Follow the money: How financial investigations aid in the fight against trafficking in human beings

Trafficking in human beings (THB) is a global issue. Identifying those involved in instigating and profiting from trafficking in human beings needs to be tackled systematically and globally. Investigating the financial trail that traffickers leave is an important element in the fight against trafficking in human beings; although tracking the trail is a challenge.

James Cockayne, Director of the Centre for Policy Research at the United Nation University and Head of the Secretariat of the Liechtenstein Initiative, was part of a panel discussing the role of financial investigations in combating THB.

We sat down with James to discuss some of the hot button issues in financial investigations, and the Liechtenstein’s Initiative’s Blueprint for Mobilizing Finance Against Slavery and Trafficking. We asked what States, and organizations such as the OSCE, could do in the financial sector to help combat human trafficking.

Your background is quite varied, dealing with issues such as human trafficking, modern slavery, organized crime, the UN system and more. What motivated you to focus on the financial implications of crime, specifically in relation to trafficking in human beings?

I run the Centre for Policy Research at United Nations University and our mandate is to bring the best available evidence into global policy processes, particularly at the UN.

We think a lot about what are the policy levers that can be pulled to create change.

We were working on anti-slavery and anti-trafficking issues for several years, in particular with the Permanent Mission of Liechtenstein to the United Nations which has been a leader in this area. That's where we started our engagement around the relationship between international criminal law and anti-trafficking.

Very quickly, it emerged from the policy research we produced, that there was a need to engage financial sector actors, particularly around financial investigations. It also became clear from some early meetings we had with actors in the financial sector that there was a disconnect between what was going on around compliance, financial investigations in anti-money laundering, and the analysis of the risks of THB when it comes to investment decisions.  

Often in large banks, you will have both a compliance function and an investment function – very different parts of the organization usually; it's not necessarily natural for them to connect on a topic like this.

There was a push from the financial sector institutions that we were engaged with to think about modern slavery and human trafficking from a more holistic perspective. That's what led to the creation of the Financial Sector Commission.  It was an attempt, over the course of a year of global consultations, to understand all the different ways in which financial sector institutions intersect with these types of risks.

Goal 2 in the Blueprint states that the first step is to understand and identify the connection to modern slavery and human trafficking risks. In this connection, acknowledging that specialized expert guidance may be needed, what role do you see for the OSCE?

There is a huge role for governments and regulators, working with the private sector, to create the needed regulatory environment conducive to most effectively addressing modern slavery and human trafficking risks.

Many of these institutions are sitting on the kind of data that's needed to identify these financial patterns, but they may be reluctant to share that information with regulators, or even with each other, because of traditional rules around privacy in the financial sector. Moreover, they might also be concerned about privacy, not just of the individuals and their banking and what they’ve invested with them, but of victims as well, so there are many valid concerns here.

International organizations clearly have a key role to play in helping different countries work together and learn from each other.

I think the OSCE work published today, Following the Money, is a really fantastic synthesis of the emerging body of practice that we have around the world.

It is spotting indicators of financial footprints of human trafficking, and it's also the start of an effort by the OSCE to work with its participating States and partners to help them work with the private sector to increase collective capacity.

However, the problem we are facing here is the result of the way the financial system works and, in that sense, we are all responsible for changing how that system works.

It's not up to any individual actor, whether it’s the state or financial institutions, to change this on their own – and they probably couldn’t if they tried because we're all invested in the way the system works – but that doesn't mean we should accept that the system has to generate this kind of outcome.

In fact, I think we should not accept that we are going to tolerate 40 million people in slavery on an ongoing basis.

So, we have to think about how we can reduce the risks of that kind of outcome and that requires collective action.

How do you think, either institutions or nations, can bring awareness to the public of the costs of trafficking of human beings and modern slavery? The blueprint talks about change at the systemic level, bringing THB concerns into the mainstream. How do you foresee this?

What we are really talking about here is the extreme and systematic form of exploitation.

I think there is a huge need for us all to stop and think why the goods and services that we are consuming are so cheap.

If we are buying clothes or consuming products that are unusually cheap, that's probably an indication that somebody's losing out in the complex supply chain.

Somebody is being taken advantage of, if not exploited. So I think again it comes back to this realization that the system performs a certain way because it creates convenience, it creates low prices, but the result is costs that we actually all absorb in different ways. The most direct costs are obviously for individual victims whose lives are often destroyed by these forms of exploitation. And that can have knock-on health implications, reduced income expectations; they can be locked out of the financial system because their credit history is tainted.

But it also creates cost for society and for the economy. For society, there are direct costs, like dealing with the healthcare burden that results from these practices, from law-enforcement costs, the costs of detecting and dealing with this problem, and there are indirect and economic costs like the reduced involvement of this person as a consumer, as a saver, as an investor in the economy.

These people are turned into economic objects rather than economic subjects, if I can put it that way. So I think this is part of a larger process of realization that many societies, many communities are going through, that the way we have organized our consumption, our investment, may have short-term benefits but it may be that we are not being the best stewards of our own resources, environmental or even economic, for future generations. We have to think about the systematic costs of the way we are organizing our environment.

So we need to think about systemic solutions, and some of that has to do with simple shortcuts like ratings. We are getting quite used to seeing sustainability ratings on food when we go to the supermarket, and there may be a desire of some to move in that direction with consumer goods around modern slavery risk.   But I think what we are more likely to see is that thought incorporated into broader sustainability ratings, and financial institutions have a key role to play here, as they are the financial intermediaries in the system. They determine the cost and capital for all of those organizations so they are really shaping the way business is done, and they are the intermediaries working with those businesses to proactively use their leverage to shape the way business gets done. So financial institutions are in a sense much more powerful than individual consumers, in having discussions with businesses saying our financing for your business is conditional upon you taking these steps to remove these risks of exploitation from your own operation. I think we can look to financial institutions, particularly investors, to play a much stronger role in that part.

Considering the OSCE’s compendium and the Blueprint, and acknowledging that we are at the beginning stages of recognizing the importance of “following the money”, what do you see as the newest trends, investigative techniques, technology that might help in this process?

The OSCE publication Following the Money is really important in giving us a synthesis and a snapshot of where we are in understanding how to find these forms of exploitation in financial transactions. Often that involves analysis of large data sets and clearly we are at a moment in the development of Artificial Intelligence (AI) where our ability to process those data sets, in powerful ways, is going to be pretty transformative. There is very interesting work coming out of the Netherlands, for example, on using AI to identify indicators of forced labour in banking transactions.

Our data sets at the moment tend to focus on other forms of exploitation, particularly sexual exploitation, and they tend to focus on the types of banking transactions we see in high-income countries. There is a need to be able to recognize what these patterns look like in middle-income countries, in low-income countries, in transnational financial relationships, and to recognize a wide range of types of exploitation.

Artificial Intelligence is going to be very important in helping us discover all those different types of exploitation. I think we are also going to see that it feeds into a market for modern slavery risk information that you are going to see developing very quickly under pressure from governments and from investors and consumers for businesses.  There is already a connection through the anti-money laundering and anti-terrorist financing regimes, but I think will see that connection deepen further.

Financial sector actors are going to take this kind of risk more seriously and incorporate it into their own decision-making.