Financial Regulation

Banks Flagging Frequent Pharmacy Trips, Bulk DVD Rentals, and Other Ordinary Activity to Turn Over Tips to Government Snoops

All sorts of normal behavior are now triggering financial surveillance as banks try to comply with confused government policies on human trafficking.



American and British banks are monitoring customers' contraception purchases, DVD-rental frequency, dining-out habits, and more in a misguided attempt to detect human traffickers, according to a new report from the British think-tank Royal United Services Institute (RUSI). Their intrusive and ineffective efforts come at the behest of government agencies, who have been eager to use asset-forfeiture powers against suspected human-trafficking rings.

There are just a few problems: sophisticated trafficking operations are generally wise enough not to do suspicious business through U.S.- and U.K.-based consumer banks. And without any obvious or majorly suspicious activity to flag, bank executives have had to get creative, coming up with improbable or absurd metrics that might indicate labor- or sex-trafficking. This, in turn, exposes all sorts of innocent bank customers—including but certainly not limited to adults engaging in consensual sex work—to privacy invasions and potential involvement with the criminal justice system.

The U.S. and U.K. banks RUSI researchers interviewed said they were happy to help law enforcement prosecute human traffickers and had little problems turning over financial records for people already arrested or under investigation. But proactively finding potential traffickers themselves proved more difficult. As RUSI explains, "the often unremarkable nature of transactions related to" human trafficking made finding criminals or victims via transaction monitoring a time-consuming and unfruitful endeavor. Yet financial institutions are boxed in by regulations that threaten to punish them severely should they participate in the flow of illegally begotten money, however unwittingly.

The bind leaves banks and other financial services eager to cast as wide a net as possible, terminating relationships with "suspicious" customers, monitoring the bank accounts of people they know, or turning their records over to law enforcement rather than risk allegations of not doing enough to comply. Thus far, American and British regulators have given financial firms some guidance on the type of activity to flag, but this guidance has been vague and open to broad interpretation. Banks have carved out varied policies based on this, sometimes also soliciting tips and training from "modern-slavery"-awareness groups.

The majority of financial firms RUSI communicated with were "from the Americas (the US in particular)," and had already taken "significant steps" to engage with the issue of human trafficking through monitoring and flagging customer accounts.

In 2014, U.S. banks filed 820 suspicious-activity reports with the feds in which the phrase human trafficking appeared (accounting for 0.1 percent of all criminal-suspicion reports), but the Financial Crimes Enforcement Network (FinCEN) saw a "tremendous jump" following the release of a related advisory in fall 2015, according to Adam Szubin, former under secretary for terrorism and financial intelligence with the U.S. Treasury Department and now acting secretary of the Treasury.

So what sorts of activity is being flagged?

Cheap travel, online advertising, and large grocery bills: One U.S. bank told RUSI that they monitor frequent travel on cheap airlines; regular payments to classified-ad sites such as; and "unusual shopping patterns." As examples of suspicious shopping activity the bank implicated frequent large supermarket bills or bulk DVD rentals. Sure, such things could simply indicate large families, frequent entertaining, or lack of access to high-speed internet and streaming services—but bank staff said it could also indicate someone holding others in captivity and, as RUSI puts it, "endeavouring to occupy groups held for exploitation when they are not working." (You know, when you're an evil international slaver but don't want your forced-sex harems to get bored!)

Once a customer's account is flagged for suspicious activity, bank staff will monitor future transactions more closely and search back through history for previous indicators of trafficking, eventually flagging the account for federal view if suspicions continue.

Sending money to "at risk" countries. Another U.S. bank told RUSI researchers that sending money from the United States to countries "at risk" for human trafficking could attract staff attention. But to determine which countries were likely hotspots of human trafficking, it relied on dubious or discredited resources like the "Global Slavery Index".

Preferring ATMs to bank tellers. A U.K. bank said it looks for cash deposits made via ATM machines rather than tellers; repeated payments to adult advertising websites; and multiple bookings with low-cost airlines to or from Eastern European countries.

Frequent pharmacy purchases or eating at both fancy and casual restaurants. One U.K. bank said it looks for small daily purchases at pharmacies and drug stores, under the theory that this could indicate frequent purchase of condoms or contraceptive pills. It also flags payments to a high-end restaurant and a cheaper one nearby on the same day. As RUSI relayed the bank's reasoning, "exploited girls might be taken for expensive dinners while their handlers eat cheaply nearby."

Like the large grocery-bill fears, these last two "red flags" are an especially ridiculous combination of likely-to-ensnare-innocent-people and ignorant-to-reality. Why would someone with a sex-trafficking operation high-volume enough to require a ton of condoms not simply buy in bulk? Why would someone need to refill a birth-control prescription or pick up emergency contraception pills daily? Pill prescriptions are doled out in at least one month supplies, and emergency contraception—even if being used incorrectly as all-the-time contraception—is good for a time-period of several days. Daily purchases at drug stores seem exceedingly unlikely to indicate sex trafficking while impugning all sorts of people who, say, live next to a CVS and pop in frequently.

The restaurant scenario is equally silly. Do they imagine that people meeting with prostitution clients at high-end restaurants are expected to split the dinner bill? Or that people who live and work in areas with a range of restaurants might not sometimes choose the chichi Italian bistro and sometimes choose Chipotle?

Brook Magnanti, author of books such as The Sex Myth and (under the pen name Belle de Jour) of Secret Diary of a London Call Girl, called the red flags "solid gold bullshit," particularly the restaurant example. Other current and former sex workers on social media echoed the sentiment. And so did banks, basically. In the RUSI report, they note that automated flagging schemes won't work, because the alleged indicators of trafficking look just like normal commercial activity, and thus "undertaking human trafficking-related investigations is highly resource intensive."

"Some financial institutions even expressed concerns that the limited 'return on effort' might discourage them and others from remaining committed to this work," RUSI noted. Banks were also discouraged to "find that steps taken in good faith can sometimes lead to penalisation and censure," with U.S. institutions in particular voicing concern that voluntary reporting just opened cans of worms with regulators. And as for help from nonprofits and advocacy groups, banks said the information they provided was "fragmented or of varying quality."

Unfortunately, this lack of reliable data or guidance hasn't stopped the scheme from spreading. Some banks interviewed by RUSI said they had started examining accounts associated with accounts associated with suspicious activity, as well as the suspicious customers themselves. That means that if you've ever sent money to or received money from an account being monitored, your account could end up monitored, too. In one such instance detailed by RUSI, a bank asked by the government to look into a human trafficking suspect found he wasn't a customer but was "connected to" one of their account holders through several transactions, thereby triggering police investigation into that account holder. This then led law-enforcement to corporate customers of the bank who were providing services (such as apartment rentals) to the suspicious customers, prompting the investigation of these corporate accounts too.