Migration has been a global phenomenon since the dawn of humankind. International economic imbalances, natural disasters, poverty and war lead millions of individuals to illegally migrate to a different country, with the hope of a better life.
However, this road to a bright future is sometimes “facilitated” by migrant smugglers for a considerable fee, sometimes costing the migrants’ lives.
The phenomenon of migrant smuggling has been defined by the United Nations Convention against Transnational Organised Crime (UNTOC), as “the procurement, in order to obtain – directly or indirectly – a financial or other material benefit, of the illegal entry of a person into a State Party of which the person is not a national or a permanent resident, with illegal entry referring to crossing borders without complying with the necessary requirements for legal entry into the receiving State.”
On 22nd of March, the Financial Action Task Force (FATF) published a Report on the money laundering and terrorist financing risks associated with migrant smuggling.
The predominant use of cash from migrants paying smugglers is the main reason why many countries do not consider migrant smuggling as a high-risk crime for money laundering and the associated financial flows are rarely investigated.
Smugglers avoid depositing the generated funds, while with no involvement of the financial sector, this illegal activity cannot be detected and reported. At the same time, migrant smugglers launder the generated funds through various methods.
The most common method of transferring funds generated from migrant smuggling internationally is hawala payments. In this case, the migrants visit hawala offices, which receive the payment and hold the funds until the smuggling has been successful after which they release the payment to the smugglers.
Other techniques of money laundering funds generated from migrant smuggling are Trade Based ML and Smurfing.
Trade based ML is when migrant smugglers use legal businesses to hide and invest illicit proceeds as if they are legitimate income, while businesses such as hotels, transport companies and travel agencies may also be used to support the facilitation activities of the networks.
Finally, FATF’s Report highlights that migrant smugglers outsource the services of professional money launderers, in order to ensure the safe laundering of the generated funds.
Financial institutions, money transfer services and other private sector businesses play a vital role in detecting and reporting money laundering associated with migrant smuggling. FATF’s report highlights key indicators that could suggest suspicious activity and can help banks, money remitters or other businesses detect and report suspicious transactions.
Some of those indicators include, inter alia, the following:
(a) Numerous transactions with money remittance companies and online payment services companies
(b) Foreign/Migrants using the same IP or machine ID to perform transactions
(c) Remittances to a different province or country of prior residence or citizenship
(d) Use of the Hawala/Hundi transaction system
(e) Repeated receipts or fund transfers of relevant overall amounts from/to several counterparties abroad
(f) Transactions through prepaid cards in areas far from the ordinary place of residence/domicile of their holders
(g) Recharging transactions between prepaid cards held by foreign nationals, living or operating in places close to reception centers for immigrants or to border crossing points
(h) Abnormal payments to hotels, apartments and other accommodation services that are located on or close to migrant smuggling routes.
The current humanitarian crisis suggests the potential increase of migrant smuggling during the next few years. Migrant smuggling has significant, not only humanitarian, but also financial effects on the economies of countries, as well as on the sound performance of their financial institutions.
Law enforcement agencies in cooperation with the private sector should act promptly and effectively to respond to this challenge.
With scores of migrants losing their lives in search of a better future and $10 Billion of illegally generated funds through migrant smuggling annually, it’s now more important than ever for authorities to act.
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