Convertible Virtual Currency is being Used for Child Abuse and Human Trafficking – Reveals FinCEN

Financial Crimes Enforcement Network (FinCEN) under the US Department of Treasury has released a ‘Financial Trends Analysis’ Report based on Bank Secrecy Act (BSA) reports submitted from January 2020 to December 2021.  The report reveals a significant increase in BSA reporting associated with the utilization of convertible virtual currencies (CVC) in instances of online child sexual abuse and human trafficking.

Virtual Convertible currency signifies digital currency that can be exchanged with traditional fiat or alternate virtual currencies. Commonly decentralized, these currencies enable a broad spectrum of online transactions, offering user flexibility and streamlined access within the digital realm. Perpetrators potentially exploit the currency’s anonymity and decentralization to conduct illicit transactions, making it challenging for law enforcement to trace their behavior.

While addressing the growing concerns about the potential misuse of convertible virtual currencies, Andrea Gacki, Director of FinCEN reportedly stated,

Human traffickers and perpetrators of related crimes despicably exploit adults and children for financial gain.

Financial institutions bear the responsibility of maintaining alertness and uncovering suspicious activities. Their proactive involvement can support law enforcement in probing potential cases of criminal activities.

Andrea Gacki further emphasized that,

Financial institutions’ vigilance and timely reporting are critical to providing law enforcement agencies with the information needed to investigate potential cases of human trafficking, sexual crimes against children, and related crimes. This reporting ultimately helps law enforcement protect and save innocent lives.

FinCEN initially centered its scrutiny on cryptocurrency transactions linked to human trafficking, however, the analysis of BSA reports revealed the involvement of cryptocurrency in online child sexual abuse (OSCE) and the distribution of child sexual abuse material (CSAM), as per the analysis.

FinCEN has also become a part of the Canadian financial intelligence unit’s Project Protect, a private-public collaboration on human trafficking, as declared by Brian Nelson, Treasury’s Under Secretary for Terrorism and Financial Intelligence, to play its role in combatting human trafficking.

Also read: FinCEN Proposes to Upgrade Transparency in CVC Mixing to Counter Terrorist Financing

Key Findings from the FinCEN’s Analysis

• The total count of OSCE and human trafficking associated with CVC increased notably from 336 to 1975 during the period between 2020 to 2021, marking a substantial surge in human trafficking from 6% to 29%.
• Out of 2311 BSA reports, 2191 reports were submitted regarding child sexual abuse material distribution and human trafficking, making an increase of 95%.
• 2157 BSA reports of 2311, revealed Bitcoin, a decentralized cryptocurrency, as the primary convertible virtual currency used for OSCE and human trafficking.
• FinCEN further highlighted four categories of suspicious transactions related to CVC, OSCE, and human trafficking, including distributed CSAM, peer-to-peer exchange, CVC mixers, and CVC kiosks.

Individuals involved in OSCE exploit children for financial profits and operate not only within the United States but also globally. Likewise, perpetrators of human trafficking target and victimize both children & adults for their illicit pursuits and force them into forced labor, slavery, involuntary servitude, peonage as well as commercial sexual activities.

Unfortunately, human trafficking is the most profitable and violent crime making at least $150 billion every year, globally. As per FinCEN’s analysis, the number of BSA reports regarding CVC links with OSCE and human trafficking reached 2311, exceeding $412 million in suspicious activity reporting.

FinCEN urges everyone to immediately inform law enforcement about suspected child abuse and human trafficking cases.

Also read: Convertible Virtual Currency (CVC) Mixing & Money Laundering