Article
Source: The Banking Law Journal, Vol. 135, No. 7
Article
07.31.18
Aside from the Bank Secrecy Act, federal law creates corporate liability for financial institutions that, even unknowingly, benefit from human trafficking if they “should have known” about the exploitation. Expanded anti-money laundering compliance focused on identifying human trafficking red flags is instrumental to mitigate potential corporate liability based on an institution’s failure to recognize financial transactions related to human trafficking. The authors of this article discuss the issues and advise smaller banks and money services businesses to expand their compliance to mitigate human trafficking corporate liability.
As larger banks and international financial institutions have been implementing increasingly sophisticated Bank Secrecy Act (BSA) and anti-money laundering compliance processes and technologies, they have also become less hospitable and less attractive to bad actors. Accordingly, criminals are increasingly exploiting less expansive know-your-customer controls at money services businesses (MSBs), community banks and credit unions to launder proceeds of human trafficking. Thus, in addition to mitigating potential criminal and civil penalties for BSA violations, comprehensive anti-human trafficking policies and procedures at smaller banks and MSBs will address potential exposure under the Victims of Trafficking and Violence Protection Act, a federal law that creates significant corporate liability for financial institutions that benefit from human trafficking if they know or “should have known” about the exploitation.