The finance sector, often seen as a pillar of economic development, plays an integral role in the grave abuses of human trafficking. With an estimated 50 million people trapped in modern slavery globally, generating around $236 billion annually, the financial industry finds itself at a crossroads. This staggering figure, reported by the International Labour Organisation, underscores the urgent need for financial institutions to recognise their inadvertent facilitation of these crimes and to harness their power to combat them.
Human trafficking is driven by and thrives on the pursuit of profit; traffickers exploit financial systems just as any legitimate business would. They use bank transfers, deposits, and other financial services to launder their illicit gains – yet in this context, it often results in money laundering. The finance sector’s involvement should not be seen as a passive one; it is a critical enabler of these activities. There are often regulations in place, yet they require strengthening compliance frameworks to identify and prevent transactions related to human trafficking. This involves extending the use of typologies, transaction monitoring, and client screening capabilities.
Anti-money laundering (AML) legislation is a powerful counter-trafficking tool, requiring financial institutions to report suspicious activities, which can provide crucial evidence to tackle a range of crimes. By confiscating assets and seizing funds connected to human trafficking, financial institutions can disrupt the operations of traffickers and provide justice for victims. The significant response to money laundering in Singapore over 2023-24 demonstrates the value of their AML regulations and response, in a case connected to the online scams linked to human trafficking, which resulted in the freezing of billions of dollars in assets. And in a high-profile case in the Philippines, the Anti-Money Laundering Council together with the National Bureau of Investigation and the Presidential Anti-Organised Crime Commission (PAOCC) jointly filed several counts of money laundering against dismissed Bamban Mayor Alice Guo, in connection with her alleged involvement with leasing a company linked to human trafficking . AMLC’s investigation, conducted together with NBI and PAOCC, revealed that Guo and her co-conspirators generated proceeds of over P101 million between June 2020 and January 2040 from their criminal activities, concealed through multiple bank accounts.
Advanced technology such as artificial intelligence (AI) and machine learning offer promising solutions. These tools can analyse vast amounts of transaction data to identify suspicious patterns indicative of human trafficking. For instance, data mining and network analysis can uncover connections between traffickers and financial transactions, providing valuable insights for law enforcement agencies. To stay ahead of traffickers who continuously adapt their methods, the finance sector must leverage these technologies.
Collaboration between financial institutions, regulators, and law enforcement is essential through holistic information-sharing partnerships. Project PROTECT in Canada, a unique public-private partnership that targets human trafficking by focusing on the money laundering aspect of the crime, exemplifies this approach by increasing relevant reporting to financial intelligence units. Such initiatives demonstrate the power of collective action in addressing complex issues like human trafficking.
Insurers, as risk managers and major investors, are also in a unique position to influence market behavior. They can set terms that exclude modern slavery risks and promote responsible practices among their clients. Developing exclusion clauses for specific policy lines, such as employers’ liability insurance, can help mitigate risks associated with human trafficking. The insurance sector’s role as norm setters and enforcers is critical in shaping the conduct of entire markets.
At a Sedex webinar series in September 2024, ASEAN-ACT explored the role of the finance sector in facilitating and responding to human trafficking. The presentation provided businesses and private sector actors with an overview a ‘ Blueprint’, borne out of the Liechtenstein Initiative for a Financial Sector Commission on Modern Slavery and Human Trafficking. The Blueprint, co-supported by the Australian Government was a response to calls from the UN General Assembly and Security Council for greater private sector engagement in combating these issues. Published in 2019, The Blueprint outlines five key goals for the financial sector:
- ensuring adherence to international laws prohibiting modern slavery and human trafficking;
- conducting thorough due diligence to identify and mitigate risks associated with modern slavery;
- utilising the financial sector’s influence to drive systemic change,
- offering solutions and support to victims of trafficking; and
- promoting innovative approaches to prevent human trafficking.
There are many practical examples of how financial institutions have successfully intervened in trafficking cases. For instance, PayPal’s collaboration with law enforcement in Australia led to significant arrests and asset seizures, which demonstrates the power of financial data in combating exploitation.
Looking ahead, the financial sector is poised to play an even more critical role. By adopting The Blueprint’s guidelines, institutions can not only protect themselves from legal and reputational risks, but also contribute to global counter-trafficking efforts.