AUSTRAC financial crime guide tackles forced sexual servitude

The Australian Transaction Reports and Analysis Centre (AUSTRAC) has issued new guidance designed to help firms identify suspicious behavior related to forced sexual servitude.

While sex work is largely legal or decriminalized across Australia and subject to regulation, forced sexual servitude is a crime where victims are made to provide sexual services against their will for little or no money. This form of slavery is a lucrative business for criminals and currently represents around 30% of all slavery cases in Australia.

The research builds on work AUSTRAC initiated in April 2020, when it identified areas of the financial system vulnerable to criminal exploitation during the pandemic. The Financial Action Task Force (FATF) subsequently noted that “One FATF member has advised reporting entities to be increasingly alert to the exploitation of workers and trafficking in vulnerable persons.” More widely, the FATF warned that risks related to human trafficking and the abuse of workers would increase during the pandemic. 

Indicators of forced sexual servitude 

Detecting and Stopping Forced Sexual Servitude includes practical new guidance from AUSTRAC and its public-private partnership, the Fintel Alliance. It aims to help firms “review their profiling and transaction monitoring programs, to target, identify and stop financial transactions associated with forced sexual servitude.”

The guide states that: “Where suspicious activity is identified, enhanced customer due diligence should be conducted in accordance with the financial services business’s AML/CTF program.”

While sexual servitude is a key financial crime typology, firms aiming to build rules to detect it based only on their own data risk missing out warning signs that could detect a crime, or connect seemingly unrelated activities. 

The guide provides some key takeaways to help compliance teams understand what to look out for, including details around transaction amounts, payment patterns and payment details. These include: 

• Lack of business-related expenses and transactions present in coordinators’ accounts
• Regular payments to hotels or short-term accommodation providers
• Receiving frequent third-party ATM cash deposits of $200-800 from multiple locations in Australia
• Receiving domestic transfers predominantly from third-party males, and regular domestic transfers predominantly to third-party females
• Purchases that are inconsistent with the customer profile, such as clothing, make-up, beauty products and services, and lingerie
• High volumes of payments – more than 15 per month – to rideshare companies 
• Frequent payments for pre-paid mobile phone top-ups and regular and large food takeaways
• Payment references that indicate sexual services or sexually suggestive commentary 
• Domestic, small-value transfers from multiple third parties to a single coordinator

Payment methods used by coordinators and customers include cash, cash ATM deposits, online domestic transfers, online payment platforms, debit and credit card transactions and face-to-face transactions at a bank branch.

Tracking online footprints 

As the pandemic has pushed more activity online, coordinators are now able to provide sexual services that cannot be provided in person. AUSTRAC notes that some online merchants may not be aware that they are facilitating illegal sex work.

It is important that compliance teams look at online footprints during their investigations, and include intelligence such as IP addresses and cell phone numbers in any suspicious matter reports (SMRs). 

No single financial indicator will confirm if an account or business is being used in relation to forced sexual servitude. Businesses should use a combination of indicators alongside their transaction monitoring alerts to identify potential suspicious activity, and report these to AUSTRAC by submitting an SMR.

Case study: Melbourne crime syndicate

AUSTRAC also stresses the close links between forced sexual servitude and organized crime. “Coordinators are opportunistically motivated by financial gain and may also be involved in other crimes such as financial scams, identity fraud, welfare fraud, and illicit drug importations,” it states.

In the case of a Melbourne-based crime syndicate, who were exploiting 100 Korean forced sex workers, financial information helped achieve multiple arrests. Victims were forced to provide sexual services to pay off debt and were found living and working in appalling conditions, while syndicate members maintained a lavish lifestyle.

Law enforcement officers used financial information to disrupt the syndicate and convict the coordinator and trusted allies of money laundering offenses. They were jailed for around two years each.