The cash conundrum

Last week I met a woman who runs a charity in Guernsey called GAST – Guernsey Against Sex Trafficking.  Their main aim is to increase awareness in Guernsey of sex trafficking – not least because so many teenagers spend years of relative security and protection in Guernsey and then travel elsewhere and are just not clued up enough to be alert to the signs of trafficking.  And this is dangerous because there are good-looking, charming young men called loverboys who are employed by trafficking groups to cruise student bars and the like, chatting up and grooming vulnerable (perhaps poor, or lacking self-esteem, or just naive) young women.

Anyway, we fell to chatting about the laundering side of the sex trafficking business, and – entirely predictably – this is a predominantly cash business.  In the developed world, we are moving further and further away from cash, and yet still the organised crime groups seem to be able to process huge amounts of it.  I accept that we cannot pull all cash-accepting businesses into the AML family, but all such businesses will of course have relationships with AML-regulated firms, be they banks or law firms or accountants.  So are those AML-regulated firms asking the right questions?  I am told that in Greece it it legal to run a brothel, but only with one prostitute.  What traffickers are doing is taking over legal brothels, populating them with dozens more trafficked women – and then paying the vastly increased cash proceeds into the bank as normal, with the story that the one legal prostitute is extremely busy.  I would say that the cash-accepting bank is not doing its AML job properly, and nor is the brothel’s accountant.  Making sure that cash-intensive businesses are operating at the expected level of cash is a crucial part of the AML effort, and I fear that this basic precaution may have gone out of fashion.

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2 Responses to The cash conundrum

  1. Roy McCarthy says:

    And what is the regulators’ role? We are making little or no progress in denting the problem of human trafficking. Few countries take the issue seriously – the most that happens is that toothless laws are enacted. A prosecution is a rarity. The only effective fighters are not governments or the growing compliance industry but the humanitarian organisations who actually get their hands dirty rather than tick boxes.

  2. Nikki Neal says:

    would agree with Roy – there is this naïve assumption that just because an activity is illegal, then all these law-abiding citizens will simply refrain from whatever naughtiness nanny state is trying to ban. reality is of course that there are certain activities which will inevitably go on, with or without the law-makers’ and law-enforcers’ blessing. so if you make them illegal, they will be conducted underground in an unregulated and untaxed manner. but if they can be in some way legalised in a way that doesn’t “open the floodgates” to wholesale society-wide moral decline, then surely this makes a lot of sense. well, it does to many of our Germanic neighbours, not usually associated with such red-blooded pastimes (give or take the odd tennis-playing broom-cupboard pleasure-seeker, I guess)…

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