State of Financial Crime 2023 Report

New FinCEN Alert: Red Flag Indicators of Human Smuggling

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On January 13, 2023, the Financial Crimes Enforcement Network (FinCEN) published an alert on human smuggling focused on smuggling activity along the United States’ southwest border. In the alert, financial institutions are provided with trends, typologies, and red flag indicators to help them “better identify and report suspicious transactions potentially related to such activity.”

According to FinCEN, human smuggling along the US southwest border generates an estimated $2 billion to $6 billion annually for illicit actors. “Recent events involving the death of migrants attempting to cross into the United States illustrate the dangers associated with human smuggling and how smuggling networks exploit human beings for profit,” the agency said. 

Red Flag Indicators of Human Smuggling

FinCEN has identified the following financial red flag indicators to assist financial institutions in detecting, preventing, and reporting suspicious transactions associated with human smuggling:

  • Transactions involving multiple wire transfers, cash deposits, or peer-to-peer payments from numerous originators from different geographic locations, either across the US or Mexico and Central America, to one beneficiary located on or around the southwest border, with no apparent business purpose
  • Deposits made by multiple individuals in multiple locations into a single account, not affiliated with the account holder’s area of residence or work, with no apparent business purpose
  • Currency deposits into US accounts without explanation, followed by rapid wire transfers to countries with high migrant flows (e.g., Mexico, Central America), in a manner that is inconsistent with expected customer activity
  • Frequent exchange of small-denomination for larger-denomination bills by a customer who is not in a cash-intensive industry
  • Multiple customers sending wire transfers to the same beneficiary (who is not a relative and may be located in the sender’s home country), inconsistent with the customer’s usual business activity and reported occupation
  • A customer making significantly greater deposits – including cash deposits – than those of peers in similar professions or lines of business
  • A customer making cash deposits that are inconsistent with the customer’s line of business
  • Extensive use of cash to purchase assets, such as real estate, and to conduct transactions

While no single red flag indicator determines illicit or suspicious activity, FinCEN reminds financial institutions to consider each transaction’s relevant facts and circumstances in line with a risk-based approach to compliance.

Money Laundering Methodologies used by Human Smuggling Networks 

While this alert builds on previous 2014 and 2020 human smuggling and human trafficking advisories, FinCEN notes that the methodologies used by human smuggling networks to launder their illicit gains remain largely the same as previously reported. These include:

  • Cash placement and layering into the legitimate financial system 
  • The use of funnel accounts to collect smuggling fees 
  • Alternative payment methods, such as mobile payment applications and other forms of peer-to-peer (P2P) networks to transfer funds

Key Takeaways

On pages 8-10 of the alert, FinCEN reminds financial institutions of their obligations under the Bank Secrecy Act, including reporting requirements and information-sharing processes. FinCEN also provides firms with specific suspicious activity report (SAR) filing instructions when indicators of human smuggling are present. In this scenario, firms should use the key term “FIN-2023-HUMANSMUGGLING” in SAR field 2, as well as in the narrative, and select SAR field 38(g) (human smuggling). 

Regarding information-sharing processes, FinCEN reminds firms they may share information with other financial institutions regarding individuals, entities, organizations, and countries suspected of possible terrorist financing or money laundering. Compliance teams looking to enhance their procedures in light of FinCEN’s reminder should consider the resources provided by the Financial Action Task Force (FATF) on the subject, including:

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Originally published January 19, 2023, updated January 20, 2023

Disclaimer: This is for general information only. The information presented does not constitute legal advice. ComplyAdvantage accepts no responsibility for any information contained herein and disclaims and excludes any liability in respect of the contents or for action taken based on this information.

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