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How SARs combat human trafficking by detecting money laundering

Napier
September 21, 2021

It is a blight on modern day society to see that slavery and human trafficking are crimes that continue to be perpetuated and, as reports in the UK indicate, flourishing.  

In this blog we explain what Modern Slavery and Human Trafficking (MSHT) is, its relationship to money laundering, and the scale of the problem. Additionally, we examine the strategies law enforcement in the UK deploy against MSHT perpetrators and organized crime groups (OCGs) and how effective SARs can help bring MSHT perpetrators to book.

We also hear from MSHT experts on SARs best practice for reporting on trafficking and slavery.

Although we will focus on MSHT within the UK AML regime, the content will be relevant to SARs practitioners anywhere in the world seeking to clamp down on money laundering perpetrated by MSHT criminals.

What is MSHT and how is it connected to money laundering?

MSHT is an umbrella term referring to modern slavery and human trafficking:

  • Modern slavery is a crime committed for the financial benefit of the perpetrator in which the victim is coerced, deceived, or threatened into being exploited for forced labour, sex, or servitude of some kind. The victim is deprived of liberty, dignity, and often too afraid or ashamed to seek help.
  • Human trafficking is a form of modern slavery which includes unlawfully transporting victims from one place to another through deception, fraud, or intimidation to subjugate them into forced labour, debt bondage, or sexual exploitation for the benefit of the perpetrator. It should not be confused with migrant trafficking, which is when illegal migrants knowingly consent to being unlawfully transported across an international border.

MSHT is essentially a financial crime in which the perpetrator gains financial benefit from exploiting the victim. This can be through profiting from the victims’ forced labour or accruing money from their servitude.

As such, the criminal faces the same dilemma as other money launderers: he has ‘dirty money’ which must be made to appear legitimate, so that it can be accessed without fear of reprisal from law enforcement.

Who are the victims of MSHT and how bad is the problem?

Throughout the UK the victims of MSHT are, as with most crimes, the poor and desperate. Whether press ganged into immiserating forced labour at farms, residential construction sites, factories, restaurants or car washes; or intimidated into working in the sex trade in salons, nail bars, massage parlours, brothels, or on adult websites – just some of the high cashflow businesses favoured by money launderers - the victims are frequently left hopeless, damaged, and destitute.

Media reports in 2018 on the independent assessment of the UK’s modern slavery regime released by the UK Home Office indicated that the number of MSHT victims in the country at the time was between 10,000 and 13,0000, with a cost to the national purse of up to £4.3 billion.

A 2020 Centre for Social Justice report estimated that the number of victims in the UK could be as high as 100,000 though it did not explore the financial costs. It stressed that the COVID-19 pandemic will likely exacerbate the poverty levels and desperation which create fertile ground for MSHT criminals.

Modern slavery offences in England and Wales increased by 51% from 2018 to 2019

Meanwhile, in 2020 the Office for National Statistics (ONS) reported that:

  • Modern slavery offences in England and Wales increased by 51% to 5144 from 2018 to 2019.
  • Of 2251 possible victims supported by NGOs in England and Wales during 2018/19, 48% experienced forced labour, and 39% sexual abuse.
  • Calls to the Modern Slavery Helpline increased by 68% from 2017 to 2018.
  • Referrals to the UK National Referral Mechanism (NRM) increased by 36% to 6,985 from 2017 to 2018, of whom 23% were UK citizens.
  • Police in England and Wales referred 205 MSHT suspects to the Crown Prosecution Service (CPS) in 2018, and 68% of the cases which the CPS prosecuted resulted in convictions.

While the ONS analysis implies that lines of reporting for possible MSHT crimes have improved, the overall evidence makes it clear that modern slavery and trafficking are flourishing in the UK, with COVID-19 pandemic likely to intensify the problem.

How is the UK fighting MSHT and how can SARs help?

In 2009, the UK government implemented the National Referral Mechanism (NRM) as a framework for reporting suspected MSHT victims. The Modern Slavery Act 2015 followed, which aligned trafficking and slavery crimes (with regional variations in different parts of the UK) beneath the umbrella term ‘MSHT,’ streamlining the prosecution of suspected perpetrators.

The Home Office’s 2020 UK Annual Report on Modern Slavery builds on the principles of the 2015 Act, pledging an additional £2m to support the police in combating MSHT. Some highlights specific to SARs included:

  • Mandating business entities to produce annually assessed modern slavery statements on what steps are being taken to combat MSHT, with improved quality of reporting.
  • Extending the reporting requirements to large public entities with budgets of £36 million or more, to better identify MSHT risks in public sector supply chain management (SCM).

Meanwhile, the NCA hosts both the Modern Slavery & Human Trafficking Unit (MSHTU), which consults with law enforcement agencies and provides support for the victims of trafficking and slavery, and the UK Financial Intelligence Unit (UKFIU), which investigates most SARs. The MSHTU and UKFIU work closely together to investigate suspicious transactions which could indicate money laundering of profits from trafficking and slavery.

Additionally, the Independent Anti-Slavery Commissioner noted that increasing the focus on illicit finances through data sharing is a key MSHT priority for law enforcement. This puts the NCA MSHTU and UKFIU at the forefront of combating this crime using financial intelligence, of which SARs are an integral part.

What do the experts say about MSHT SAR reporting?

The UKFIU's monthly podcast focuses on how SARs help to combat crime, and the strengths and weaknesses of UK’s AML regime. In the September 2020 episode, experts provided insights into MSHT-specific SARs reporting:

  • Sharon Turner of the NCA MSHTU advised financial crime analysts to look out for bank accounts that access adult service websites, use a single car hire firm for multiple small trips, or book many single one-way flights for many young women.
  • Richard Farrell, also of the NCA MSHTU, noted that MSHT is perpetrated over a long period of time, meaning its transactional activity looks different to firearms or drugs trafficking in that the frequency is large, but the value of each activity is small. He said financial crime analysts should be alert to the collective amount moved over time.
  • Denise Napper, Operations Manager at the UKFIU, emphasised clarity as best MSHT SAR practice - where analysts can relate the SAR clearly to a victim or perpetrator, indicate specifically the transaction dates and money flows, and how recently they occurred, all of which helps to inform law enforcement what action to take and how urgently

The UKFIU has also published a MSHT SAR guide as well as industry specific MSHT SARs guides for the accountancy and legal sectors which include red flags of potential MSHT.

We have seen in this blog the sheer scale of the UK’s MSHT problem, and the determination of key role players, led by the government, to stamp it out. We have also seen how central to combating this terrible crime SARs are - now and in the future. The next chapter in this series will focus on how SARs can detect the financial flows associated with online child abuse and assist law enforcement to combat the crime.

How can Napier help your business combat MSHT and stay onside with the regulator?  

Our previous blog looked at how monumental a task the overhaul of the UK AML regime is, and what a challenge it is becoming for regulators and AML practitioners alike. We have noted elsewhere that the global cost of AML compliance is also soaring. In this blog, we have been at the coalface of how pivotal the AML sector is in combating the modern-day scourge of trafficking and slavery, as well as the increased reporting requirements fighting this crime place on the industry.

As a specialist compliance technology company, Napier believes that the solution lies in AI-driven automation to reduce false positives which distract human investigators from catching the truly bad actors. Our fully scalable, cutting-edge technology and AI-based automation can also help your organisation streamline its SAR reporting processes.

Trying to get your AML compliance in line with the law?  

Contact us to find out how our systems can help or request a demo request a demo to see in action.