Ethically Enhanced Due Diligence and Human Trafficking

In 2016, ACAMS Today published the article, “Raising Awareness about Human Trafficking,” which talked to the value of public-private partnerships and a Canadian anti-human trafficking initiative called Project Protect.1

As a result of Project Protect, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) has identified that suspicious transaction reports (STRs) received during 2016 had increased by 500 percent over the previous year and by extension disclosures to law enforcement by 537 percent.

FINTRAC, working closely with the private sector, law enforcement and victims of human trafficking also published a comprehensive operational alert, which was circulated to 31,000 law enforcement agencies and reporting entities.2 The alert focused on indicators of money laundering related to human trafficking as sexual slavery, and complements the 2014 FinCEN guidance on human trafficking, which also addresses human smuggling and trafficking for labor exploitation.3

Last year was globally catalytic in raising awareness on human trafficking, with awareness now being translated into action that addresses the problem using a multifaceted approach

Last year was globally catalytic in raising awareness on human trafficking, with awareness now being translated into action that addresses the problem using a multifaceted approach, albeit arguably often in a patchwork quilt of well-intentioned, but often competing effort.

“A patchwork quilt” should not be seen as a criticism, rather as groundswell recognition of the inhumanity of human trafficking and a desire to end it across its multiple fronts (sex trafficking, labor trafficking, organ trafficking, etc.) accompanied by multiple initiatives.

In Canada, examples of initiatives include numerous law enforcement agencies and nongovernmental organizations promoting human trafficking campaigns resulting in arrests and interdictions. For example, on April 11, London (Ontario) Police announced the results of Project Equinox, which resulted in 78 arrests of traffickers and their clients and 18 victims of human trafficking being rescued from the clutches of their pimps, the youngest aged 15 years.4

In the U.S., CNN reported on ‘The Trucker Army’ against human trafficking—big rig truckers on the lookout for and rescuing victims of human trafficking. In addition, various states including Texas, Kansas, Arkansas and Ohio, are enacting laws to require prospective truck drivers to undergo compulsory human trafficking awareness training.5

Internationally it is refreshing to see recent human trafficking arrests in places like Fiji and Kenya.6,7 In February 2017, Peter Warrack had the privilege of presenting on a project to combat human trafficking in the Caribbean as part of an Interpol training program held in St. Lucia. Also, human trafficking was on the agenda at a Financial Action Task Force (FATF) typologies meeting in Moscow on April 24, 2017.

In keeping with the global narrative, on March 15, 2017, the U.N. Secretary General António Guterres urged governments to implement laws to prosecute traffickers8 and called for governments, (and by extension law enforcement) to engage with the private sector and cautioned that any support needs to incorporate the voices and views of the people affected (i.e., the victims of human trafficking).

Working in partnership with the public sector is not new in Canada (as seen by Project Protect) and there are similar initiatives in the U.S. However, when the public and private sectors (Canada’s FIU FINTRAC and a major bank) co-presented on the subject at the U.N. University event, Breaking the Financial Chains Workshop,9 held at Grace farms in Connecticut on April 2017, many in the esteemed audience viewed this as positive, revolutionary and a takeaway to present back to the U.N.

The need for all stakeholders to work together in fighting all forms of human trafficking was a clear message in the RUSI10 report “Disrupting Human Trafficking: The Role of Financial Institutions” as presented by Tom Keatinge at the Grace Farms Workshop.

As the two-day workshop unfolded, it became clear that whilst Project Protect addressed human sex trafficking, other forms of human trafficking not as prevalent in Canada (i.e., the issues of forced labor and supply chain due diligence) were of major concern to the international audience in attendance.

Standard Chartered Bank (Netherlands) provided a compelling presentation on supply chain due diligence centered on the diamond industry in the Democratic Republic of Congo.

In identifying the elements of the supply chain (i.e., production, distribution, preparation and sales), the presenter opined on increasing public and regulatory expectations that institutions providing financial services (e.g., banks) to entities in the supply chain would conduct due diligence on the customer’s customer to provide a level of comfort that there was no association to human trafficking (or as in this example slavery and forced labor).

I refer to this as ethically enhanced due diligence (EEDD) and, according to lawyer, Michael Volkov, in an article published online on April 4, 2017:

“There are specific legal risks for U.S. companies that may arise from federal contracting regulations and possible AML implications. More important, is the reputational risk for global companies that may fail to implement basic hiring and employment controls to avoid human trafficking. Companies have to monitor and regulate their supply chains to avoid the serious harm from human trafficking and possible hiring or facilitation of hiring of human trafficking victims.

Since 2015, every company with a U.S. government contract must comply with U.S. regulations governing human trafficking. Companies that have a contract over $500,000 must implement a specific compliance program and certify each year to compliance. Companies have to implement compliance programs to detect and prevent human trafficking by third-party agents and subcontractors that may recruit potential employees from overseas or may use such employees in overseas positions. This requirement extends to monitoring and auditing of third-party agents and subcontractors for compliance with human trafficking prohibitions.

Prime contractors are required to exercise vigilance in making sure that their subcontractors comply with specific contractual requirements.”11

Volkov’s useful article alludes to possible AML implications, but does not spell them out. It would arguably make sense that if goods are manufactured using slave labor, which is a crime in many countries, then those goods and the funds derived from selling them become the proceeds of crime.

If the funds are then transmitted through the financial system, it is at this point where money laundering may occur and be reportable via a STR or suspicious activity report (SAR).

Ethical Due Diligence is gaining momentum internationally and is becoming further embedded into law, and by extension compliance. In February, Dutch legislators adopted a new bill, which if enacted would require certain companies to investigate the existence of child labor in their supply chain and on March 27, 2017, the French Parliament adopted a law establishing a duty of vigilance for parent and subcontracting companies. The law amends the Commerce Code and requires companies to establish and implement a plan for improving human rights, the environment, and health and safety issues in their supply chains.

Another takeaway from the U.N. University were findings from Liberty Asia, an NGO that “aims to prevent human trafficking through legal advocacy, technological interventions, and strategic collaborations in Southeast Asia.”12 Liberty Asia reported that out of 18 countries surveyed only six had formal guidance issued from their respective FIUs on the topic of human trafficking.13,14 Furthermore, it was noted that many countries without formal guidance relied on other guidance issued in other jurisdictions, primarily the U.S. However, it is likely that this appropriation of intelligence can see diminished results as not all indicators are constant across international borders.

In summary, it is an uncomfortable but realistic assumption that human trafficking, in its many different forms, is not going away any time soon. According to the Pope, in a message read out by the under secretary of the Migrants and Refugees Section of the Dicastery for Promoting Integral Human Development, to the Organization for Security and Co-operation in Europe (OSCE)’s 17th Alliance against Trafficking in Persons Conference, in Vienna, it is getting worse.

However, although it may be getting worse in many parts of the world with respect to migrant smuggling and forced labor situations, in North America, as far as human trafficking and sexual slavery are concerned, there is reason to be optimistic as the public is becoming more aware and corresponding action by law enforcement is addressing it. This is good news, but more needs to be done.

ACAMS has always been at the forefront of raising awareness about human trafficking as evidenced by the human trafficking panel at the recent AML and Financial Crime conference in Florida and numerous publications and chapter events over the years. Let us keep the message alive.

Peter Warrack, CAMS, CBP, CFE, director of AML advisory and compliance officer, Bank of Montreal, Toronto, Ontario, Canada,

Joseph Mari, CAMS, CBP, senior manager—major investigations team, AML FIU, Bank of Montreal, Toronto, Ontario, Canada,

Disclaimer: The views and opinions expressed in the article are solely those of the authors.

  1. Karla Monterrosa-Yancey, “Peter Warrack and Constable Lepa Jankovic: Raising Awareness about Human Trafficking,” ACAMS Today, June-August 2016,
  2. “Indicators: The Laundering of Illicit Proceeds from Human Trafficking for Sexual Exploitation,” FINTRAC, December 15, 2016,
  3. “Guidance on Recognizing Activity that May be Association with Human Smuggling and Human Trafficking—Financial Red Flags,” FinCEN, September 11, 2014,
  4. “London-Area Police Help 18 Women and Girls Leave Sex Trade after Human Trafficking Operation,” CBC News, April 11, 2017,
  5. Eoghan Macguire, “Eyes of the Highways: Raising a ‘Trucker Army’ for Trafficking Fight,” CNN, April 12, 2017,
  6. Praneeta Prakash, “Cases of Human Trafficking in Fiji,” Fiji Broadcasting Corporation, April 6, 2017,
  7. “Seven Somali Men Arrested Over Human Trafficking Ring in Kenya,” Eyewitness News, April 6, 2017,
  8. “At Security Council, UN Officials Urge Governments to Implement Rules on Prosecuting Traffickers,” UN News Centre, March 15, 2017,
  10. Royal United Services Institute—a U.K. Think Tank,
  11. “Human Trafficking and Smuggling—A Compliance Requirement,” JDSUPRA,
  13. Australia, Cambodia, Canada, China, France, Hong Kong, India, Indonesia, Liechtenstein, Malaysia, New Zealand, Singapore, Switzerland, Thailand, Netherlands, United Kingdom, United States and Vietnam.
  14. Australia, Canada, Thailand, Netherlands, United Kingdom and the United States.

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