Boosting Cooperation for the Suppression of Human Trafficking and Illegal Migration

In the face of growing concerns over drug trafficking activities, financial institutions in the United States are being urged to strengthen their compliance measures.

Recent enforcement actions have highlighted the dire consequences of failing to adhere to regulatory guardrails. A regional U.S. bank, for instance, processed millions in cash deposits and international wires over several years, despite red flags indicating trafficking-related activity.

To minimize the risk of employee complicity in enabling drug trafficking networks, financial institutions should assess and test their internal controls, properly assign responsibilities, implement regular employee vetting systems, and foster a culture of accountability.

The U.S. Drug Enforcement Administration's 2024 National Drug Threat Assessment has identified cartels like the Sinaloa Cartel and Jalisco New Generation Cartel as the dominant forces behind drug trafficking into the U.S. These cartels also use sophisticated networks that support human trafficking operations.

Financial institutions must evolve their detection and reporting mechanisms to stay ahead of regulatory expectations and play a meaningful role in disrupting illicit economies. Effective Financial Crime Risk Management (FCRM) programs rely on technology solutions that require careful planning, selection, customization, consistent monitoring, assessment, maintenance, and enhancement.

The designation of cartels as Foreign Terrorist Organizations (FTOs) significantly increases legal risks for financial institutions with exposure to customer bases and geographies where cartel-related transactions are most prevalent. In response, institutions should conduct independent reviews of U.S. and non-U.S. regulatory requirements to align their BSA/AML/CFT, sanctions, fraud, and Anti-Bribery and Corruption (ABC) programs with both U.S. and international regulatory obligations and industry standards.

The current administration has prioritized stricter border enforcement and increased scrutiny of businesses that may be indirectly facilitating these activities. This policy direction is expected to ripple throughout the financial sector, reshaping day-to-day compliance operations and elevating expectations for proactive risk mitigation.

Financial institutions should perform financial crime risk assessments tailored to their specific business model, identifying potential risks posed by human trafficking, drug smuggling, and cartel operations. Regular assessments of compliance staff levels and skills are also crucial to ensure they are commensurate with risk exposure and program demands.

To remain compliant and effectively manage risk amid rapidly evolving regulatory priorities, financial institutions should adopt a proactive, risk-based approach. This includes enhancing Know Your Customer (KYC) protocols, ensuring transaction monitoring systems are properly developed and tuned, and applying heightened scrutiny to customers and transactions originating from or linked to regions known to have a high cartel presence.

Institutions may need to engage professional managed services to provide scalable support across core financial crimes compliance functions. Additionally, financial institutions in the United States can adopt a proactive, risk-based approach by implementing comprehensive IT and cybersecurity risk management strategies, aligning with regulatory compliance requirements, anticipating threats, and ensuring business continuity through holistic governance and compliance frameworks. This includes strengthening data privacy compliance, using advanced cybersecurity responses, and integrating real-time data analytics to detect and manage risks effectively while adapting to rapidly changing regulatory priorities.

The U.S. Congress recently passed significant budget increases for immigration law enforcement, signalling a continued focus on illegal immigration, human trafficking, and narcotics smuggling. With these challenges looming, financial institutions must be vigilant and proactive in their efforts to combat illicit activities.