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No more “Empty Pages”*

Polaris points out the importance of strong, consistent laws to attack human trafficking

With a nod to pop music, veteran John Byrne’s blog scans the anti-laundering and anti-terrorism world. John pierces silliness and inconsistency, and strongly believes in private-public partnership. With a nod to pop music, veteran John Byrne’s blog scans the anti-laundering and anti-terrorism world. John pierces silliness and inconsistency, and strongly believes in private-public partnership.

I have previously written about how the AML community can (and does) join forces to address the many forms of human trafficking. Research is an essential tool in dealing with this global problem and Polaris has just added to the incredible amount of work they have been doing since 2003.

In its new report, Human Trafficking In Illicit Massage Businesses, Polaris found that there are more than 9,000 illicit businesses in the U.S. and revenues totaling over $2.5 billion annually. The revenue to the states may make legislators reluctant to change the requirements for reporting and licensing. However, it is clear after reading this report that the issue is complex, many victims are harmed, and that putting a spotlight on this can only be a positive force for change.  

The current environment

Here’s what I have been able to glean from the past seven or so years where the financial sector has worked with various public and private sector partners to combat human trafficking:

Elimination is, sadly, a dream. However, disruption and sunlight on bad actors are certainly achievable.

In fact, Polaris has a “Disruption Strategies” team for that very reason. The focus on illicit massage businesses—“IMBs”—is targeted at the business owners and operators who exploit victims using the lax, incoherent, or “empty” laws that allow these criminal to prey on the innocent.

The report is valuable for several reasons, including publicizing the partnership with a number of law enforcement offices and the National Association of Attorneys General that is utilizing new strategies to prosecute and investigate this nationwide problem.

For our community, the report does give potential “flags” that could indicate trafficking with IMBs. This includes use of Craigslist, and pricing for massages well below market rates in those regions.

In addition, Polaris outlines the business model of IMBs that network with some legal operations and are able to launder monies through those entities. There is a useful example in the report of a finance manager from a car dealership that owned two IMBs and how that was utilized to move funds through a shell company.

The report shows a common management structure of this criminal business model which all of us should understand, even in the knowledge that criminal models change.

What can be done?

Polaris eschews hand-wringing and urges adoption of a multi-prong strategy to fight these business predators. The research proves that the laws and regulations in this area are woefully deficient or non-existent. Many laws focus mainly on the employees (i.e. massage therapists) and their certification and not the overall business.

Only 12 of the 50 states have laws regulating the operations of massage businesses, so that is the place the start. (If you believe that the local level, such as the county, is where these businesses should be regulated, only 12% of the counties reviewed have laws or ordinances that cover massage operations.)

Another common complaint by those fighting these illegal business operations is the continued use of shell companies. Obviously we have the impending Customer Due Diligence (CDD) rule and beneficial ownership identification requirement coming in May. However, staying vigilant on accounts being opened in this industry remains key.

Finally, the report correctly calls out the real estate industry for how landlords ignore what type of business they are enabling. Since most IMBs rent, it is time to ask that industry “What exactly are you doing?”

Time for action

Polaris offers recommendations on what strong laws could include and I simply leave it to our proactive AML community for how best to assist the organization in its important mission. Polaris offers draft letters to the editor to shine a light on these efforts.

 The AML community has worked well with law enforcement and others on various aspects of human trafficking—so let us not stop now.

I urge everyone to read the entire report, as this blog represents only a very cursory summary of only some of the important facts.

We can turn empty pages into strategic and tactical tools against those that continue to profit and prey on so many innocent victims.

* “Empty Pages” is a song released as a single in the US in 1970 that appeared on Traffic’s “John Barleycorn Must Die.” It was written by Jim Capaldi and Steve Winwood.

John Byrne

John Byrne is Senior Advisor to the Advisory Board  of the Association of Certified Anti-Money Laundering Specialists and Vice-Chairman of AML RightSource. ACAMS, with more than 70,000 members, develops anti-money laundering/sanctions/financial crime detection programs and certifies specialists in financial and non-financial businesses and government agencies. Byrne is a nationally known regulatory and legislative attorney with over 30 years of experience in a vast array of financial services issues, with particular expertise in all aspects of regulatory oversight, policy and management, anti-money laundering (AML), privacy, and consumer compliance. He has written hundreds of articles on AML; represented the banking industry in this area before Congress, state legislatures, and international bodies such as the Financial Action Task Force (FATF); and appeared on CNN, Good Morning America, the Today Show, and many other media outlets. Byrne has received a number of awards, including the Director's Medal for Exceptional Service from the Treasury Department's Financial Crimes Enforcement Network (FinCEN) and the ABA's Distinguished Service Award for his career work in the compliance field. His podcast, "AML Now" (on ITunes) received a 2017 Communicator Award for hosting from the Academy of Interactive and Visual Arts. Byrne's blog on AML and Fraud on received a Gold Hermes Award in 2016. John received the ACAMS Lifetime Service Award in September. Byrne can be e-mailed at [email protected]; and don't miss John's updates on Twitter! You can find him at @jbacams2011

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