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Should banks do more to help end human smuggling?

US human smuggling

Human smuggling is a large and booming business. In the state of Arizona alone, $360 million was known to have moved through bank accounts linked to human smugglers between 2008 and 2013. And between June and September 2014, Homeland Security seized nearly $1 million from over 500 bank accounts suspected of being used by smugglers. With the United Nations Office on Drugs and Crime (UNODC) estimating 3 million illegal entries into the United States from Mexico each year, these “coyotes” (as Mexican human smugglers are known) are making anywhere from $6.6 to $10 billion annually.

A recent article published by Bloomberg has put a very human face on human smuggling by profiling one particular illegal immigrant and the role that big US banks, such as Bank of America, JPMorgan Chase and Wells Fargo, have played in helping him evade authorities.

Terry Goddard, former Arizona attorney general who led human smuggling probes from 2003 to 2010, believes that more needs to be done to strengthen anti-money laundering (AML) and know your customer (KYC) compliance.

“The regulators and the bankers are not doing a very good job of policing their accounts. There’s a level of ordinary suspicion that banks and regulators are failing to employ,” says Goddard.

As attorney general, Goddard went after Western Union for their failure to detect wire transfers to coyotes, resulting in a $94-million fine and an agreement to hire more investigators and to notify authorities about any transfers over $500 in or out of the US Southwest. Since that time, smugglers made a shift to banks to receive payments.

Tom Welch, head of the financial crimes unit in the Arizona office of Homeland Security, is also frustrated with the amount of cash flowing through US banks to human smugglers.

“Way more money is going through than we’re definitely comfortable with,” says Welch. “We’re losing the battle.”

In 2013, prosecutors and federal agents started putting pressure on banks to deal with the growing problem. As a result, JPMorgan and Bank of America responded began to require cash depositors to show identification and restricted cash deposits to account holders and designated co-signers.

Should banks be doing more to put an end to human smuggling?

Unfortunately, human smuggling takes less precedence on the ever-growing list of potential threats faced by banks. In addition to the existing focus on terrorist financing, tax evasion, and drug-smuggling transactions, bank compliance officers are overloaded due to increased legalization of marijuana sales and online gambling in the US.

“I wasn’t able to make human smuggling a priority,” says Holly Ray, a former AML investigator and compliance officer at JPMorgan. She faced numerous challenges when it came to dealing with human smuggling.

The inability to prioritize human smuggling isn’t the only issue at hand. According to Breitbart’s blog post, there are many other factors that stand in the way. Banks could stand to lose significant sources of income by shutting down large, money-making deposit accounts. Smaller banks lack the resources to retain enough trained and experienced compliance officers. And the US federal government also shoulders some of the blame, as heavy fines from the Treasury Department are preferred over criminal prosecution by the Department of Justice to avoid upsetting the stability of the financial system.

Rather than waiting for prosecutors to force their hand through court orders or the threat of large financial penalties and fines, banks should show greater corporate responsibility and leadership by proactively doing what is needed to thwart human smugglers. Streamlining due diligence checks and investigations using new technologies to detect suspicious account activity is one step in the right direction. At a time when there’s no shortage of innovation, banks need to start thinking outside the box and take a more innovative approach.

Disclaimer: Trulioo provides no warranty that the information contained in this document is accurate, up to date or complete and in no circumstance does such information constitute legal advice. Any person who intends to rely upon or use the information contained herein in any way is solely responsible for independently verifying the information and obtaining independent expert advice if required.

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