Human trafficking is a global problem affecting millions of people each year, domestically and internationally. According to the International Labour Organization (ILO), there are approximately 25 million victims of human trafficking worldwide, and the problem is rising. Human trafficking is a lucrative business that generates an estimated $150 billion annually, and traffickers often use the financial system to launder their profits. By creating roadblocks against money laundering, payments providers such as Prairie Payments Joint Venture (PPJV) and credit unions can play a vital role in deterring human trafficking.
Money laundering and human trafficking
Money laundering is the illegal process of taking money made through criminal activities, and making these funds appear ‘clean’—i.e., they appear to have come from a legitimate source. This allows the criminals to then use those funds in legitimate financial institutions.
A simple example would be a criminal group buying a small business like a restaurant and using it as a front. The restaurant might bring in $2,000 in actual profits but the group would then claim $4,000 on their books and deposit $4,000 in the bank, thus disguising $2,000 of ill-gotten gains as legitimate business revenue. There are more complicated schemes involving everything from investing in valuable commodities and gambling at casinos to taking advantage of the relative anonymity of cryptocurrencies.
Human trafficking is one criminal activity that generates significant profits for those involved, and traffickers must launder these profits to avoid detection by law enforcement. This is where the financial system becomes a critical component in the fight against human trafficking.
Anti-money laundering (AML) and the role of financial institutions
Credit unions are financial institutions that are community-based and member-owned and operated, with a focus on serving the needs of their members. Credit unions can play a vital role in the fight against human trafficking—using their knowledge of their members and the local community to identify and report suspicious financial activity that could be the result of criminals laundering the proceeds of human trafficking. Suspicious activities can include large cash withdrawals or wire transfers to known human trafficking hotspots.
One example of an American credit union actively involved in the fight against human trafficking is the Michigan State University Federal Credit Union (MSUFCU). MSUFCU has a Human Trafficking Task Force dedicated to preventing human trafficking and helping victims. The task force includes representatives from law enforcement, local organizations and the credit union. Together, they work to identify and report suspicious financial activity associated with human trafficking.
PPJV and Project PROTECT
In Canada, we have Project PROTECT. This is a unique public-private partnership between government, law enforcement agencies and financial institutions that was created in 2016. It provides training and resources to help financial institutions and their employees identify suspicious financial activity associated with human trafficking. Under Project PROTECT, such activities are then reported to FINTRAC (Financial Transactions and Reports Analysis Centre of Canada) who provide the analysis and information needed for law enforcement agencies to investigate and prosecute those involved in human trafficking.
Project PROTECT has successfully prevented human trafficking. Between 2016 and 2021, FINTRAC provided 979 disclosures of actionable financial intelligence to police and law enforcement agencies across Canada and internationally.
As a payment system solutions provider to financial institutions, PPJV can also play a crucial role, using advanced analytics and machine learning to identify patterns of payments activity associated with human trafficking and working with our member credit unions to flag suspicious financial activities to Project PROTECT.
Human trafficking is a global problem that requires a collaborative effort to prevent. Financial institutions such as credit unions and their partners, including PPJV and Project PROTECT, can play a crucial role in preventing human trafficking by identifying and reporting suspicious financial activities. By working together, financial institutions and law enforcement agencies can disrupt the financial flows related to human trafficking and prevent the exploitation of vulnerable individuals. With ongoing vigilance, we can all help to prevent this criminal activity.