trafficking Work

There are a number of identifiable stages involved in human smuggling and in human trafficking during which traffickers may need to interact with the financial system. This advisory includes below a brief description of these stages to provide financial institutions with the necessary context to appropriately identify potential human smuggling and/or human trafficking-related transactions. Financial indicators, including those described in Appendices A and B, may reflect transactions associated with actions that facilitate one or more of the stages of human smuggling and/or human trafficking.

How Human Smuggling Works

Stages of Human Smuggling generally include:

Solicitation: A potential migrant may seek the services of a local facilitator/smuggler. Local facilitators/smugglers are often part of a larger smuggling network that works to bring migrants across a country border. In the United States, illegal migrants often originate from Mexico and Central America, but they may originate from anywhere in the world.

Transportation: Migrants may be smuggled through a number of different routes and transportation modes to avoid detection. The person may be transported by air, sea and/or land over an international border.

Payment: Payment to smugglers or to smuggling networks are generally conducted in one of three ways.

1. Pay In Advance: The migrant or the migrant’s relatives provide full payment to the smuggler before traveling. This method of payment is often used by relatives of unaccompanied minors for their migration.

2. Partial Payment: A portion of the smuggling fees is paid prior to departure, with the remaining due upon arrival; final payment is often made by relatives of the migrant in the United States.

3. On Arrival: After the migrant is successfully smuggled, the migrant’s relatives pay the full fee to the smuggler. This method of payment is often used by relatives of unaccompanied minors for their migration.

How Human Smuggling Works

Stages of Human Smuggling generally include:

Recruitment or Abduction: Traffickers obtain their victims through deception or force. For instance, traffickers may recruit victims through the use of kidnapping, false marriages, or advertisements offering employment or study abroad. Individuals from countries and geographic areas that have been affected by economic hardship, armed conflicts or natural disasters are particularly vulnerable to these tactics.

Transportation: After being collected, victims are transported to locations where they are exploited or sold to other traffickers. Victims may originate from abroad or within the United States and may be transported by air, sea and/or land domestically or internationally.

Exploitation: During this stage, traffickers profit from exploiting victims through forced labor, sexual exploitation, involuntary participation in crimes or other activity. Businesses in the service and manual labor industries (e.g., massage parlors, restaurants, farms, construction companies, domestic services) have been frequently used to exploit trafficked individuals.³ In contrast to the one-time illicit proceeds of human smuggling, this final phase of human trafficking may generate ongoing criminal proceeds.

FinCEN Guidance to Financial Institutions

Due to some similarities with legitimate financial activities, financial institutions may consider evaluating indicators of potential human smuggling or trafficking activity in combination with other red flags and factors, such as expected transaction activity, before making determinations of suspiciousness. No one transaction or red flag by itself is a clear indicator of human smuggling or trafficking. Additionally, in making a determination of suspiciousness, financial institutions are encouraged to use previous FinCEN advisories and guidance as a reference when evaluating potential suspicious activity. For instance, in May 2014 FinCEN published an advisory on the use and structure of funnel accounts,⁴ one of the red flags identified in Appendices A and B of this advisory. Financial institutions may consider incorporating the guidance outlined in this advisory in a manner that is commensurate with their risk profile and business model.

In evaluating whether certain transactions are suspicious and/or related to human smuggling or trafficking, financial institutions are encouraged to share information with one another, as appropriate, under Section 314(b) of the USA PATRIOT Act.⁵ Section 314(b) establishes a voluntary information sharing mechanism allowing financial institutions to share information with one another regarding possible terrorist activity or money laundering and provides financial institutions with the benefit of a safe harbor from liability that might not otherwise exist with respect to the sharing of such information.⁶ Thus, suspected money laundering involving the proceeds of human smuggling or human trafficking activity could be shared amongst financial institutions under Section 314(b).

Suspicious Activity Reporting

SARs continue to be a valuable avenue for financial institutions to report suspected human smuggling or trafficking. Consistent with the standard for reporting suspicious activity as provided for in 31 CFR Chapter X, if a financial institution knows, suspects, or has reason to suspect that a transaction has no business or apparent lawful purpose or is not the sort in which the particular customer would normally be expected to engage, and the financial institution knows of no reasonable explanation for the transaction after examining the available facts, including the background and possible purpose of the transaction, the financial institution should file a Suspicious Activity Report.

To assist law enforcement in targeting instances of human smuggling and trafficking, FinCEN requests that financial institutions include one or both of the below key term(s) in the Narrative and the Suspicious Activity Information:⁷

“ADVISORY HUMAN SMUGGLING” and/or “ADVISORY HUMAN TRAFFICKING”

Financial institutions should include one or both terms to the extent that financial institutions are able to distinguish between human smuggling and human trafficking. The narrative should also include an explanation of why the institution knows, suspects, or has reason to suspect that the activity is suspicious. It is important to note that a potential victim of human smuggling or trafficking should not be reported as the subject of the SAR. Rather, all available information on the victim should be included in the narrative portion of the SAR.

FinCEN’s mission is to safeguard the financial system from illicit use and combat money laundering and promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial authorities.

Transactional and Customer Red Flags

Who would most likely see the Red Flag?

Multiple wire transfers, generally kept below the $3,000 reporting threshold, sent from various locations across the United States to a common beneficiary located in a U.S or Mexican city along the Southwest Border.¹

Who: Banks/Credit Unions
Money transmitters

Multiple wire transfers conducted at different branches of a financial institution to or from U.S or Mexican cities along the Southwest Border on the same day or on consecutive days.

Who: Banks/Credit Unions
Money Transmitters/Prepaid Card Providers

Money flows that do not fit common remittance patterns:

• Wire transfers that originate from countries with high migrant populations (e.g., Mexico, Guatemala, El Salvador, Honduras) are directed to beneficiaries located in a U.S or Mexican city along the Southwest Border.
• Beneficiaries receiving wire transfers from countries with high migrant populations (e.g., Mexico, Guatemala, El Salvador, Honduras) who are not nationals of those countries.

Who: Banks/Credit Unions
Money transmitters

Unusual currency deposits into U.S. financial institutions, followed by wire transfers to countries with high migrant populations (e.g., Mexico, Guatemala, El Salvador, Honduras) in a manner that is inconsistent with expected customer activity. This may include sudden increases in cash deposits, rapid turnover of funds and large volumes of cash deposits with unknown sources of funds.

Who: Banks/Credit Unions
Money transmitters

Multiple, apparently unrelated, customers sending wire transfers to the same beneficiary, who may be located in a U.S or Mexican city along the Southwest Border. These wire senders may also use similar transactional information including but not limited to 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 transfers.

Who: Banks/Credit Unions
Money transmitters

A customer’s account appears to function as a funnel account², where cash deposits (often kept below the $10,000 reporting threshold) occur in cities/states where the customer does not reside or conduct business. Frequently, in the case of funnel accounts, the funds are quickly withdrawn (same day) after the deposits are made.

Who: Banks/Credit Unions

Checks deposited from a possible funnel account appear to be pre-signed, bearing different handwriting in the signature and payee fields.³

Who: Banks/Credit Unions

Frequent exchange of small-denomination for larger denomination bills by a customer who is not in a cash intensive industry. This type of activity may occur as smugglers ready proceeds for bulk cash shipments. ⁴

Who: Banks/Credit Unions
Casinos

When customer accounts near the Southwest Border are closed due to suspicious activity, new customers may begin transacting on behalf of those customers whose accounts have been closed. This may be done as a means to continue illicit activities. In this case, new accounts often reflect activity similar to that of the closed accounts where transactions may be frequently-occurring, currency-intensive and involve individuals that used to receive/send funds from/to accounts previously-closed due to suspicious activity.

Who: Banks/Credit Unions

Unexplained/unjustified lifestyle incommensurate with employment or business line. Profits/deposits significantly greater than that of peers in similar professions/business lines.

Who: Banks/Credit Unions
Casinos/Money Transmitters/Check Cashers/Prepaid Card Providers

Inflows are largely received in cash where substantial cash receipts are inconsistent with the customer’s line of business. Extensive use of cash to purchase assets and to conduct transactions.

Who: Banks/Credit Unions
Money Transmitters/Check Cashers

Transactional Red Flags: Behaviors observed as part of account activity

Who would most likely see the Red Flag?
When most likely to see the Red Flag?

A business customer does not exhibit normal payroll expenditures (e.g., wages, payroll taxes, social security contributions). Payroll costs can be non-existent or extremely low for the size of the customer’s alleged operations, workforce and/or business line/model.

Who: Banks/Credit Unions

When: Exploitation stage

Substantial deductions to wages. To the extent a financial institution is able to observe, a customer with a business may deduct large amounts from the wages of its employees alleging extensive charges (e.g., housing and food costs), where the employees only receive a small fraction of their wages; this may occur before or after the payment of wages.

Who: Banks/Credit Unions
Check Cashers/Prepaid Card Provider

When: Exploitation stage

Cashing of payroll checks where the majority of the funds are kept by the employer or are deposited back into the employer’s account. This activity may be detected by those financial institutions that have access to paystubs and other payroll records.

Who: Banks/Credit Unions
Check Cashers/Prepaid Card Provider/Money Transmitters

When: Exploitation stage

The following two red flags may signal anomalous customer activity; however, they should be applied in tandem with other indicators when determining whether transactions are linked to human trafficking.

Transactional activity (credits and/or debits) inconsistent with a customer’s alleged employment, business or expected activity, or where transactions lack a business or apparent lawful purpose.

Who: Banks/Credit Unions
Check Cashers/Prepaid Card Provider/Money Transmitters/Casinos

When: Recruitment, Transportation and Exploitation stages

Frequent outbound wire transfers, with no business or apparent lawful purpose, directed to countries at higher risk for human trafficking ¹ or to countries that are inconsistent with the customer’s expected activity.

Who: Banks/Credit Unions
Money Transmitters

When: Recruitment, Transportation and Exploitation stages

A customer’s account appears to function as a funnel account,² where cash deposits occur in cities/states where the customer does not reside or conduct business. Frequently, in the case of funnel accounts, the funds are quickly withdrawn (same day) after the deposits are made.

Who: Banks/Credit Unions

When: Exploitation stage

Multiple, apparently unrelated, customers sending wire transfers to the same beneficiary. These wire senders may also use similar transactional information including but not limited to a common address and phone number. 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 transfers.

Who: Banks/Credit Unions
Money Transmitters

When: Exploitation stage

Transactions conducted by individuals, escorted by a third party (e.g., under the pretext of requiring an interpreter), to transfer funds (that may seem to be their salaries) to other countries.

Who: Banks/Credit Unions
Money Transmitters/Check Cashers

When: Exploitation stage

Frequent payments to online escort services for advertising, including small posting fees to companies of online classifieds as well as more expensive, higher-end advertising and website hosting companies.

Who: Banks/Credit Unions
Money Transmitters/Prepaid Card Providers

When: Exploitation stage

Frequent transactions, inconsistent with expected activity and/or line of business, carried out by a business customer in apparent efforts to provide sustenance to individuals (e.g., payment for housing, lodging, regular vehicle rentals, purchases of large amounts of food).

Who: Banks/Credit Unions
Money Transmitters/Prepaid Card Providers

When: Transportation and Exploitation stages

Payments to employment or student recruitment agencies that are not licensed/registered or that have labor violations.

Who: Banks/Credit Unions
Money Transmitters/Prepaid Card Providers/Check Cashers

When: Recruitment, Transportation and Exploitation stages

Customer Interaction Red Flags: Behaviors observed while interacting with the public

A customer establishes an account or visits a branch to conduct transactions while always escorted by a third party (e.g., under the pretext of requiring an interpreter). Correspondingly, the third party escorting the customer may always have possession of the customer’s ID.

Who: Banks/Credit Unions
Money Transmitters/Check Cashers

When: Exploitation stage

Common signer(s)/custodian(s) in apparently unrelated business and/or personal accounts. Similarly, common information (e.g., address, phone number, employment information) used to open multiple accounts in different names.

Who: Banks/Credit Unions

When: Exploitation stage

Accounts of foreign workers or students where the employer or employment agency serves as a custodian.

Who: Banks/Credit Unions

When: Exploitation stage

Unexplained/unjustified lifestyle incommensurate with employment or business line. Profits/deposits significantly greater than that of peers in similar professions/business lines.

Who: Banks/Credit Unions
Casinos/Money Transmitters/Check Cashers/Prepaid Card Provider

When: Recruitment, Transportation and Exploitation stages

Inflows are largely received in cash where substantial cash receipts are inconsistent with the customer’s line of business. Extensive use of cash to purchase assets and to conduct transactions.

Who: Banks/Credit Unions
Money Transmitters/Check Cashers

When: Recruitment, Transportation and Exploitation stages