Banks Turn to Bitcoin Tracking in Fight Against Human Trafficking

Inside the struggle to trace the transactions of human traffickers, who, in recent years, have turned to bitcoin.

AccessTimeIconFeb 27, 2017 at 12:31 p.m. UTC
Updated Dec 11, 2022 at 1:58 p.m. UTC

A shift occurred in the summer of 2015 that sent modern-day slavers flocking to bitcoin.

Following pressure from Illinois law enforcement, Visa and MasterCard ceased doing business with BackPage, an online classified ads service that has been accused of being a thinly veiled front for prostitution and human trafficking.

As some positioned the move as the kind of "moral policing" for which bitcoin was a perfect workaround, the decision had an unintended side effect that may have actually helped make the job of modern day slave traders even easier.

The tried-and-true investigative techniques that had been until that moment employed by law enforcement and banks to help prevent human trafficking were largely rendered null and void as the pedlars of human cargo embraced bitcoin.

Then, in December 2015, a victim of human trafficking and sexual slavery, Timea Nagy, addressed a room filled with financial executives from some of the largest banks in Canada and made a plea for help.

At the meeting, organised by the founder of social enterprise startup Timea's Cause as part of its process of training law enforcement and others to identify human trafficking victims, Nagy made a call to the room filled with financial executives, asking them to modernize the way they track the financial transactions that power human trafficking.

Nagy told CoinDesk:

"In the olden days, we could track the traffickers purchasing sexual ads for victims. But because of bitcoin, you can't see where the money comes from and where it goes. So it's really, really hard for investigators to actually follow the money, specifically in human trafficking."

The result of her plea was instant, and continues to bear fruit at some of the largest financial intuitions in Canada.

The director of risk intelligence for the Bank of Montreal (BMO), Peter Warrack, stood to accept the challenge, and by the time he left the building, he'd been contacted by Canada regulator FINTRAC and many of his banking peers.

"She basically appealed to the audience, the banks, for help," Warrack told CoinDesk. "Her message was: you're the banks, you see the money, you can help us identify the traffickers."

Springing into action

The response was swift.

On 19th January, 2016, Warrack and his colleague at the Association of Certified Anti-money Laundering Specialists (ACAMS), Joseph Mari, formally launched Project Protect to reimagine the way human trafficking is tracked.

Representatives from all five largest banks in Canada are participating in Project Protect, he said, including the Bank of Montreal, the Canadian Imperial Bank of Commerce, the Royal Bank of Canada, Scotiabank and the Toronto-Dominion Bank.

Another member of Project Protect, professional advisory firm Grant Thornton has published a detailed account of what to look for to identify human trafficking across industries, including suspicious trends in industries such as hospitality, automotive, property management, travel and the financial services.

Initially, the group of banks, advisory firms and tech companies focused on drawing up a list of the high-tech ways slave traders cover their tracks, including 17 types of financial transaction patterns, six types of contextual 'indicators' and 11 types of financial transactions, formally published by FINTRAC in last December.

The document has "been sent out to every reporting institution in Canada" resulting in a "many hundreds of percent increase" in the incidences of financial institutions reporting suspicious activity, according to Mari, who is also a senior manager of major investigations at BMO.

Mari told CoinDesk:

"It’s really brought things to the forefront, to increase reporting for human trafficking, which translates into increased arrests, getting people off the street, giving people a chance again."

The bitcoin sub-stream


The official wording of the indicator on the official FINTRAC document describes what this particular type of human trafficking transaction might look like: "Bitcoins or other virtual currencies: frequent purchases in multiples of small amounts (eg $3, $12, $24), directly by the client or through exchanges."

As part of the process of identifying human trafficking trends Project Protect has partnered with "major technology companies" which Mari didn't want to name for this report to "scrape BackPage and other adult sites on a daily basis."

His team is looking for telephone numbers and emails to "filter it down to what looks like human trafficking as opposed to normal sex trade workers."

But with a proliferation of guides posted by sex trade workers on how to use bitcoin on BackPage and elsewhere, the amount of data was increasing and proved particularly difficult to parse.

"As we started to flesh it out," Mari said. "What we noticed was that cryptocurrency played a role in this, and it became a sub-stream within Project Protect."

On 7th February, Project Protect hosted an event dedicated exclusively to blockchain and cryptocurrencies at the Toronto chapter of ACAMS. Present was the senior research director of Canada’s central bank, James Chapman, Alan Cohn of the Blockchain Alliance, Joseph Weinberg of Paycase and Jonathan Levin of Chainalysis.

Patterns in the bitcoin

Founded in 2015, Chainalysis's mission is to look for patterns on the bitcoin blockchain, in part to help fight cybercrime.

Since signing a contract with Barclays following the startup's completion of the British bank’s Rise accelerator, Chainalysis has gone on to raise $1.6m and is now working in a formal capacity with Europol to help fight online criminals.

At the Toronto event, Mari said he showed Chainalysis CEO Jonathan Levin the indicator criteria his team had determined based on crawling sites known to host human trafficking.

"He was able to pull up transactions that mirrored that," said Mari. Even if the identities were obscured, it was a potentially important step, he said.

Levin confirmed with CoinDesk that he "compared notes" with event participants, going on to describe that since bitcoin is frequently exchanged for local currencies, identifying the "typology" of human trafficking using cryptocurrency required cooperation between companies like his, banks and the government.

"We can identify the difference between single sex workers and what looks more like human trafficking," Levin said, adding:

"Like Project Protect, this requires collaboration between private industry and law enforcement to share intelligence and information."

Firsthand experience

Timea's Cause
Timea's Cause

Since inspiring the creation of Project Protect, Timea Nagy has continued her work alongside law enforcement to shine a light on human trafficking.

After an earlier non-profit she founded was unable to generate the funds it needed to be sustainable, Nagy launched Timea’s Cause as a for-profit social enterprise in 2014. She now works "shoulder to shoulder" with members of law enforcement to teach them how to identify human trafficking victims based on her own personal experience.

Nagy told CoinDesk she first moved from her home in Hungary to Canada at the age of 19 in pursuit of a job as a nanny.

After being told the nanny job was no longer available, she says she was "broken in" to the sex industry lifestyle and forced to perform various sexual acts earning her "owners" as much as $50k over the time she was kept.

She said:

"After three months of that, I decided I would die in it or I’d die trying to escape."

Since that time, the industry has changed. Though she declined to share details of how frequently she’s seen bitcoin used by sex traffickers, she says she has witnessed the impact firsthand as a result of traveling across North America working with various law enforcement officials.

Similar to Nagy’s own work, which has been conducted in tandem with both Canadian and US government officials, current anti-money laundering (AML) work to fight human trafficking using bitcoin is also international.

A global problem

Still, it is difficult to track the problem of human trafficking in Canada due to low incidences of reporting credited to the fear experienced by victims.

But, between 2005 and 2012, there were 25 human trafficking convictions in the country, with the International Labour Organization (ILO) estimating a total of 20.9 million victims of human trafficking around the world. Globally, total profits generated from the industry are estimated by ILO to be $150bn.

Helping track those profits is Joe Ciccolo, the second half of the so-called 'Bitcoin Joes' as they're known in the AML industry, along with Joseph Mari.

On 9th March, Ciccolo’s BitAML is speaking at a sister-event to the Toronto gathering hosted by the Chicago chapter of ACAMS. Also scheduled to attend is the state’s Illinois Blockchain Initiative, first reported by CoinDesk, the president of Chicago-based Burling Bank, the CEO of bitcoin ATM company Digital Mint and more.

Beyond that, a British think tank called the Royal United Services Institute (RUSI) has commissioned Mari to review a paper analyzing the challenges of AML regulation around cryptocurrecies.

The paper is expected to be be released in March as part of the European Union Parliament's plans to implement new regulations.

Another call for help

It turns out Timea Nagy's plea for help has helped reveal just how much assistance is truly needed, even by the banks she herself reached out to.

In spite of the international support, Mari emphasizes the efforts to use cryptocurrency to track human trafficking are still in their earliest phases. He describes Project Protect’s goal as two-fold. The first target is to increase the reporting of suspicious transactions that fit the criteria his team of banks and more has created.

The second is more educational. But it’s not so much that they’re out to teach – which they are – but, rather, to learn, so they can better teach others how cryptocurrency is being used to continue modern-day slave trading.

Mari concluded:

"Any help that we can get from the international community about what human trafficking looks like in the blockchain space would be very much appreciated."

Human trafficking sign via Shutterstock


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