Money laundering and human trafficking

By Christine Duhaime | July 21st, 2013

Human trafficking – a serious and growing problem

According to a report by the United Nations Economic Commission for Europe, the revenues of human traffickers is estimated to range from $5 billion to $9 billion annually. And according to a US State Department report published in 2011, approximately 12 million people—primarily women and children—are trafficked annually worldwide.

Human trafficking is a modern form of slavery which involves the transport, harbouring or sale of persons through coercion, force, kidnapping, deception or fraud for the purposes of placing them in a situation of forced prostitution, domestic servitude, debt bondage or other slavery-like practices.

Human trafficking for forced prostitution, or sexual exploitation, is the most prevalent type in the US and Canada. It is run and controlled by organized crime in both countries and tends to occur behind fronts, like escort agencies and message parlours.

In Canada, organized criminal networks with links to Eastern European organize the immigration of women from former Soviet states into Canada to work as escorts in Toronto and Montreal. The problem also exists in Vancouver there, organized criminal networks tend to originate from Asia and arrange for the trafficking of Asian women into Vancouver for prostitution.

Across Canada, the majority of  victims are Canadian girls between 14 and 25 years of age and most are taken from the Peel Region in Ontario.

Police agencies in Germany, Austria, Czech Republic, Belarus, and Israel have said that there are Canadian connections to transnational human trafficking rings  in these countries, meaning that Canadian organized crime is operating human trafficking in those countries, trafficking girls for forced prostitution in the Czech Republic, Germany, Israel, the United Kingdom and Canada.

During one ICE investigation in the US, young girls from Mexico reported being smuggled and trafficked into the US and forced to live in the crawl space of a house and engage in forced prostitution for the man who smuggled them into the country. When ICE agents interviewed the girls after raiding the house, they were told that the girls were forced to pay the pimp $400 a month to live in the crawl space. The pimp also made them pay $200 per outfit for clothes he bought at a second-hand shop and he charged them $25 each way for a car ride when he forced them to go to out-calls with johns. None of the money earned from forced prostitution was allowed to be kept by the girls.

The money laundering investigation into that pimp and his family revealed that various family members had bank accounts fed by a stream of wire transfers but had no apparent source of  income. They had purchased four homes in the US, as well as an avocado farm and a strip mall, laundering the illegal income. To obtain mortgages, they executed letters stating that they had gifted each other the amounts of the down payments. They had also laundered money by purchasing 141 cars.

All human trafficiking activities involve money laundering. The proceeds collected from criminal activities are transformed by criminals into apparently legitimate money or other assets.  Traffickers use the proceeds of crime to invest in cash intensive businesses such as real estate or strip clubs or bars. Some red flags are as follows:

Red Flags 

Red flags for johns

  • structuring deposits to avoid currency transaction reports;
  • credit card transactions with business front companies;
  • even number charges on credit card transactions;
  • cash withdrawals from ATM machines between 11pm to 6am;
  • credit card payments to online escort websites;
  • withdrawals of cash in geographical regions different than where john lives;
  • frequent international travel, including to AML risk countries;
  • past evidence from credit card statements of escort or prostitution purchases;
  • multiple  bank accounts and credit cards.

Red flags for pimps

  • leasing high end vehicles;
  • structuring deposits to avoid currency teransaction reports;
  • credit card transactions with business front companies;
  • even number charges on credit card transactions;
  • credit card payments to buy classified ads;
  • most of the transactions occurring between 10pm and 6am;
  • large cash deposits;
  • unexplained and unjustified cash lifestyle;
  • mismatch between amounts spent and occupation of person;
  • frequent real estate transactions carried out by straw persons;
  • payments for rent for addresses where prostitution is known to occur;
  • frequent payments for hotel rooms;
  • common telephone numbers used to open up bank accounts;
  • frequent deposits and withdrawals with no apparent business sources.
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