Online marketplaces and virtual currencies have simplified life, making it easier to process transactions across borders and connect individuals from different parts of the world. Unfortunately, criminals such as human traffickers take advantage of online marketplaces for illicit transactions. The anonymity and global reach provided by these technologies reduce the risk of detection typically associated with face-to-face transactions or geographical limitations, making it easier for traffickers to operate undetected. Virtual currencies, in particular, have been used to obscure illegal transactions and activities.
Cryptocurrency and Human Trafficking
Virtual currencies, also known as cryptocurrencies or convertible virtual currencies (CVCs), are increasingly being used in criminal transactions. CVCs are “digital representations of value that are usually not government-issued legal tender.” Between 2017 and 2021, Binance, the world’s largest cryptocurrency exchange, processed transactions totaling an estimated $2.3 billion from hacks, frauds, and illegal drug sales, according to Reuters.
Human trafficking is no different, given its monetary value to traffickers. According to the Nasdaq’s Global Financial Crime Report, $346.7 billion of illicit funds were linked to human trafficking in 2023, but that number is a conservative estimate given how much trafficking goes undetected.
Human traffickers are turning to cryptocurrency to help remain undetected. For example, in November of 2023, Cryptocurrency firm Tether froze $225 million worth of its cryptocurrency, after collaboration with the United States Department of Justice found the funds were linked to a human trafficking group in Southeast Asia.
A February 2024 analysis from the United States’ Financial Crimes Enforcement Network (FinCEN) found “an increase in Bank Secrecy Act (BSA) reporting associated with the use of convertible virtual currency (CVC) and online child sexual exploitation (OSCE) and human trafficking.” The Bank Secrecy Act requires financial institutions to help U.S. government agencies detect and prevent financial crimes; the analysis indicates there has been a substantial increase in BSA reports from financial institutions related to human trafficking and the use of cryptocurrencies. According to the Financial Crimes Enforcement Network, the total number of trafficking and OSCE BSA reports involving cryptocurrency increased from 336 in 2020 to 1,975 in 2021, and there was also a 23% increase in human trafficking-related BSA reports. FinCEN additionally identified over 1,800 unique bitcoin wallet addresses related to suspected human trafficking offenses.
How Cryptocurrencies Facilitate Crime
The decentralized and fairly unregulated nature of cryptocurrency and blockchain technologies allow criminals to evade law enforcement. The anonymity and connection supplied by online marketplaces and virtual currencies also makes it easier to hide transactions. Anonymous accounts allow criminals to convert funds and obscure money trails, creating complex chains of cryptocurrency transfers to cover their tracks.
Criminals can exploit the anonymity of virtual currencies thanks to:
- Darknet marketplaces, anonymized websites that are only accessible with certain softwares
- Peer-to-Peer (P2P) exchanges, where fiat currencies are exchanged for CVCs
- CVC mixers, which conceal the illicit destination of funds
- CVC kiosks, like ATMs, where individuals can exchange fiat currency for CVCs or vice-versa
All transactions on a public blockchain can be tracked, especially with machine-learning algorithms that can analyze patterns and connect payments to specific wallets. However, law enforcement has a limited ability to detect and track transactions due to privacy technology, users’ noncompliance with anti-money laundering requirements, and locations on the dark web that provide extra anonymity.
Human Trafficking and Cryptocurrency Scams
Cryptocurrency is not only facilitating human trafficking; human trafficking is also facilitating cryptocurrency scams. Especially since the COVID-19 pandemic, when normal revenue streams were stemmed by travel restrictions and many interactions and transactions turned to the internet, not only has human trafficking increased, but trafficking victims have been forced to work as cyber scammers.
The most common scam is known as pig-butchering, in which scammers develop a relationship online with a victim, lure them into a cryptocurrency investment scam, and then clean the account and disappear.
False job advertisements can lure people in search of higher pay, and this was especially the case during the pandemic, when economic desperation made people more susceptible to scams. To facilitate the scams, human trafficking recruiters frame job advertisements to appeal to well-educated, multilingual individuals with technological skills.
Challenges in Preventing Financial Crimes
Countries have issued warnings to their citizens, but these often do not prevent scams; American’s reported losses to scams on social media platforms grew from $42 million in 2017 to $1.2 billion in 2022. The Center for Strategic and International Studies suggests there is a role for social media platforms to help prevent fraudulent recruitment, and as well as a role for app stores because scammers can exploit lax financial technology regulations to create platforms that operate without oversight. However, how exactly to go about this remains a challenge; platforms like Facebook and X (formerly Twitter) use software to report suspicious activity, but are still considered to facilitate crimes like human trafficking.
Still, technology is a tool that can be used against perpetrators. Stop Modern Day Slavery spoke with Elisar Nurmagambetov, cofounder of Consilienz (now Black Ice AI), a software company that uses data analysis to combat illicit financial crimes, including human trafficking. Organizations like the Anti-Human Trafficking Initiative also shine a light on dark and illicit industry practices within the global economy through financial data analysis. Stop Modern Day Slavery has many additional informational resources to educate yourself on the human trafficking risks that still exist.
Originally from New Jersey, Corinne has always loved learning about different cultures and her family’s ancestral roots across Europe. She earned her Bachelors in International Studies at the College of New Jersey and recently received her Masters in International Relations in Madrid. She currently works for an international organization at the UN in New York, and hopes to continue working on important global issues and their intersections with gender equality. In her free time, Corinne is likely to be on a hiking trail, at the gym, in the kitchen baking and listening to music, or on the couch with a good book.