FINANCIAL FLOWS FROM HUMAN TRAFFICKING

1 FATF REPORTF inancial FLOWS from HUMAN TRAFFICKING July 2018 The FINANCIAL Action Task Force (FATF) is an independent inter-governmental body that develops and promotes policies to protect the global FINANCIAL system against money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction. The FATF Recommendations are recognised as the global anti-money laundering (AML) and counter-terrorist financing (CFT) standard. For more information about the FATF, please visit This document and/or any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. The Asia/Pacific Group on Money Laundering is an inter-governmental organisation, consisting of 41 member jurisdictions, focused on ensuring that its members effectively implement the international standards against money laundering, terrorist financing and proliferation financing related to weapons of mass destruction.

2 Citing reference: FATF - APG (2018), FINANCIAL FLOWS from HUMAN TRAFFICKING , FATF, Paris, France, 2018 FATF/OECD-APG. All rights reserved. No reproduction or translation of this publication may be made without prior written permission. Applications for such permission, for all or part of this publication, should be made to the FATF Secretariat, 2 rue Andr Pascal 75775 Paris Cedex 16, France (fax: +33 1 44 30 61 37 or e-mail: Photocredits coverphoto Thinkstock FINANCIAL FLOWS FROM HUMAN TRAFFICKING 1 2018 | FATF-APG Report Table of Contents ACRONYMS .. 2 EXECUTIVE SUMMARY .. 3 INTRODUCTION .. 5 The previous report and this report .. 5 Scope .. 5 Objectives and structure .. 6 Methodology .. 7 PART ONE: OVERVIEW OF THE SCALE AND SCOPE OF HUMAN TRAFFICKING .. 9 Global estimates .. 9 Profile of victims .. 10 Geographical routes and TRAFFICKING FLOWS .. 10 Domestic HUMAN TRAFFICKING FLOWS .. 10 TRAFFICKING within regions .. 11 Trans-regional TRAFFICKING .. 11 HUMAN TRAFFICKING , irregular migration and conflict.)

3 12 Change in the scale and scope of HUMAN TRAFFICKING .. 12 Proceeds derived from HUMAN TRAFFICKING .. 13 Terrorist financing from the proceeds of crime derived from HUMAN TRAFFICKING .. 14 Links between HUMAN TRAFFICKING , migrant smuggling and kidnap for ransom .. 16 AML/CFT risk assessments .. 16 PART TWO: ANALYSIS OF MONEY LAUNDERING FROM HUMAN TRAFFICKING CASE STUDIES .. 18 HUMAN TRAFFICKING for sexual exploitation .. 20 Identifying suspicious transactions and money laundering from HTSE victim 20 Identifying money laundering and STRs from HTSE perpetrator or launderer transactions .. 24 HUMAN TRAFFICKING for forced labour .. 26 Types and characteristics of forced labour .. 27 Identifying suspicious transactions and money laundering from the types of HTFL .. 28 HUMAN TRAFFICKING for the removal of organs .. 32 Indicators of money laundering from HUMAN TRAFFICKING .. 34 PART THREE: CHALLENGES AND GOOD PRACTICES IN COMBATTING ML/TF FROM HUMAN TRAFFICKING .. 35 Challenges identified in the 2011 FATF Report.

4 35 Challenges identified in the current study .. 35 Good practices in combatting ML/TF from HUMAN TRAFFICKING .. 38 CONCLUSION AND POTENTIAL NEXT STEPS .. 47 REFERENCES .. 48 ANNEX A. ADDITIONAL CASE STUDIES .. 50 ANNEX B. INDICATORS OF LAUNDERING THE PROCEEDS OF HUMAN TRAFFICKING .. 65 ANNEX C. NATIONAL ACTIONS TO CONSIDER TO ENSURE AN EFFECTIVE SYSTEM IN COMBATTING MONEY LAUNDERING/TERRORIST FINANCING FROM HUMAN TRAFFICKING .. 71 2 FINANCIAL FLOWS FROM HUMAN TRAFFICKING 2018 | FATF-APG Report ACRONYMS AML/CFT Anti-Money Laundering/Countering the Financing of Terrorists FATF FINANCIAL Action Task Force FIU FINANCIAL Intelligence Unit FSRB FATF-style regional body HTFL HUMAN TRAFFICKING for the purpose of forced labour or services, slavery or practices similar to slavery, and servitude HTRO HUMAN TRAFFICKING for the purpose of removal of organs HTSE HUMAN TRAFFICKING for the purpose the exploitation of the prostitution of others or other forms of sexual exploitation ILO International Labour Organisation ISIL Islamic State of Iraq and the Levant ML Money Laundering NPO Non-profit organisation NRA National Risk Assessment Reporting entities Private entities with obligations in a jurisdiction s AML/CFT regime RTMG FATF s Risks, Trends and Methods Group STR Suspicious Transaction Report TF Terrorist Financing The previous FATF report FATF s 2011 report.

5 Money Laundering Risks Arising from TRAFFICKING in HUMAN Beings and the Smuggling of Migrants UNODC United Nations Office on Drugs and Crime FINANCIAL FLOWS FROM HUMAN TRAFFICKING 3 2018 | FATF-APG Report Executive Summary 1. In addition to its enormous HUMAN cost, HUMAN TRAFFICKING is estimated to be one of the most profitable proceeds generating crime in the world, with the International Labour Organisation estimating that forced labour generates USD billion per year. While in the past, many aspects of the crime went unseen , there is now an increased understanding of the breadth and gravity of HUMAN TRAFFICKING , particularly with respect to domestic HUMAN TRAFFICKING and HUMAN TRAFFICKING for labour exploitation. HUMAN TRAFFICKING is also one of the fastest growing forms of international crime. The increased displacement and vulnerability of people in, and around, conflict zones increases instances of HUMAN TRAFFICKING , including potential involvement by opportunistic terrorist organisations.

6 2. As we learn more about the way HUMAN traffickers operate and exploit vulnerable humans, it is clear that this phenomenon affects nearly every country in the world. The FINANCIAL Action Task Force (FATF) and the Asia/Pacific Group on Money Laundering (APG) jointly undertook this study to improve global understanding of the FINANCIAL FLOWS associated with the crime of HUMAN TRAFFICKING , both as a money laundering predicate and potential source of terrorist financing. This study updates the FATF s 2011 report. This study has brought granularity to indicators of suspected money laundering of the proceeds of HUMAN TRAFFICKING by separating HUMAN TRAFFICKING into three categories in line with the Palermo Protocol: HUMAN TRAFFICKING for forced labour, sexual exploitation or for the removal of organs. 3. The project team found that the proceeds from each of these types of exploitation are realised in a different manner, and required different laundering mechanisms.

7 In addition, each of these three types of exploitation could be better understood and detected through the FINANCIAL activities of the various actors and/or roles involved to conduct each of the three types of exploitation. Further segmentation based on roles and actors provided a second opportunity to develop a more detailed understanding of the offence. The report also provides a more precise set of global money laundering indicators for use by reporting entities, FINANCIAL intelligence units and other national authorities. 4. This study also identifies the challenges national authorities frequently face in detecting, investigating and prosecuting money laundering and terrorist financing from HUMAN TRAFFICKING . The study identifies good practices, and in particular the two primary good practices, to mitigate some of these challenges: Assess the diverse money laundering risks from HUMAN TRAFFICKING , share with stakeholders and ensure that they re understood Leverage expertise, capabilities and information through partnerships between the public sector, private sector, civil society and NPO communities.

8 5. This study updates the FATF Global Network s understanding of the FINANCIAL FLOWS from HUMAN TRAFFICKING , and provides tangible indicators and best practices for national authorities to improve their effectiveness in combatting money laundering and terrorist financing from HUMAN TRAFFICKING (see Annex B). While our 4 FINANCIAL FLOWS FROM HUMAN TRAFFICKING 2018 | FATF-APG Report understanding is improved, it is by no means complete. This study therefore concludes with practical next steps to develop further precision to the FINANCIAL FLOWS from HUMAN TRAFFICKING , both at the global level, and at the regional/national level. FINANCIAL FLOWS FROM HUMAN TRAFFICKING 5 2018 | FATF-APG Report Introduction The previous report and this report 6. In July 2011, FATF published a report titled, Money Laundering Risks Arising from TRAFFICKING in HUMAN Beings and Smuggling of Migrants, which studied the nature and scale of the HUMAN TRAFFICKING and migrant smuggling problem by looking at: countries of origin, transit and destination, operational responsibilities, challenges, and identified trends, typologies and risk indicators.

9 7. Since the publication of the 2011 report, global awareness of HUMAN TRAFFICKING has increased and different countries and international organisations have worked to better understand and address HUMAN TRAFFICKING . Whilst progress has been made in understanding the scale of the problem, the FATF has not updated its research on FINANCIAL FLOWS related to HUMAN TRAFFICKING nor money laundering and terrorist financing associated to HUMAN TRAFFICKING . This study updates the FATF s knowledge on the topic. Scope 8. This report aims to provide an updated and more precise understanding of the FINANCIAL FLOWS related to HUMAN TRAFFICKING , and the various components of HUMAN TRAFFICKING that this report will identify, building on the wide body of work which has been completed since the last FATF report on the topic. It is designed to be used by FATF members, national authorities, FINANCIAL institutions, non-government organisations and any other individuals or bodies with an interest in tackling the FINANCIAL FLOWS related to HUMAN TRAFFICKING .

10 9. For the purposes of this report, HUMAN TRAFFICKING is defined with reference to the types of exploitation set out in in the Palermo Protocol. Box 1. HUMAN TRAFFICKING Definition from the Palermo Protocol The definition utilised for the term HUMAN TRAFFICKING is the definition provided in the The Protocol to Prevent, Suppress and Punish TRAFFICKING in Persons, especially Women and Children, supplementing the United Nations Convention against Transnational Organised Crime. This protocol entered into force on 25 December 2003 and 173 jurisdictions have ratified or acceded to it as of January 2018. The Protocol defines HUMAN TRAFFICKING as: the recruitment, transportation, transfer, harbouring or receipt of persons, by means of the threat or use of force or other forms of coercion, of abduction, of fraud, of deception, of the abuse of power or of a position of vulnerability or of the giving or receiving of payments or benefits to achieve the consent of a person having control over another person, for the purpose of exploitation.