DEREK SMITH: Uniting to battle modern slavery


Derek Smith

In celebration of June 19, an historic date in history that marked the abolition of slavery in Texas, financial crime professionals are grappling with a different but uncomfortably similar problem: Modern day slavery and human trafficking.

The Caribbean Financial Action Task Force (CFATF) defines modern slavery as "an umbrella term that covers a set of specific legal concepts including forced labour, debt bondage, chattel slavery and other slavery-like practices, human trafficking and forced marriage". According to the Global Slavery Index 2023, "an estimated 50m people were living in modern slavery on any given day in 2021, an increase of 10 million people since 2016". Wherever there is money involved, financial institutions can become unwitting facilitators for traffickers seeking to legitimise their illicit gains through money laundering.

Articles published by Forbes.com note that human trafficking is one of the most profitable crimes, and because it involves large sums of money, it is also a money laundering mecca. Financial crime professionals and other executives must remain vigilant to combat this pervasive problem. To address this pressing concern, "It is essential that they ACT (Be Aware, Communicate, and Take Action)", according to Nancy D. Lake.

Numerous red flags exist across various industries, and here are a few worth considering as the potential for human trafficking increases.

Financial Institutions

Financial institutions should be on the lookout for unlicensed or unregistered recruitment agencies that may be a source of labour law violations. Transaction monitoring controls should be in place for customers with unusually large accounts. The presence of third parties accompanying customers during account openings or transactions, and holding their personal identification documents (ID), is also a red flag. Polaris, a non-profit group dedicated to fighting modern-day slavery and human trafficking, emphasises that traffickers consistently employ banks to launder their money. Thus financial institutions must assess their risk-based approaches and due diligence regimes in order to counter the diverse and elusive financial flows associated with human trafficking.

Supply Chain

In the supply chain, despite traditionally not being involved in combating modern-day slavery, health, safety and environment (HSE) professionals are becoming more aware of its dangers. They must look out for warning signs, such as charges for health checks and/or recruitment fees that are excessive or illegal; inconsistencies in contract details or absence of an explicit contract; paying less than you should or deducting unnecessary wages; and passports and ID documentation thay are illegally confiscated or withheld. Another red flag is waved when work permits are restricted to a single company.


Hotels, despite the misconception perpetuated by movies, are not limited to inexpensive establishments for traffickers. Research by Polaris indicates that traffickers consider factors such as convenience, buyer comfort and hotel policies when selecting locations. Hotels with stringent policies that impede collaboration with law enforcement become attractive to traffickers.

Hotel staff should be alert to extended stays by guests with minimal luggage; reservations made with business cards but paid in cash; the presence of sex paraphernalia and large amounts of cash left behind; and the lack of human trafficking awareness training within the establishment.

In conclusion, the fight against modern-day slavery and human trafficking, particularly their financial connections, extends beyond the responsibility of financial institutions. It is a collective business issue that necessitates collaboration from all parties involved. By remaining vigilant and implementing effective preventive measures, we can strive towards a world where the scourge of modern-day slavery and human trafficking is eradicated.

NB: About Derek Smith Jr

Derek Smith Jr. has been a governance, risk and compliance professional for more than 20 years. He has held positions at a TerraLex member law firm, a Wolfsburg Group member bank and a ‘big four’ accounting firm. Mr Smith is a certified anti-money laundering specialist (CAMS), and the assistant vice-president, compliance and money laundering reporting officer (MLRO) for CG Atlantic’s family of companies (member of Coralisle Group) for The Bahamas and Turks & Caicos.


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