What’s human trafficking got to do with money laundering?

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The connections between terrorist financing, money laundering and violence against women are significant. So this Women’s Day, we look at how conducting your regular due diligence with new clients can help in the global fight against human trafficking and modern slavery. This also helps in fighting violence against women more generally.

Human exploitation as a source of terrorist financing

Though terrorist groups do use human trafficking as a source of revenue, it is important to note that it does not appear to be a key source of revenue. Nonetheless, the extent of human tragedy and suffering that this causes is enormous.

According to a joint Financial Action Task Force (FATF) and Asia/Pacific Group on Money Laundering (APG) report, organisations like ISIL, Boko Haram and Al-Shabaab are actively involved in the trafficking of victims for various purposes. ISIL bought and sold captured Yazidi women in ‘slave auctions’, as well as receiving money from their families for their return – it was estimated that between USD 35 million and USD 45 million was earner by ISIL from payments by the Yazidi community (FATF 2018).

Nobel Peace Prize winner Nadia Murad was kidnapped and held by ISIS.

There were also reports of organised begging rings, for which terrorist groups like ISIL and Boko Haram used displaced or kidnapped children. Boko Haram has kidnapped thousands of women and girls and ‘some of these women have been subjected to domestic servitude, forced labour, and sex slavery through forced marriages to its militants’ (FATF 2018). 

Case Study: Suspicious behaviour leads to arrests

A case study highlighted by the FATF report on the subject brings to light the importance of due diligence checks in financial institutions. 

Spanish police investigated an organised criminal group in Spain that trafficked women for sexual exploitation from Eastern Europe and South America. 

This organisation owned several nightclubs in the South of Spain and it incorporated more than thirteen front companies to launder the proceeds obtained from human trafficking. 

During the police investigation the Financial Investigation Unit (FIU) received several (Suspicious Transaction Reports STRs) related to one of the front companies of the organisation. The suspicious transactions were mainly cash deposits in the companies’ bank accounts. These cash deposit amounts were below the threshold which usually triggers a requirement to verify the customer’s identity, the so-called customer identification threshold. The bank accounts of the nightclubs showed mainly credit cards payments in exact amounts and a low volume of cash operations. The money was then withdrawn in cash in other regions of Spain and the operations were supported with fake invoices linked to construction activities. [You can find out more about how fake invoices can be used for criminal purposes here]

The FIU and the investigative police unit collaborated from an early stage and this aided the police unit to uncover new operations and new branches of the organised criminal group conducting Human Trafficking for Sexual Exploitation (HTSE).

For more such case studies, please see the FATF report.

Crime finances terrorism

Not so long ago, we were watching The BBC’s McMafia which very accurately showed the relationship between what might be seen as ‘harmless’ money laundering at the click of a bank worker’s button and the harsh reality of the criminal activity that it finances. 

We had a closer look at the above dynamics here.

Another prominent example of crime financing terrorism is that of Islamic State in Libya ‘taxing the passage of illicit drugs through newly established drug routes … from Morocco to Libya’ (source: Forbes). This income from criminal activity is not just limited to areas where Islamic State has geographic influence, but also in more classical ways: for example, Islamic State has partnered with members of Italian organised crime groups since 2015 to smuggle drugs. Researchers also warn about terrorists’ use of kidnap for ransom as a fundraising method

All this illicit activity is definitely connected. We have evidence that over 57% of terrorists in Europe and North America between 2014 and 2017 had previously been involved in criminal activity before they undertook terrorist activity (source: Forbes).

And now we also see that men ‘with a history of sexual violence and domestic abuse’ operate within organisations like Islamic State which uses rape and slavery as terrorism.

Awareness campaign about modern slavery

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