State of Financial Crime 2023 Report
The Financial Action Task Force (FATF) has warned that financial flows from migrant smuggling may be at risk of money laundering and terrorist financing (ML/FT) and urged authorities to “follow the money” linked to this criminal activity.
In its latest report focusing on an area of global ML/TF concern, the FATF warns that while many countries don’t consider migrant smuggling to be high-risk for ML, it is thought to generate more than $10bn per year globally.
The report – announced at FATF’s March Plenary – aims to update the understanding of ML/TF risks associated with migrant smuggling, to help countries mitigate the risks and disrupt and recover the proceeds. It urges increased collaboration with national and international authorities and the private sector, calling for support for countries directly affected by migrant smuggling.
“Migrant smuggling might not yield as high sums compared to other major transnational crimes, but it often causes significant physical harm and suffering. Countries need to take action so that they are more effective in pursuing, disrupting, and recovering the illicit profits that incentivize criminals to smuggle migrants,” the report says.
Migrant Smuggling in the Americas
The UN estimates that there are around three million irregular entries into the US each year, with the US Customs and Border Protection encountering almost 1.5 million people attempting to enter the country illegally at the Mexican border between 2019 and 2020. In 2019, around two-thirds of migrants transiting through Mexico hired a guide to cross into the US, the report says.
Brazil has also detected significant numbers of irregular migrants from African and Latin American countries, with the flow from Venezuela constantly increasing. Migrants from Haiti, Bengal, and Africa are known to enter Brazil to reach the US.
Report Key Findings
The report highlights a number of key areas that authorities and firms should be aware of:
- While migrant smuggling has grown in recent years, the number of smugglers arrested remains very low, with few investigations or prosecutions initiated or concluded
- Informal money transfer system hawala is the most common method of transferring funds generated from migrant smuggling between jurisdictions – making it hard for law enforcement agencies to investigate
- Other ML methods include physical transportation of funds via cash couriers or money mules; trade-based money laundering; smurfing (a large number of deposits of small amounts made into bank accounts); and investments in real estate, high-value goods, and legal businesses
- The increasing use of social media by smugglers enables law enforcement agencies to detect and trace smuggling activity more easily
- While there is limited evidence of the misuse of virtual assets, the report warns this could change in the future
- An increase in smuggling has led to smugglers outsourcing their money laundering activities to professional laundering networks
- A large percentage of countries are unable to provide complete statistics on the performance of their AML/CFT systems in relation to migrant smuggling
FATF’s main recommendations include countries proactively following the money linked to migrant smuggling; and the strengthening of inter-institutional, international, and regional cooperation, particularly to support countries that are directly affected by migrant smuggling.
The report also highlights the importance of strengthening cooperation with the private sector and providing them with guidance and information on the specific methods that smugglers are using to transfer and conceal proceeds.
Other examples of best practices include financial behavior profiling using pattern recognition techniques, expansion of border surveillance systems, and raising awareness.
The report highlights work carried out in Brazil in recent years to help tackle migrant smuggling and associated ML/FT risks. This includes the Brazilian Federal Prosecution Service joining the Iberoamerican Network of Prosecutors Specialized in Combating Trafficking in Persons and Smuggling of Migrants (REDTRAM), an international forum that has been helping to combat these crimes through the quick exchange of information and sharing of experiences.
Brazil has also created a Working Group in the Federal Prosecution Service to encourage and support possible investigations involving human trafficking, migrant smuggling, and corruption. The Federal Police have also developed a business intelligence data-mining tool called ÁQUIA to discover patterns of migrants and coyote registers.
Takeaways for Compliance
There is a lot to unpick in this FATF report and compliance teams should find the accompanying handout very useful in summarizing some of the key points.
Part three of the main report also contains good practices for combating ML/TF from migrant smuggling, and the case studies in Annex A and indicators of ML/TF in Annex B are also helpful.
Find out more about the state of financial crime in 2022 with our complete guide.
Originally published April 1, 2022, updated April 1, 2022
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