Financial Intelligence Information for Combating Human Trafficking
Updated: Jul 13
MOKAS Strategic Analysis Report – Financial Intelligence Information for Combating Trafficking in Human Beings and how it relates to Cyprus
Further to the issuance of MOKAS Report , it was noted human trafficking generates an estimated $150 billion worldwide annually with a significant portion of those profits passing through legitimate financial services businesses, nevertheless it remains a crime with low levels of detectability. The financial sector has many connections with human trafficking, for instance by handling profits from the industry or relying on slavery for cost reductions and increased profits.
One of the most effective ways to identify potential cases of human trafficking is to investigate the financial trail, this is essential for numerous reasons:
The evidence from the financial sector can assist Law Enforcement and prosecutors in building their investigation and evidence without solely relying on the victim’s testimony.
Financial evidence may help identify victims and alert authorities to trafficking in human beings even before a victim files a complaint or it can confirm a victim’s testimony and provide additional information regarding the criminal activity.
Financial seizures of proceeds of trafficking may be redirected to the victims as a remedy and support their rehabilitation.
Financial evidence can lead to a preventative function and assist in the implementation of an anti-trafficking system.
Addressing the financial implication of human trafficking can assist in the cooperation between private and public agents.
Successful confiscation of such illegal proceeds would not only constitute punishment for the perpetrators, but also would reduce the availability of financing for further crimes.
Human Trafficking in Cyprus
Due to its geographical location, Cyprus is the first entry point for many immigrants in Europe and therefore a destination for human trafficking. As illustrated in the chart sexual exploitation (36%) and labour exploitation (26%) constitute the main forms of trafficking in humans in Cyprus, 75% of which were female. Though it appears that identified victims for sexual exploitation decreased slightly in recent years, this could be due to prostitution moving to pubs, private flats and massage places where the rate of detection could be lower. Furthermore, as per the findings of the National Risk Assessment (NRA) due to the increasingly transnational nature of the activities, there is a call for increased cooperation between various agencies to effectively evaluate the level of money laundering involved in trafficking and associated underlying offences.
Cyprus has signed and endorsed all International and European Conventions related to human trafficking, establishing the domestic law no. 60(I)/2014 on Prevention and Combating of Trafficking and Exploitation of Persons and the Protection of Victims Law.
According to statistics held by the police, for the period of 2015 to 2022, a total number of 126 investigations were launched into trafficking in human beings by the Police, of these 104 individuals were prosecuted before the Court with 31 convictions obtained.
The Report notes that trafficking in human beings for commercial sexual exploitation can at times be confused with prostitution which is not criminalized in Cyprus. A main indicator to assist in the differentiation between those willingly involved in the sex industry and those being trafficked is how the funds are being utilized. For instance, if the funds are coming into the account from multiple individuals or cash and are immediately sent out to a third party this could indicate human trafficking, whereas if the funds are utilized by the account owner for day to day living it may be legitimate sex work.
Financial Red Flag Indicators and Typologies
It is important that red flag financial indicators and typologies are considered as holistically inclusive with other relevant data available; considering all indicators may reveal unknown links which when taken in aggregate could lead to reasonable suspicion of human trafficking.
High risk businesses and occupations include: the livestock sector, agriculture, night pubs/ bars, massage parlours, recruiting / staffing agencies, escort services.
Below are examples of transactional red flags, however there are many more entities should be vigilant for:
Corporate accounts that do not exhibit normal payroll expenditures (for instance, extremely low or non-existent).
Payroll irregularities (for instance, the same wage for all staff regardless of their role).
Employee salaries into a shared bank account.
Any information that arises suggesting unacceptable behaviour towards an employee.
Cash deposits or withdrawals without economic rationale.
Limited payments to social insurance by victims.
Employers having power of attorney on bank accounts of their employees,
Transactions with multiple jurisdictions, high-risk jurisdictions and /or with the victims’ countries of origin.
Guidance to Reporting Entities
As a result of the Report, trafficking in human beings will be added to GoAML as a new report indicator, Regulated Entities are urged to utilize this when submitting a report to the Financial Intelligence Unit (FIU).
A STR / SAR report must be made as soon as possible after suspicion arises, with a clear explanation of the facts in such a way that it can be understood without professional or specialist knowledge. The timing is of utmost importance in order to interrupt human rights violations and prevent further violations.
Reporting Entities are advised to include key words such as “Human Trafficking” when submitting reports relevant to human trafficking. Financial institutions must also include as much relevant detail as possible to aid and quicken the investigation process.
First line employees of Money Service Businesses and Financial Institutions should receive sufficient training so that they are able to detect unusual behaviour.
The FIU prioritizes human trafficking cases, promptly disseminating the result of the analysis to the Cyprus Police in an effort to disrupt the criminal activity.
Information is exchanged between the public and private sector in order to strengthen cooperation between the agents.
FIU are improving their operational awareness and capability in identifying financial flow pertaining to human trafficking in order to aid in the detection of traffickers and victims.
The number of freezing orders have increased from the early stages of investigations into human trafficking, thus enabling the court to issue final confiscation orders following criminal proceedings. This operates as both a punishment as well as preventing the economic fuelling of further human rights violations.
For advice and assistance with matters relating to this information in this article, please contact our team of professionals.
Written by Andie Henderson - Legal and Compliance Associate | The Legal Opinions