U.S. GOVERNMENT PUBLISHING OFFICE

31–327 PDF WASHINGTON : 2018

FOLLOWING THE MONEY: 

HOW HUMAN TRAFFICKERS 

EXPLOIT U.S. FINANCIAL MARKETS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT 

AND INVESTIGATIONS 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

SECOND SESSION 

JANUARY 30, 2018 

Printed for the use of the Committee on Financial Services 

Serial No. 115–71 

( 

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(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

JEB HENSARLING, Texas, Chairman 

PATRICK T. MCHENRY, North Carolina, 

Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

STEVE STIVERS, Ohio 

RANDY HULTGREN, Illinois 

DENNIS A. ROSS, Florida 

ROBERT PITTENGER, North Carolina 

ANN WAGNER, Missouri 

ANDY BARR, Kentucky 

KEITH J. ROTHFUS, Pennsylvania 

LUKE MESSER, Indiana 

SCOTT TIPTON, Colorado 

ROGER WILLIAMS, Texas 

BRUCE POLIQUIN, Maine 

MIA LOVE, Utah 

FRENCH HILL, Arkansas 

TOM EMMER, Minnesota 

LEE M. ZELDIN, New York 

DAVID A. TROTT, Michigan 

BARRY LOUDERMILK, Georgia 

ALEXANDER X. MOONEY, West Virginia 

THOMAS MACARTHUR, New Jersey 

WARREN DAVIDSON, Ohio 

TED BUDD, North Carolina 

DAVID KUSTOFF, Tennessee 

CLAUDIA TENNEY, New York 

TREY HOLLINGSWORTH, Indiana 

MAXINE WATERS, California, Ranking 

Member 

CAROLYN B. MALONEY, New York 

NYDIA M. VELA ́ ZQUEZ, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JAMES A. HIMES, Connecticut 

BILL FOSTER, Illinois 

DANIEL T. KILDEE, Michigan 

JOHN K. DELANEY, Maryland 

KYRSTEN SINEMA, Arizona 

JOYCE BEATTY, Ohio 

DENNY HECK, Washington 

JUAN VARGAS, California 

JOSH GOTTHEIMER, New Jersey 

VICENTE GONZALEZ, Texas 

CHARLIE CRIST, Florida 

RUBEN KIHUEN, Nevada 

SHANNON MCGAHN, Staff Director 

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(III) 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

ANN WAGNER, Missouri, Chairwoman 

SCOTT TIPTON, Colorado, Vice Chairman 

PETER T. KING, New York 

PATRICK T. MCHENRY, North Carolina 

DENNIS A. ROSS, Florida 

LUKE MESSER, Indiana 

LEE M. ZELDIN, New York 

DAVID A. TROTT, Michigan 

BARRY LOUDERMILK, Georgia 

DAVID KUSTOFF, Tennessee 

CLAUDIA TENNEY, New York 

TREY HOLLINGSWORTH, Indiana 

AL GREEN, Texas, Ranking Member 

KEITH ELLISON, Minnesota 

EMANUEL CLEAVER, Missouri 

JOYCE BEATTY, Ohio 

MICHAEL E. CAPUANO, Massachusetts 

GWEN MOORE, Wisconsin 

JOSH GOTTHEIMER, New Jersey 

VICENTE GONZALEZ, Texas 

CHARLIE CRIST, Florida 

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(V) 

C O N T E N T S 

Page 

Hearing held on: 

January 30, 2018 .............................................................................................. 1 

Appendix: 

January 30, 2018 .............................................................................................. 27 

WITNESSES 

TUESDAY, JANUARY 30, 2018 

Banafa, Bassem, Financial Forensics Consultant, Bassem Banafa, LLC ........... 11 

Frundt, Tina, Founder and Director, Courtney’s House ...................................... 9 

Shelley, Louise I., Founder and Director, Terrorism, Transnational Crime 

and Corruption Center, George Mason University ........................................... 7 

Vance Jr., Hon. Cyrus R., District Attorney, New York County, District Attorney’s Office ............................................................................................................ 6 

APPENDIX 

Prepared Statements: 

Banafa, Bassem ................................................................................................ 28 

Frundt, Tina ...................................................................................................... 36 

Shelley, Louise I. .............................................................................................. 39 

Vance Jr., Hon. Cyrus R. ................................................................................. 46 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Green, Hon. Al: 

Statement for the record from Christina Bain ............................................... 54 

Statement for the record from Children at Risk ............................................ 55 

Statement for the record from the Mayor of Houston ................................... 57 

Statement for the record from Project Girls ................................................... 59 

Statement for the record from The Landing .................................................. 60 

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FOLLOWING THE MONEY: 

HOW HUMAN TRAFFICKERS 

EXPLOIT U.S. FINANCIAL MARKETS 

Tuesday, January 30, 2018 

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON OVERSIGHT

AND INVESTIGATIONS, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 2:04 p.m., in room 

2128, Rayburn House Office Building, Hon. Ann Wagner [chairwoman of the subcommittee] presiding. 

Present: Representatives Wagner, Tipton, Ross, Zeldin, Trott, 

Loudermilk, Kustoff, Tenney, Hensarling, Green, Cleaver, Beatty, 

Moore, and Gottheimer. 

Also present: Representative Davidson. 

Chairwoman WAGNER. The subcommittee on Oversight and Investigations will come to order. Today’s hearing is entitled ‘‘Following the Money: How Human Traffickers Exploit U.S. Financial 

Markets.’’ Without objection, the Chair is authorized to declare a 

recess of the subcommittee at any time and without objection, all 

members will have 5 legislative days within which to submit extraneous materials to the Chair for inclusion in the record. 

Without objection, members of the full committee who are not 

members of the subcommittee may participate in today’s hearing 

for the purpose of making an opening statement and questioning 

the witnesses. The Chair now recognizes herself for 5 minutes for 

an opening statement. 

One the biggest problems confronting our Government today is 

combating the pure evil of human trafficking, particularly trafficking for sexual exploitation. To say that human trafficking is a 

massive problem is to engage in gross understatement. 

According to a September 2017 report from the International 

Labor Organization, it is estimated that 40.3 million people were 

victims of human trafficking in 2016 alone. There is a reason for 

this explosive growth. 

Human trafficking is an immensely profitable crime. Profits are estimated at $150 billion a year including $99 billion from the commercial sex exploitation. Moreover, compared to other popular 

crimes like drug trafficking, human trafficking requires very little 

investment, thus, making it a minimal risk and a high reward endeavor. 

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As with any large multinational criminal enterprise, the life 

blood of human trafficking is the ability to transfer money. If the 

traffickers are unable to move their ill-gotten proceeds or to purchase ads to traffic victims on sites such as Backpage or The Erotic 

Review, their schemes fail. 

Today, Congress has not devoted sufficient attention to the vitally important question of how do we ensure that our financial 

markets are not being exploited by these traffickers. That changes 

with this hearing today, which is the opening step of the committee’s bipartisan investigation into this important issue. 

From the testimonies you will hear today, our witnesses will 

make it clear it is time for the U.S. Government and Congress to 

get serious about combating human traffickers’ exploitation of our 

financial system. It is important to note what this hearing is not 

about. 

This hearing is not about prescribing solutions. It is about gathering information to allow all the relevant stakeholders to work together to ensure that this country has a comprehensive plan in 

place to prevent the exploitation of our financial systems. I am particularly excited to hear the testimony of our distinguished panel 

of witnesses as they touch on new financial products that may be 

outside the reach of regulations or even regulators’ traditional surveillance tools. 

For example, we will hear that while money has historically been 

transmitted using remittance services and funnel accounts, the use 

of prepaid cards and cryptocurrencies creates an unforeseen challenge for financial regulators. It is not just Congress who needs to 

learn more about these issues. While law enforcement agencies are 

on the frontlines doing excellent work in this area, it is a massive 

undertaking. In enforcement, in briefings with committee staff, law 

enforcement has candidly admitted that they need to gather more 

information about these new trends, and in some cases have indicated they may lack existing authority to do so. 

It is vital that we learn more about these areas to craft solutions 

to address human trafficking exploitation of our financial systems 

that are not only effective but are also appropriately tailored. 

On a personal note, many of my colleagues here know that I 

have worked tirelessly to put an end to online sex trafficking. My 

bill, the Allow States and Victims to Fight Online Sex Trafficking 

Act, would clarify that websites like Backpage that advertise sex 

trafficking can be held accountable under Federal and State law. 

Although Backpage gets the majority of the headlines, you will 

hear today about many, many other sites that appear to follow the 

same business model. 

I look forward to hearing all of your testimony this afternoon, 

and I also look forward to working with my friends on the other 

side of the aisle to thoroughly investigate this bipartisan issue. 

With that, I yield back the balance of my time. I would now like 

to recognize the gentleman from Texas, Mr. Green, the Ranking 

Member, for 5 minutes. 

Mr. GREEN. Thank you, Madam Chair. I thank the witnesses for 

appearing and I am grateful to this effort that we are endeavoring 

to take up. It is bipartisan and it is an opportunity for us to demonstrate that, when it comes to the sins associated with sex trafmcarroll on FSR431 with DISTILLER

3 

ficking, there is very little daylight in between us, that we plan to 

work together for the betterment of people who are victims. 

I would like to indicate that sex trafficking is a very polite term. 

It is a term that does not embrace all of what happens. It is a term 

that is used in polite society, but what it really means is kidnapping. The literal taking of children from their parents. Taking them 

across State lines, across international boundaries. 

It is a term that would in some circles be called sexual assault, 

rape, and that can too often lead to the taking of life. Many victims 

of sex trafficking end up with their lives being lost. This hearing 

is absolutely timely in the sense that Dr. King reminds us that the 

time is always ripe, R-I-P-E, to do that which is right. 

We are doing that which is right today. In so doing, I think that 

we should let the persons who are victims know that they are not 

alone, that we have not only the Congress of the United States 

very much interested in what is going on, but also I would like to 

just mention that in my city, the city of Houston, the mayor has 

a letter that I will ask we receive into the record by unanimous 

consent. 

Our mayor is focusing on raising awareness, focusing on coordinating services to engage in direct outreach, focusing on becoming 

a national model. Also, we have PG, Project Girls. This is an institution, an organization, if you will, that is made up of survivors 

who are actually helping others to survive. Another letter for the 

record. 

Another letter would include the Children at Risk. This is a program that started in 2014 and they have the effort on to combat 

sex trafficking by focusing on the demand for commercial sex. Finally, I would mention The Landing, another entity that will focus 

on not only eliminating but preventing sex trafficking. 

Chairwoman WAGNER. Without objection. 

Mr. GREEN. Thank you, Madam Chair. This sex trafficking is 

metamorphosing in the sense that the means, the methodology by 

which compensation is being received is changing. It is changing 

from what we might consider a traditional means of making payment, credit cards or cash. 

Credit cards in the sense that you can buy the prepaid cards 

more appropriately stated. It is moving from these means that we 

have some degree of knowledge as to how we can manage and trace 

to the cyber area into what we—one company is known to have the 

label bitcoin. 

We are looking at the cryptocurrency, and this is much harder 

to trace, much harder to understand how the movements are taking place. People have the ability in cryptocurrency of transferring 

money from one to the next without the trail that we are customarily looking for. We have to change our strategy. We have to metamorphose along with those who are performing these dastardly 

deeds. 

It is important for us as we do this to make sure that we include 

those persons who have been made victims. It is important to hear 

from people who can give us firsthand information and a firsthand 

understanding of how all of this transpires. I appreciate all of the 

professionals who are here and I look forward to hearing from all 

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of you, especially one person today who is going to be able to share 

information based upon experience. 

Not an experience that is pleasant, not an experience that we celebrate, but an experience that can be beneficial to those of us who 

desire to legislate in an effective way so as to not only reduce sex 

trafficking, but to eliminate it. It ought to be wiped off the face of 

the earth. I pledge to work with the Chairwoman and all others of 

goodwill to see that it is done. I yield back. 

Chairwoman WAGNER. Gentleman yields back. I thank the Ranking Member for his opening statement. I would now like to recognize the gentlelady from New York, Ms. Tenney, for 1 minute for 

an opening statement. 

Ms. TENNEY. Thank you, Chairwoman Wagner. Human trafficking is a modern day form of slavery that affects millions of people around the world each year. The victims of human trafficking 

are forced to engage in commercial sex or labor by traffickers who 

hold them often through threats of violence and other hostile 

means. 

According to UNICEF, there are nearly 21 million human trafficking victims worldwide, 55 percent of whom are women and 

girls. It is tragic to know that this atrocious crime against humanity is actually happening here in the U.S. 

As a multibillion dollar industry, traffickers will employ extreme 

measures to exploit the most vulnerable in our societies for profit. 

It is important that we study the new trends and the methodologies used by human traffickers in the financial systems so that we 

can develop effective methods to combat this terrible scourge on 

humanity. 

As a member of the New York State Assembly, I championed a 

number of issues to provide protections for victims of human trafficking. I was an original co-sponsor of the Trafficking Victims Protection and Justice Act, a bipartisan measure that was put in place 

while I was a member of the State Assembly. 

I am also glad to sponsor and I am proud to sponsor a number 

of other human trafficking initiatives that are currently introduced 

or will be introduced in the House. I just want to thank the Chairwoman for having this very important hearing on something that 

many Americans don’t realize is happening right here. 

I want to thank the panel for being here today for this very important hearing on a really important topic. I just want to say 

thanks for your expertise and for enlightening us on this issue, this 

very important issue that many Americans don’t realize is happening right here. Thanks so much and I yield back. 

Chairwoman WAGNER. Gentlelady yields back. Indeed, modernday sex slavery is hiding in plain sight. I now am also pleased to 

recognize the gentlelady from New York once again, Ms. Tenney, 

to introduce today’s first witness. 

Ms. TENNEY. Thank you, Chairman Wagner. It is my honor today 

to introduce New York District Attorney, the Honorable Cyrus 

Vance, Jr. Though District Attorney Vance has many, I would like 

to highlight many, many achievements, especially I would like to 

highlight today that he has recovered nearly $12 billion in the 

course of settlements with nine banks that violated U.S. sanctions 

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5 

and expanding the human trafficking program into the human trafficking response unit. 

As an attorney and a fellow New Yorker, I appreciate the time 

that you have put into your job to fulfill your duties and to serve 

the great State of New York. We are honored and looking forward 

to your testimony. Thank you so much for being here with us 

today. 

Chairwoman WAGNER. I thank Ms. Tenney for her introduction 

of our first witness, who I have had the great pleasure of interacting with at the Manhattan District Attorney’s Office with his 

fantastic staff that has been instrumental in helping us as we move 

forward in some of the legislation that we are pursuing in this committee and beyond. 

I would now like to introduce our next witness, Dr. Louise Shelley. Dr. Louise Shelley is the Founder and Director of the Terrorism Transnational Crime and Corruption Center at George 

Mason University. Dr. Shelley is a leading expert on the relationship among terrorism, organized crime and corruption, as well as 

human trafficking. 

She received her undergraduate degree from Cornell University 

and Masters in Criminology from the University of Pennsylvania. 

The Chair now recognizes the gentleman from Texas, the Ranking 

Member, Mr. Green, to introduce our next witness. 

Mr. GREEN. Thank you, Madam Chair. Madam Chair, I have the 

honor of introducing Ms. Tina Frundt. She is a leading figure in 

the crusade to help children sexually exploited for commercial purposes. Ms. Frundt is a survivor of domestic trafficking and dedicates her life to helping women and children heal from domestic 

sex trafficking and commercial sex exploitation. 

She also trains law enforcement and other nonprofit groups to 

help and provide resources to victims. She is a member of the 

Washington, D.C. Anti-Trafficking Taskforce and the Prince 

George’s County Human Trafficking Taskforce. 

In 2010, she was awarded the Frederick Douglas Award. The 

award is given to an individual who has survived slavery and is 

using their life and freedom to help others. In December 2015, Tina 

was named to the United States Advisory Council on Human Trafficking by President Barack Obama. 

Chairwoman WAGNER. I thank the Ranking Member. It is now 

my pleasure to introduce our final witness, Mr. Bassem Banafa. 

Mr. Bassem Banafa is a forensic accountant who provides consulting services and expert witness testimony on civil and criminal 

matters nationwide. 

Of note, Mr. Banafa has assisted attorneys and investigators in 

complex cases involving human trafficking, drug trafficking, money 

laundering, cyber crime, large-scale fraud, and organized crime. 

Mr. Banafa received his BSC in Accounting from Santa Clara University. 

Without objection, the witnesses’ written statements, will be 

made part of the record and recorded after and following their remarks. I welcome all of you. Once the witnesses have finished presenting their testimony, each member of the subcommittee will 

have 5 minutes within which to ask questions. 

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On your table, there are 3 lights. Green means go, yellow means 

you have 1 minute left, and red means your time is up. With that, 

again, welcome to all of you and I would like to ask District Attorney Vance to be recognized for 5 minutes. 

STATEMENT OF HON. CYRUS VANCE, JR. 

Mr. VANCE. Thank you and good afternoon, Representative Wagner and Ranking Member Green. I am very honored to be asked 

to speak before the committee. Thank you, Representative Tenney, 

for your kind introduction and for the service that you provided as 

a State legislator and now at the Federal level. I am joined today 

by my colleague and friend, Carolina Holderness, who runs our sex 

trafficking unit at the Manhattan DA’s Office. 

My written testimony details steps that our office is taking to address the increasingly complex world of human trafficking as well 

as the roadblocks that we face in our investigations. Some of the 

key challenges we face are those that have already been mentioned 

in the opening statements. They relate to obtaining financial data 

in an increasingly intricate global economy. Now, we are working 

closely with banks and financial institutions and money service 

providers to identify trafficking victims and activity and these partnerships have had tremendous impact on our work. 

For example, we have seen traffickers use social media to recruit 

young teenagers from rural areas all over the country. To bring 

these children to Manhattan, the traffickers wire money to purchase bus tickets. Money remittance services such as Western 

Union have worked with us to place alerts on sex traffickers so 

that we can trace where the money is being sent and intercept it 

before a child is victimized. Companies like Western Union, 

PayPal, and Venmo have been hugely helpful to our investigative 

efforts. 

However, traffickers are now turning to alternative methods of 

payment that were alluded to earlier, that allow them to remain 

anonymous, such as prepaid gift cards and cryptocurrencies. Individuals are using these prepaid gift cards to register trafficking 

websites, obtain cryptocurrency, and purchase sex. In one case 

from my office, someone used a Visa Vanilla Gift Card to anonymously register an escort website on GoDaddy. We are also seeing 

cryptocurrencies being used by traffickers to purchase advertisements and by sex buyers to purchase premium memberships on review board websites. 

This trend is driven by the fact that mainstream credit card companies are refusing to do business with sites such as Backpage. Before the rise of cryptocurrencies, many of these sites had been relegated to using other money processors that charge steep fees. 

Now, some members of the cryptocurrency community are specifically catering to traffickers who post advertisements on Backpage 

and other sites. Paxful, which is a peer-to-peer marketplace where 

users can exchange gift cards for bitcoin, explicitly publishes 

YouTube videos laying out step-by-step instructions for turning 

these cards into cryptocurrencies to pay for Backpage ads. 

I understand that the recent explosion in the use of 

cryptocurrencies is a complicated issue. I really understand that 

and it is a complicated problem that you are going to sort through. 

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But I hope that your efforts will continue to be forceful, and we 

look forward as law enforcement to collaborating with you in your 

examination of potential legislative and regulatory solutions. 

Obtaining financial data on financial transactions can be challenging also because of our country’s lax incorporation laws, which 

make it easy for traffickers and other criminals to hide behind 

anonymous shell companies. In many of our investigations, we find 

evidence of illicit activity but we don’t know who is behind the activity because the criminal is using layers of shell companies to 

hide his or her identity. 

There is a bill currently pending in Congress that addresses this 

issue, the Corporate Transparency Act, which would require companies to disclose their true beneficial owners so that individuals 

running human trafficking rings cannot hide behind shell companies. On behalf of the Manhattan DA’s Office and I believe speaking for law enforcement generally, we urge the Congress to pass 

this act. 

Finally, I would like to acknowledge one of the other challenges 

that we have faced in our investigations and that is the rise of the 

use of encryption, particularly on smartphone devices. I know this 

is a politically charged issue, but I really want to tell you that since 

2014 when Apple and Google moved to what is called default device 

encryption to the extent that, for example, Apple can no longer 

open its devices in order to comply with search warrants, this has 

confronted law enforcement with a real challenge. Everyone in this 

room probably uses their cell phone for every purpose in their life 

now. The same goes for criminals. They have moved off paper and 

they are conducting their businesses on the Internet online and 

using their mobile devices. 

The inability, on behalf of law enforcement, to access the content 

of those machines is affecting our ability to bring cases in sex trafficking and a whole range of other crimes. I know as you look forward to your task, we look forward and stand ready to help in any 

way we can, Chairwoman. 

[The prepared statement of Mr. Vance can be found on page 46 

of the appendix.] 

Chairwoman WAGNER. I thank the District Attorney Cy Vance 

for your testimony and we have had lengthy conversations here 

about encryption and it is something that we certainly will be looking into in the future. I thank you for your testimony. I would now 

like to ask Dr. Shelley to please be recognized for 5 minutes to give 

her testimony. Dr. Shelley. 

STATEMENT OF LOUISE SHELLEY 

Dr. SHELLEY. Thank you, Madam Chair, Ranking Member Green, 

and members of the subcommittee for this opportunity to testify. 

It is a great honor, I think you have taken on an absolutely core 

means to address human trafficking, because human trafficking 

leaves important financial traces that we are not using well enough 

in our pursuit of this egregious crime. 

Like the other speakers, I have identified the movement of 

human trafficking online into less visible locales, but I think it is 

also important to note that human trafficking is increasingly converging with the opioid epidemic. Victims are being trapped by 

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opioids and people who are using opioids are becoming victims of 

human trafficking. 

Therefore, as we develop measures to help locate human trafficking, we may also be making an enormous impact on the opioid 

epidemic. One of the things that I have found in my research that 

follows what was going on several years ago is that we are not 

doing enough of what I would call creative data mining of the financial records of banking institutions. 

I was very fortunate to speak to some bankers who are at the 

absolute forefront of this, who are what I would call alumni of JP 

Morgan’s initial program that very cleverly found human trafficking in a way that does not harm the victims and is not as sensitive to some of the problems that Mr. Vance just identified. 

What this requires is a proactive way of mining the financial 

data of banking institutions. That is, combining investigative techniques, patterns of human trafficking that are constantly changing 

but can be learned from law enforcement and translating them into 

algorithms that can be then used to mine data. 

When this is best done, one can be changing your success in finding human trafficking from a 15 percent rate if you are just reporting suspicious financial transactions through SARs (suspicious activity reports) to as high as an 85 percent rate if you are using and 

combining the best data analytics and the patterns gained from social science. 

Key to this is public-private partnerships which are already existing and they need expansion just as was laid out by the first witness, who explained the absolute need for this. But at the moment, 

we have too much pressure being placed on the banking community 

to do reactive ways of finding human trafficking through traces of 

what might be a suspicious transaction, as opposed to the more creative methods of going through huge bodies of data and actually 

finding the needle in the haystack. 

This is being done now by some of the most creative bankers during the Super Bowl and I can’t say too much publicly but it is very, 

very promising in looking for these traces when the ads for human 

trafficking increase, as I put in my testimony, 4 to 5 times at the 

time that you have a Super Bowl. 

Nowhere in the banking community did I find the use of textbased analysis, which is a very, very profitable tool to analyze large 

amounts of data. If this were combined with the type of numerical 

data analysis that is now being used by some of the most proactive 

banks, we could be making much more headway in this area. 

We need to be as flexible and innovative in using new techniques 

of data analysis to address this issue as the human traffickers are 

using in going online. Therefore, I think that we need to be focusing on this as legislation 2219 talks about, identifying the best 

practices in the field. This includes data analysis, beneficial ownership, related to real estate as I talk about in a prominent case from 

North Carolina, from Congressman Pittenger’s district, and also 

ways of implementing and encouraging exchanges of best practices. 

There is much that can be done and there are many sophisticated people with technological expertise that can help us. Therefore, I think we need to be restructuring how we praise and reward 

the banking community for being innovative and not tying them 

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down to measures that are not the most effective in addressing the 

problem. Thank you. 

[The prepared statement of Ms. Shelley can be found on page 39 

of the appendix.] 

Chairwoman WAGNER. Thank you, Dr. Shelley, for your testimony. It is now my pleasure to recognize Ms. Frundt, who is here 

on behalf of our victim’s community and is the founder of 

Courtney’s House. It has been wonderful to collaborate with you 

over time. You are recognized, Ms. Frundt, for 5 minutes for your 

opening statement. 

STATEMENT OF TINA FRUNDT 

Ms. FRUNDT. Thank you. Madam Chair, Ranking Member Green, 

thank you so much for that wonderful introduction, and members 

of the subcommittee, thank you for the opportunity to testify before 

the Subcommittee on Oversight and Investigations. 

My name is Tina Frundt and I am Executive Director and 

Founder of Courtney’s House. Courtney’s House is based in Washington, D.C. and provides direct services to both males and females 

of sex trafficking between the ages of 11 and 21. Our current caseload is more like 13 to 19 years old. 

I currently sit on the White House Advisory Council on Human 

Trafficking and serve as Co-chair of the Rule of Law Committee, 

which is responsible for developing a uniform set of investigative 

protocols for all Federal law enforcement agencies. I have extensive 

experience providing expert witness testimony in Federal and local 

trials on human trafficking. Since Courtney’s House’s inception, we 

have helped over a thousand survivors exit their trafficking situation. I have previously spoken at many hearings in respect to sex 

trafficking. I am also a survivor of child sex trafficking, so my perspective today is going to be a lot different. 

Sex trafficking is something that I not only experienced firsthand 

for over 20 years but also in my daily work as a service provider 

for sex trafficked youth. The population I serve can speak directly 

about what goes on today on the financial side of sex trafficking 

along effects of not just emotional and physical trauma but along 

financial insecurity. 

I really want to focus on that I have a very young population, 

and I say that because of having a very young population, trafficking trends change all the time. You have to be updated on the 

changes all the time on the ground. My testimony will not only 

touch on what happened to me but the importance of increasing 

the effectiveness of the financial industry. 

Passage of H.R. 2219 to increase the role of the financial industry in combating human trafficking will provide an important step 

in the right direction, but we have to make sure that we cover everything. 

When I was 13–1/2 I met a man that was 15 years older than 

me. During my trafficking situation, I survived manipulation, torture, and mental abuse, but due to time, I will focus my remarks 

today on the longstanding financial insecurity and financial abuse 

I experienced firsthand of my trafficking experience. 

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Most of my population once again is under the age of 19 and 

were sold on Instagram, Facebook, Snapchat, and Tagged, especially our boys who are sold on Tagged. 

There are a few ways survivors are recruited on social media; 

through Facebook Live and Instagram Live, where they are actually sold and auctioned on Live. Facebook and Instagram Live now 

are used heavily to sell survivors because you can screen, you can 

allow for your friend and private groups, and then you can use 

some of these methods to boost your population and pay to boost 

it throughout Facebook. 

Additionally pimps and traffickers use this boost to feature and 

promote private groups of pimps and traffickers to recruit young 

girls and to sell them on Live. Survivors who are referred to 

Courtney’s House who are minors are sold on social media. Traffickers are moving away from Backpage and recruiting children 

and youth on social media. 

Since January 2017, 100 percent of all of our survivors were sold 

on the following mechanisms I said which was Facebook, 

Instagram, Tagged. This is very important and I keep saying how 

old they were. It is important that they were 14 to 15 because they 

can’t own things in their names yet unless someone steals all their 

information to do so. 

Street, online, hotel, and motels, it is a popular misconception 

that trafficking does not occur on the street. If this were true traffickers would miss a population of buyers who still prefer to buy 

sex on the street. I don’t think we actually think of traffickers as 

business people because that is not even a good business model. 

You will sell your product everywhere because you would maneuver 

that everywhere to hide your money. 

I think that it is hard for people to see and understand streetbased sex trafficking. Most traffickers do not have one person they 

sell. Like any good business person, pimps, and traffickers focus on 

many avenues to increase their weekly profits; children and youth 

are placed on the street but they are also placed at the same time 

in hotels, motels, strip clubs, online, and private homes. Children 

and youth are forced on the street throughout the time. 

Survivors who are 13 and 15 are advertised online. Now you may 

ask me how they are advertised in these open markets. When you 

are a trafficker and you are a U.S. citizen you do hand over all of 

your bank information. Yes, children who may get a monthly income every month and it is put on a bank card. When you are with 

a trafficker, you actually have to hand over your own banking information as well, your Social Security Card, your SSI, your Government benefits, your food stamps, all gets handed over to them. 

That brings this back to me, and why this is an important issue 

to survivors. When I was 14, I had property in my name. I had cars 

in my name. Of course I didn’t find this out until my late 20’s when 

I was homeless and trying to apply for programs and transitional 

housing programs and rental assistance programs, which I was not 

able to get because my credit was bad, so I got approved but I can’t 

get assistance because the realtors and the renters won’t accept me 

because my credit was bad and stolen. 

There were no laws for protecting victims’ credit, there still really isn’t. It took me many years to prove my identity, many years 

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to ask about laws that weren’t even on the book yet to clear anything. It took me 5 to 8 years to clear up anything. You had to 

prove the trafficking situation. I had to help write policy to change 

their perspective. 

I have actually never spoken out about my financial issues before 

today due to my sex trafficking situation. Working through your 

trauma is one thing, but repairing your credit fraud and your financial footprint will take a lifetime. It follows you throughout 

your time. It stops you and prevents you from moving on. 

Thank you all so much for your time. I would be ready and willing to answer any questions. 

[The prepared statement of Ms. Frundt can be found on page 36 

of the appendix.] 

Chairwoman WAGNER. Thank you, Ms. Frundt, very much for 

your testimony. 

We have looked at Vacator legislation and laws but I guess I 

have never really taken into account the difficulties with credit 

scores and such too. I appreciate your testimony very, very much. 

Mr. Banafa, you are now recognized for 5 minutes. 

STATEMENT OF BASSEM BANAFA 

Mr. BANAFA. Madam Chair, Ranking Member Green, and members of this subcommittee thank you for the opportunity to testify 

before the Subcommittee on Oversight and Investigations today. 

My name is Bassem Banafa. I am a Financial Forensics consultant at my own firm Bassem Banafa, LLC and for PlainSite, an organization that works on legal transparency. 

I was previously a forensic accountant with the Contra Costa 

County District Attorney’s Office in California where I personally 

reviewed and analyzed tens of millions of dollars in transactions 

conducted by human trafficking organizations. I also worked at 

Wells Fargo in the Financial Institution Investigations Group, 

which was tasked with investigating other financial institutions 

that may have been compromised by criminal organizations that 

were processing transactions through Wells Fargo. 

Prior to that I worked at TM Financial Forensics, LLC, another 

consulting firm where I worked on disputes that involved tens of 

billions of dollars in losses between financial institutions that had 

processed transactions for each other and failed to conduct sufficient due diligence to prevent those same losses. 

I was asked to provide the Committee with an assessment as to 

how financial institutions monitor, review, and verify depository relationships with payment processors. There are five ways that a financial institution can engage a payment processor. One, engaging 

a third party to process automated clearing house transactions 

which are bank to bank transactions, and bank account to bank account transactions. Two, engaging a third party to process payment 

card transactions such as Visa and Mastercard. Three, engaging a 

money services business to process transactions that we are all familiar with: Wire transfers or credit card transfers. Four, engaging 

a money services business to process alternative payment methods 

such as cryptocurrency or gift card transactions. Five, engaging another financial institution that may itself process those transactions for payment processors. 

mcarroll on FSR431 with DISTILLER

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To support my analysis of financial institutions overseeing these 

payment processors, I looked at four websites and their payment 

methods. These four websites are associated with the commercial 

sex trade and these are the payment methods currently available 

to users wishing to engage with those websites. 

One in particular that I will go over is the Erotic Review, which 

allows users to provide extensive, detailed reviews of their participation in commercial sex. This includes measurements of the victim that they purchased, the ambiance of the situation where they 

engaged in the act, and a detailed description of the acts that were 

purchased. 

This site allows users to purchase access to these reviews 

through U.S. financial institutions. The cryptocurrency transactions it accepts are processed through a U.S.-based 

cryptocurrency payment processor. The credit card transactions 

that it accepts are processed through U.S.-based credit card processing companies. The beneficial owners of this website are largely 

located in the United States. The customers of this website are located in the United States. How is this company able—the Erotic 

Review able to accept transactions this way with the current backlash against human trafficking? 

In my written testimony I went over the various methods that 

a financial institution may use to review the activity at a payment 

processor and why this may not have succeeded in preventing the 

Erotic Review from accessing U.S. financial markets. In particular 

there is a problem with the way that we engage financial institutions and ask them to prevent money laundering. 

The Erotic Review uses a Cyprus-based shell company to accept 

these transactions. Because this company is based in Cyprus, 

through a chain of shell companies that are also based in Cyprus, 

that are in Anguilla, that are in Amsterdam, the Erotic Review is 

able to evade many anti-money laundering structures. Because 

there are limited incentives for financial institutions to invest more 

in detecting this type of evasion, the Erotic Review is able to accept 

these payments. 

I concluded my written testimony by asking members of the subcommittee to consider that law enforcement needs to be able to 

pursue these transactions wherever they occur, in the United 

States or abroad. The way to do it is to understand how these financial institutions work. As they have grown to accept 

cryptocurrency and other payments their internal structures have 

become increasingly complex and it has become difficult to identify 

what it is that a law enforcement officer needs to subpoena or get 

a search warrant for. That is where I believe we need to enhance 

our knowledge and ability, when pursuing that information within 

financial institutions. 

Thank you. 

[The prepared statement of Mr. Banafa can be found on page 28 

of the appendix.] 

Chairwoman WAGNER. Thank you, Mr. Banafa, very much for 

your testimony. 

I will inform members of the committee that votes have been 

called. I am going to attempt to get through my questions here 

first. We will absolutely convene again, if they have called them 

mcarroll on FSR431 with DISTILLER

13 

early, I thought they were going to be closer to 3:15 to 3:30, but 

I am going to try to get through my questions and we will come 

back immediately following votes and resume the hearing. 

With that, District Attorney Vance, I am going to start with you. 

In your testimony you noted that more and more banks and credit 

card companies refuse to do business with those who facilitate sex 

trafficking and as a result have turned to prepaid gift cards. 

Can you go into greater detail on how the shift from more, what 

I call, traditional methods such as wire transfers or credit cards 

has changed the playing field for your office and how difficult is it 

to find out where the money is coming from and how difficult does 

it make it to prosecute? 

Mr. VANCE. Madam Chair, we had the opportunity to talk briefly 

before the hearing today and I described to you the difference between anonymity or my sense of the difference between anonymity 

and privacy. 

All of us obviously have a constitutional right to privacy. I think 

we are all jealously guarding that. I am not sure the Constitution 

has given us the right to be anonymous in defense of investigations 

by law enforcement. To answer your question, gift cards that can 

be purchased with cash and that have no way to identify who is 

the purchaser are then being accepted by sites such as Backpage 

in order to advertise prostitution and sex trafficking. I think that 

is a typical example of how the use of technology and anonymity 

provided by cards makes it very difficult for anyone to be able to 

identify who is actually the person who purchased the site, the advertisement on the site. 

Chairwoman WAGNER. Thank you, Mr. Banafa. 

I appreciated your testimony about Erotic Review. It’s abhorrent, 

absolutely abhorrent. I had the displeasure of viewing it for the 

first time in the Manhattan DA’s office and some of their reviews. 

It is the first time I had been exposed to this review site. 

But following up on the question to the District Attorney we 

know that major credit card companies won’t process payments on 

sites like Backpage, but they will accept these cryptocurrencies. In 

fact they often promote this by moving to cryptocurrencies, credit 

card companies are now just one step removed. 

Since I can still use my credit card to purchase a currency like 

bitcoin for instance, how can major payment processors like Visa, 

American Express, and others monitor transactions and help ensure their services aren’t being used to facilitate trafficking? 

Mr. BANAFA. Thank you for the question, Madam Chair. 

This issue, a similar issue, came up several years ago with payment processing for adult websites in general. Visa and Mastercard 

responded to this issue by requiring direct registration of every 

merchant regardless of the payment processor that was being used. 

I would imagine that requiring registration for bitcoin processors 

and enforcing registration at the merchant level for merchants that 

accept bitcoin through processors that are one, two, three levels removed would provide the information necessary to ensure that this 

doesn’t occur. 

Chairwoman WAGNER. Thank you. 

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Ms. Frundt, first, it is an honor to have you here today. You are 

a tremendous spokeswoman for victims of trafficking, and I am so 

grateful for our partnership. 

I know you touched on this in your testimony, but can you elaborate here briefly on the importance of having financial institutions 

work with victims of trafficking to, as you called it, ‘‘fill in the 

gaps’’? 

Ms. FRUNDT. Yes, one of the things that I think that is a gap is 

not having survivors at the table with financial institutions. It 

changes so rapidly that you need to know on the ground what is 

also happening, but also importantly is, when I was trying to clear 

my credit for years, 5 to 8 years, there was nothing on the bank 

websites to tell me anything on how to file this, because it doesn’t 

trickle down to training. 

The person on the 1-800 number answering, you have to go 

through a lot and I stopped for a year because I was frustrated. It 

needs to be accessible to survivors. Even in an investigation process, when your case is being investigated, ask us more financial 

issues, like we will give you this, we will tell you how it happened 

but people aren’t asking the right questions to get the right answers, that is at the 10th step instead of at the very beginning. 

Chairwoman WAGNER. Thank you very much. 

Dr. Shelley, the same question for you, what does your research 

say about the importance of working with victims to stay ahead of 

the criminal enterprises that are always changing their behaviors 

as we are hearing on adapting, what best practices have you identified, ma’am? 

Dr. SHELLEY. I think that it is important not only to have the 

victims but unfortunately within trafficking organizations their 

bookkeepers and financial participants and they also need to be 

interviewed, because they can help you find the traces and the patterns that you are looking for. 

For example, 8 years ago one of the key ways of finding human 

trafficking was charging to nail salons. That is not a key element 

of how you find human trafficking today. There are many more elements that are being used in terms of payment systems that trafficking victims use for their transport, to be not too specific. 

But by sitting down with people who are constantly in the process of running a business or being exploited, they know how these 

patterns work. That is what you need because all these patterns 

leave traces of financial data, and they can help construct the algorithms that then find the human trafficking organizations without 

putting the victims in jeopardy. 

Chairwoman WAGNER. Thank you, Dr. Shelley. 

Sadly, we are going to have to hang on here, and I ask your indulgence while we run to vote. We have two votes, folks. We will 

reconvene right afterwards. 

The Subcommittee on Oversight and Investigations now stands 

in recess. 

[Recess.] 

Chairwoman WAGNER. The Subcommittee on Oversight and Investigations will come to order. 

The Chair now recognizes the gentlelady from Wisconsin, Ms. 

Gwen Moore for 5 minutes. 

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Ms. MOORE. Thank you, Madam Chair. Let me thank the witnesses for coming. I especially want to thank Ms. Frundt for coming. I have had an opportunity to hear about her wonderful program and the numbers of survivors that she has supported, and do 

appreciate the work. 

I guess I want to start with the financial expert—my bifocals 

don’t work as well, so excuse me if I mess your name up, Mr. 

Banafa. I guess I am concerned or I have a question about how discerning or discovering these financial crimes is being implemented 

through the President’s council and engagement with the financial 

services community and with victims and survivors. Can you give 

us a little bit of the elements and the methodology that you guys 

are using to coordinate all those things? 

An earlier example, and I don’t want to consume all my time, 

was where you said, nail salons. People weren’t getting manicures 

at 2 o’clock in the morning. You were able to figure that out. How 

with the President setting up this technology agency, how are you 

better able to find these algorithms, and a little bit more explicit? 

Mr. BANAFA. Thank you very much for the question. Many of 

these financial institutions are coming together with social service 

organizations to identify red flags. Although, as Ms. Frundt has explained, these are changing constantly; my hope is that the result 

of those collaborations is that we will be able to keep up with those 

changes. 

Some examples of the red flags that we have identified include 

the identification of types of shell companies, such as those in highrisk jurisdictions including Cyprus, that many of these websites are 

using. I think three of the four websites I identified in my written 

testimony were using shell companies in Cyprus. Credit card companies in the United States are allowing the use of Cypriot shell 

companies to accept these transactions. 

Ms. MOORE. Ms. Frundt, I guess I would—you have day-to-day 

contact with these young people and thank you again for this work. 

I am so happy that you are on the frontlines of identifying this as 

a human crisis issue rather than just a law enforcement issue. How 

do you develop the trust and so forth to get victims to break 

through the brainwash that they have experienced? What do you 

do? What protocols do you do to try to reach out to these folks? 

Ms. FRUNDT. Thank you very much for that question. I am going 

to walk you through a day-to-day to get a better understanding of 

Courtney’s House. 

I did something that was very difficult in the very beginning. I 

grew up in Chicago, Illinois and I grew up in foster care, and I 

grew up in an environment where I didn’t trust police at all. Actually almost didn’t take a job at the very beginning with the Polaris 

Project, because they asked me to help start a human trafficking 

task force. I am saying that because I only saw a negative way. 

One of the things I realized in time is that I had to partner with 

the police, U.S. attorneys, and also have them come to our fun 

events, have them be able to come to our drop-in center and be a 

part of it, have them dress down, they love that. I promise you. 

We serve food every day. We come and they are not allowed to 

ask them questions, and they can ask them questions. That is 

when they get ready. First we were just a very honest organization 

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where they see us and we know what is happening on the ground. 

It is not like I am just a little old lady because I am sometimes. 

It is not like that, it is actually where kids are—and these are kids. 

These are 13- or 14-year-olds. 

I think that people don’t understand that if you work serving 

youth, you need to be a youth-led organization, meaning that we 

are on social media for our kids. We have Snapchat. We actually 

face-time our drop-in center and have other survivors tell them 

about the program who are their age. That is really important because that is how we do it. Then we have them come in. 

Although I work with the missing and absconders unit inside of 

foster care, our kids help find other missing kids, and when the police come and we have friends, they are friends with them, they actually get to tell them, can I tell them, can you call detective so 

and so and ask them to come, like that never happens. 

Ms. MOORE. Right, right. 

Ms. FRUNDT. We are creating a community and that is why they 

open up because we are creating a positive community. 

Ms. MOORE. Thank you so much. 

Thank you, Madam Chair, for your indulgence. 

Chairwoman WAGNER. My pleasure. The gentlelady yields back. 

The Chair now recognizes the gentleman from Colorado, the Vice 

Chair of the Oversight Investigation Committee my friend, Mr. Tipton, for 5 minutes. 

Mr. TIPTON. Thank you, Chairwoman. I appreciate you holding 

this very important hearing. 

Something impacting every State and my home State of Colorado, 2016 more than a thousand cases of human trafficking were 

reported with our two major interstates that are running through 

our State and the cartel activity unfortunately that we are starting 

to see as well. We are seeing this impact a lot of our communities 

and obviously devastating an awful lot of lives. 

We do have in my home area, the West Slope of Colorado, have 

a group called the West Slope Against Trafficking. It is an antitrafficking organization trying to be able to create awareness in 

Mesa County. The head of that organization recently said, one of 

the most important resources that we should develop is a community awareness on what it looks like, what to do when you encounter it, and the knowledge of the crime is the best defense against 

it. 

Dr. Shelley, expanding that sentiment onto the financial services 

industry, is it difficult for financial institutions to use analytical 

tools to be able to spot the patterns and data that may indicate 

suspicious or illegal behaviors with regards to trafficking? 

Dr. SHELLEY. I don’t think it is difficult if you have the right skill 

set on board. I think too many banks have just former criminal investigators and you need people with data analytics skills. You 

need people with social science skills, people who can help write algorithms. But fortunately today, there are many people who would 

be happy to work with the banking community and the bankers, 

some of them who are proactive, are seeking help outside, not only 

with the law enforcement community, but with anybody that can 

help them. 

mcarroll on FSR431 with DISTILLER

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That is not the problem. The problem is having enough allocated 

resources within a bank. A bank that needs to deal with its SARs 

is just drowning. The SARs do not allow them enough time, with 

10 or 20 people, to do the proactive and creative thinking that this 

data mining requires. That is the major challenge. 

Mr. TIPTON. Expanding on that, it caught my attention in your 

testimony, you brought up the opioid crisis. We just had two 

roundtables in my district this last week, the impact, the expansion 

of that. Are those some of the tells that we might be looking for 

to start to be able to be more proactive? 

Dr. SHELLEY. Absolutely. In fact, while you were on recess, I was 

doing some wonderful networking here with people who are looking 

at just this issue with the intersection of opioids and human trafficking and there are cases that are being developed. There is evidence the two overlap and yet we tend to stovepipe and look at 

opioids or we look at human trafficking. 

But often, the human traffickers are less careful than the drug 

traffickers and it can help give us an enormous window into the 

way the opioids traffickers are operating. 

Mr. TIPTON. I appreciate that and I think that you speak to 

something very important as has Ms. Frundt in terms of trying to 

be able to be proactive as opposed to being reactive. 

Unfortunately, Ms. Frundt, you had to live this. 

Ms. FRUNDT. Yes. 

Mr. TIPTON. Are there some areas that you could maybe point to 

that when we are looking at—it all revolves ultimately around finances as you had indicated. Where are some of the areas where 

you see us in the financial service sector to be able to be more 

proactive as opposed to just being reactive? 

Ms. FRUNDT. Once again with the training to financial institutions, having survivors on the board and helping them with the 

training. But there is a gap, I think, that we are missing that we 

see a lot that is not online and one of them is popup shops. We love 

that concept of popup shops. 

But what we are seeing online is that these tattoo shops and barber shops are doing popup shops with stripping and young girls 

there and selling them online on Instagram or Facebook. There is 

a whole development where other business owners are actually cutting through that where I am saying, ‘‘I am coming to you’’ and I 

am saying, ‘‘Here, if you pay me $500, I get a cut of $3,000 off of 

that, I will let you rent my space off of a building that I own.’’ 

We really have to reach to financial institutions on community 

levels, so they can be aware of this and what is happening and 

they are advertising this online of where the locations are throughout the different cities. That connecting is important. 

Mr. TIPTON. Good. I am about out of time, but I would like to 

ask the District Attorney. Is that something that you are looking 

at in terms of prosecution as well? 

Mr. VANCE. Yes, sir. We actually—I think public-private collaboration in this area is particularly important and we work with the 

Thomson Reuters Foundation which itself brought a group of large 

banks together in a working group so that we could provide to 

them the typologies of crimes that we are seeing so that the banks 

mcarroll on FSR431 with DISTILLER

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would understand what records they might have that might be relevant to building and proving cases. 

We know here how the crime is being committed. Once the banks 

understand what records are involved and what to look for, they 

have the data. I think because of the work of committees like this, 

and it is so important, when people understand the scope of the 

problem and actually understand it is out there because we don’t 

have a huge awareness of this issue in the United States. Once 

businesses understand the scope of the problem, they want to jump 

on. They are good corporate citizens and they think this is—among 

the worst things that could be happening in America is to tolerate 

sex trafficking or human trafficking. 

Mr. TIPTON. Thanks, sir. 

I apologize for asking a question with 8 seconds to go, Chairwoman. Thanks for your indulgence. 

Chairwoman WAGNER. No. No. No. It is quite all right. We want 

to make sure everybody can be heard. 

The gentleman’s time has expired. The Chair now recognizes the 

gentlelady from Ohio, my good friend and a true leader and champion in the area of human trafficking and specifically partnering 

with me on online sex trafficking issues, the gentlelady from Ohio, 

Mrs. Joyce Beatty, for 5 minutes. 

Mrs. BEATTY. Thank you to Madam Chairwoman and also to our 

Ranking Member. 

First, let me say to the panel, thank you. You have been more 

than our traditional panel because you have lived the issue. You 

are in the field of investment, knowledge, and research in it. I want 

to applaud you for being here and being so personal and detailed. 

Certainly, to our Chair and my good friend and colleague, thank 

you for your leadership. 

So often, you as panelists or as guests or America, you do not 

hear us talking about positive relationships and what we do together on both sides of the aisle. I can tell you, when it comes to 

whether it is online human trafficking, whether it is educating our 

court system, educating our police department, telling people if you 

see something, say something, I can tell you Congresswoman Ann 

Wagner is at the top of the list of being the biggest advocate and 

she chose not to do it alone. She reached over as a Republican and 

with me being a Democrat, we have been in this fight and we will 

continue to be in that fight together. 

I wanted to take that moment of personal privilege to say that. 

Chairwoman WAGNER. Thank you. 

Mrs. BEATTY. But, I have a whole series of questions like my colleagues, but I am going to be a little spontaneous here because of 

the dialog. We are hearing a lot about cryptocurrency. We are hearing a lot about how it affects our credit. If you have been trafficked 

and oftentimes they are using your Social Security number, your 

name, your life, and you get no value out of it other than bad credit 

when you become of age or when you are no longer in that situation. 

Most of you have mentioned that in your testimony, but I think 

what struck me, Tina—I am sorry to call you Tina, but that is how 

I know you. Let me just interject how much I love following you. 

I was with you 2 years ago when you came with Congresswoman 

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Wagner and Ted Poe and Caroline and spoke and it was so powerful. I followed you around the country. 

But, I am going to take my time to ask all of you to respond to 

something that she said. What we are doing here is great. We find 

out about something and we try to write legislation to curb it or 

to discontinue it. That cryptocurrency is the new way, but you say 

we should be more proactive than reactive. What is it each of you 

would say to us because we write the laws and we know it. We 

have heard you testify on it. We know it is a problem. 

We know what is happening. We know that there are places like 

FinCEN that is working on trying to stop this. Tell me what we 

could do to be more proactive, because I think that is the answer. 

It is too late when it is over or you are harmed. What should we 

do? 

Ms. Frundt, do you want to start first? 

Ms. FRUNDT. There are a few things on fixing the gaps to me. 

I am going to keep saying it. There is a huge gap with financial 

institutions and knowing what is happening on the ground. Once 

again, putting survivors in part of that training in connecting will 

really help, because it changes so much and you have to be on the 

changes that happen continuously, too. 

The other piece to me that is really important is to how financial 

institutions notify. When I was going through this issue of—and 

cleaning my credit, no one answered that number. Remember that 

back of your card number, that 1-800 number that you have to 

call? 

Mrs. BEATTY. Yes. 

Ms. FRUNDT. They do not know anything about trafficking and 

they have no idea and they send you around with all this information that you have to prove. There is nothing on anyone’s website 

that I could look up that anyone knew anything about. It was so 

frustrating that I did stop. 

You get so mad. You stop for a couple of years. It is hard when 

you talk to lawyers and things weren’t introduced yet. It makes 

this so frustrating. These things are not accessible to survivors. It 

is not even explaining anything. That is an easy fix to me, of making something accessible and saying that you do something. 

Also, if police would tell people more about that, you will get way 

more information, why do kids tell us things and adults tell us 

stuff because I tell them, ‘‘This is to help you clean because you 

cannot get your own apartment. You are not going to be able to get 

anything. What if victim assistance gave you money, your landlord 

will not rent to you.’’ You phrase it in ways on how it will affect 

them. 

We will give you all the information in the world. We will give 

it. Just phrase it and start asking us more questions about it. And 

then, also, explain cash apps, Google Wallet, like Google needs to 

be trained, right? These cash apps that we use, Square reader. All 

of these people need to be trained and understand, because those 

are the mechanisms that they are using. 

Mrs. BEATTY. OK. Thank you. 

Chairwoman WAGNER. I am going to allow a little indulgence 

here. Would anybody else like to respond? 

Mrs. BEATTY. Thank you. 

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Chairwoman WAGNER. Dr. Shelley? 

Dr. SHELLEY. I think the question that you are asking about 

what to do with cryptocurrency is very much related to the bill that 

you referred to that you have been teaming up with Representative 

Wagner, which is the idea that we need to be regulating our new 

innovations in the technological space much more, where they have 

had a free pass while we are regulating utilities. We are regulating 

banks, but in the online space, these groups are going—like bitcoin, 

like other cryptocurrencies—without regulation. 

Unfortunately, as we have been discussing over and over again, 

the criminals who are committing all these exploitative acts are extremely innovative and adaptive. Without any measures to try and 

control these new payment systems, they are at the forefront of its 

use, and therefore I think you need to think about cryptocurrencies 

the way you are thinking about your other piece of legislation on 

how we deal with online marketplaces. 

Mrs. BEATTY. Thank you. 

Chairwoman WAGNER. District Attorney Vance, do you have anything to add? 

Mr. VANCE. I couldn’t agree more with what the doctor said. I 

support her suggestions. Britain now has a Cabinet-level position 

to deal with human slavery and that says something about the 

commitment of that government and country to the issue. With 

that kind of leadership, it provides the opportunity for the country 

to be inspired, to heed the call for both good corporate citizenship 

and personal involvement. 

Now, I am not saying that we should have a cabinet member on 

that, but what I am saying is that given the scope of the problem 

as the Chairwoman has indicated in the international scope of it, 

I think America should be viewed as stepping up to take a leadership role in the international fight and that could take many forms, 

but we should be at the front of the line on this, as this committee 

has been, and that will have impact. 

Mrs. BEATTY. Thank you. 

Mr. Banafa? 

Mr. BANAFA. Yes. I think that is an excellent question and I 

think it is important to understand that cryptocurrency is worthless without actual currency. The relationships between these 

cryptocurrency processors and financial institutions is an area that 

we need more understanding of and if necessary, regulation. 

BitPay, one of the largest cryptocurrency processors in the 

United States, had said publicly that they have relationships with 

multiple financial institutions, including institutions in the U.S., 

but that those institutions did not wish to be disclosed publicly. I 

think that is very telling regarding the role of cryptocurrency and 

their financial institutions in the United States. 

Chairwoman WAGNER. Thank you. 

The gentlelady’s time is expired and I appreciate the committee’s 

indulgence in letting the witnesses expound on a very important 

question. 

It is now my pleasure for the Chair to recognize the gentleman 

from Georgia, Mr. Loudermilk, for 5 minutes. 

Mr. LOUDERMILK. Thank you, Madam Chair, and I really appreciate the hearing here and all of our witnesses. A very difficult submcarroll on FSR431 with DISTILLER

21 

ject from not only the emotional aspect and the stories we hear, but 

the heavy lift that we have to do to deal with this horrendous 

crime. 

Dr. Shelley, we are currently updating the Bank Security Act 

and we have had several hearings in some other subcommittees 

and full committees on this, the updates, which it needs to be updated to actually incorporate new technologies and the new financial systems that we deal with today. But it is interesting in one 

of the hearings recently, many of the bankers, they came in and 

testified, it was that they understand the importance of the SARs 

that they fill out, the Suspicious Activity Reports. 

But, some of the criticism is there is often suspicious activity 

that does not just fit right within the scope of the law that they 

would want to be able to report, and the other part which I found 

intriguing was quite often, they never get feedback from law enforcement on the reports that they submit that would help them to 

actually identify more trends of what are the activities that are 

being done for nefarious causes versus like when I had a business, 

every month, because I had a payroll processor, I transferred 

$10,000, $20,000 a couple of times a month, wired it out. Of course, 

that would generate a SAR, but that was nothing suspicious. Do 

you have any thoughts on that as we look at updating the BSA? 

Dr. SHELLEY. Absolutely. You are getting to the heart of the 

problem, is that from a banking point of view there is rarely that 

one piece of information that you report in the SARs that reveals 

human trafficking. Just as in the report that I did for the World 

Economic Forum which summarized the data mining that J.P. Morgan was successfully doing and finding cases, there were about 

eight elements that were needed to locate a human trafficking or 

a suspected human trafficking organization. 

There may not be so many elements now, but it is not one or two 

things. Therefore the way the SARs is designed doesn’t get at the 

problem and Government regulators are drowning in SARs. 

Mr. LOUDERMILK. Right. 

Dr. SHELLEY. We need to use the greatest advances that we are 

having now in looking at the enormous data that we are collecting. 

We need social science. We need victims. We need people who have 

insights into how trafficking operates and then transfer this into 

data analytics. It is not something that bankers can do themselves, 

and that is the wonderful thing of the shared wisdom on this panel. 

This diversity is really going to help you get to this, the complexity 

and the diverse elements you need to move into a new way of 

thinking about analyzing and finding risks in banking. 

Mr. LOUDERMILK. Thank you. Another issue that we have discussed now in two Financial Services Subcommittee hearings 

today, we are going to be discussing more often is this aspect of 

cryptocurrency. Now, with the strength of the cryptocurrency becomes the weakness for us for things like this, and it is the anonymity of it which actually makes it a prime solution for cyber security risk that we have. Many businesses are looking at this block 

chain technology because it is superior in decentralizing, but it 

does create a problem in the law enforcement realm. 

I think I am going to see more use of prepaid credit cards, the 

more that we have cyber breaches, Government is probably the bigmcarroll on FSR431 with DISTILLER

22 

gest culprit of cyber breaches after today, I personally know more 

and more people, when they get a paycheck, they buy prepaid credit cards to do all their transactions with. They are not doing anything illegal and nefarious, but because the fear of their money 

being at risk through cyber crime. 

I think that it is not the cryptocurrency itself, it is the block 

chain technology that I think is going to be a reality we have to 

deal with. I think we are going to have to not try to regulate it 

through legacy standards, but come up with new regulations. 

Mr. Vance, with this, what are the tools that law enforcement is 

using now specifically with cryptocurrency? I know we were able to 

take down Silk Road. I do not know if we actually were able to get 

the perpetrators, but we were able to take the site down with Silk 

Road. What are the tools that we can use today going after the 

cryptocurrency users? 

Mr. VANCE. I think first and foremost is to find a human to be 

able to explain what is happening, that is old fashioned inside witness who may be seeking leniency. Some of our old techniques are 

just as important as they always were in terms of understanding 

how money is moving and then how we can interrupt that. 

But clearly, generally speaking, Representative, we have become 

much more sophisticated in our ability to use technology to identify, to start to paint the picture just by dots filling in. I think our 

technology is much stronger in terms of identifying where the 

issues are and what investigative leads we could follow. But at the 

end of the day, separating intel from prosecution, I do think cases 

are going to be made where people are going to actually have to 

get up there and testify and that is going to still be the most important evidence we have, I believe. 

Mr. LOUDERMILK. Thank you. 

Chairwoman WAGNER. The gentleman’s time is expired. 

The Chair now recognizes our Ranking Member, Mr. Al Green, 

for 5 minutes. 

Mr. GREEN. Thank you, Madam Chair. 

Again, I thank the witnesses for appearing. I would like to deal 

with something that may appear to be a bit mundane, but I think 

is absolutely necessary to confront. It is indicated in the intelligence that has been reported to me that in 2014, the Urban Institute estimated that the underground sex economy ranged from 

$39.9 million in one American city, we need not name the city, to 

$290 million in another American city. 

This is a lot of money. We also know that this is a cash-intensive 

business which means that there are some persons masquerading 

with a facade of legitimacy that are walking into banks, leaving 

cash-intensive businesses and they are making deposits. We know 

that laundromats are cash-intensive. We know that night clubs, 

businesses where you bring cash at the door and you don’t get a 

receipt. We understand that restaurants, car washes, cash-intensive businesses. 

I do not know if there is a profile on the typical perpetrator, but 

we have to at some point expose the fact that a lot of people who 

are masquerading as legitimate business people are fronts for the 

bagging of the money and placing it into commerce. We have to go 

after them, but we have to expose them and the world needs to 

mcarroll on FSR431 with DISTILLER

23 

know who they are, because if we don’t, in a sense, we are allowing 

them to continue to have this veneer of legitimacy. 

Mr. District Attorney, to what extent have you been able to infiltrate these professionals in some circumstances who are 

masquerading as legitimate business people? 

Mr. VANCE. We opened up our Human Trafficking Response Unit 

in 2012. We have had dozens of indictments and obviously investigations, scores of investigations. Congressman, I am not aware of 

us having found a business such as you described and identifying 

that as the source for money laundering of a human trafficking operation. 

But what we do see and the way we approach these investigations now are not as sex crimes investigations but business crimes 

investigations, because this is a business. What has changed from 

I think our prosecutor’s perspective is we are using all the traditional investigative techniques that go along with business investigations: Search warrants, subpoenas, identifying assets, seizing 

assets, this is how we get at the traffickers. 

Mr. GREEN. May I just intercede and suggest this, what about— 

you talked about human capital in terms of ascertaining your intelligence, acquiring your empirical evidence. What about surveillance? In my city, there is a business that never has cars at that 

location, but we know that it stays in business. It deals in the 

purveying of paraphernalia for sex. Never any cars there, but they 

stay in business. Wouldn’t that kind of surveillance at least give 

some indication that there may be something untoward occurring 

there? 

Mr. VANCE. Absolutely. The investigations begin on tips and observations and then, as you well know, they then require manpower to staff those investigations and stay the course. 

You are right, absolutely, and I am sure the law enforcement and 

I am sure that our office from time-to-time just misses the thing 

that is right in front of our eyes because we are not paying close 

enough attention. It happens. But I think our goal is obviously, 

with experience and with help from a variety of experts, to really 

try to minimize those misses to the smallest degree we can. 

Mr. GREEN. I assume that all of the persons associated with 

banking, the persons associated with the various departments of 

the constabulary, all of them are honorable people and that they 

all mean well, but I do believe as has been indicated, that the people who are engaged with the people who purvey, they have something to share with us that may be a bit more nuanced and mundane but that can make a difference. I do appreciate what you said. 

Now, I have gone 12 seconds over. I am going to ask for unanimous consent to have one more minute, Madam Chair. 

Chairwoman WAGNER. Without objection. 

Mr. GREEN. Thank you. 

I want to now go back to the person who has had an experience 

that I don’t celebrate in any way, but I am appreciative that you 

are amenable to sharing your thoughts with us. I am just curious. 

As it relates to you, what was it that gave you the courage to step 

away? You mentioned a little bit earlier and I do not mean to give 

you so little time, but I am interested in knowing what broke the 

bond? 

mcarroll on FSR431 with DISTILLER

24 

Ms. FRUNDT. Thank you for asking me that question. I need people to understand that you get tired of being sick and tired and 

that really means that, I didn’t have services or anything like that. 

You get tired of repeating your same mistakes over and over and 

over and over and there is no outcome. It is a scary thing to go out 

on your own to do something different every day that you didn’t do 

different before to get a different outcome. 

For me, I got tired of being sick and tired. Thankfully, drugs has 

never been my issue because I am sure if I was addicted or did any 

drugs in life, that would have been an issue for me. The issue for 

me was convincing myself I was smart, convincing myself that I 

can pull my negative into positive and see in the world that everybody else thinks like this is the world, me, this is a new world for 

me. I hadn’t lived in a world where people did not do criminal activity. Like, I did not know how to survive in this world. 

To be honest with you, it is more of that, of getting sick and tired 

and not knowing how to fix things and trying your best to get a 

different outcome than what you had before. 

Mr. GREEN. Thank you. 

Madam Chair, I ask unanimous consent that you would be allowed to consume as much time as you may for questioning. 

Chairwoman WAGNER. Thank you. Hearing no objection, I have 

one other area and I thank the Ranking Member for his support 

and for his indulgence here. 

One thing that we have not explored too much, I want to get a 

little bit of your background and information on is dealing with 

these gift cards. We hear a lot about how money is loaded on to 

these gift cards and they are used for payments for services on 

websites, review sites, whatever it may be. Ms. Frundt talked 

about even Facebook and Snapchat, and Instagram, and other avenues. 

Mr. Banafa, I understand that there are now websites that cater 

to people interested in trading or even selling gift cards for cash. 

How do these websites ensure that payments for these gift cards 

are not facilitating child sex trafficking? 

Mr. BANAFA. Thank you very much for that question, Madam 

Chair. To clarify, and I didn’t go into this in my written testimony, 

there are two types of gift cards that we have discussed today, open 

loop gift cards and closed loop gift cards. Open loop gift cards include prepaid Visa and Mastercard cards. Those are cards that 

allow you to reload with cash and are not limited to a single merchant. 

There are also gift cards that are limited to a single store, such 

as Starbucks gift cards. Those cards are now being used on 

websites to purchase access to The Erotic Review, and purchase access to other merchants that wish for their customers to remain 

anonymous. 

Chairwoman WAGNER. City Guide, Eros, any of these websites 

out there, correct? 

Mr. BANAFA. Yes. 

Chairwoman WAGNER. Alright. 

District Attorney Vance, any thoughts regarding the gift cards 

and how they are really facilitating child sex trafficking, also knowmcarroll on FSR431 with DISTILLER

25 

ing that they are so easily transportable and that there are few 

ways that law enforcement can perhaps track their movement? 

Mr. VANCE. Madam Chair, I do not have anything smarter to say 

than the last witness. This is where we are. We want anonymity. 

Now, we have it, but there is a cost. Ultimately, it then comes back 

to you, the legislators, to figure out where do you draw the bounds. 

It is just like encryption. 

We have ceded in the Internet world authority to the players of 

the world without regulating it, and we are now coming to a time 

in our culture where we will see the consequences of that total unregulation is behavior that is occurring right in front of us that we 

know is awful, but we don’t yet know or have the willingness to 

step in and say, ‘‘We are going to impose some laws here.’’ 

At the end of the day, I think that is what we are going to have 

to do if you want to actually take on the kinds of funding questions 

that you are exploring, and a lot of folks won’t be happy if you do 

that. But a lot of us will say, ‘‘This is—we need to strike a balance 

not to have an all or nothing approach to these issues.’’ 

Chairwoman WAGNER. As I think you so well stated at the beginning of your testimony, certainly, we are all entitled to privacy, but 

not necessarily anonymity, especially as it pertains to criminal activity, especially when it pertains to the exploitation and victimization and rape of tens of thousands of women and children and 

young men and boys not just across our country, but globally. It is 

absolutely abhorrent and it is something that when I served as a 

United States Ambassador in Western Europe, I was introduced to 

this horrific crime coming frankly from Eastern Europe. 

Never did I realize until I returned home and began to delve in, 

that again it was happening right here in the United States of 

America. It is incumbent upon the Congresswomen Moore and 

Beatty and certainly our Ranking Member here, Congressman 

Green, and myself and others to stand up for those who have no 

voice, to give you the tools and the resources so that you can put 

these criminals behind bars. We have no business in the United 

States of America to turn a blind eye to modern-day sex slavery 

which is exactly what this is. 

It is our duty to protect our victims and give them the support 

and the resources and the tools to rehabilitate their lives. I appreciate all of your testimony. I appreciate some of the new areas that 

now we are going to delve into here, especially as it comes to some 

of the online social media sites that, we talked about the websites, 

but we haven’t necessarily gone into all the Facebook, and the 

Instagram, the Snapchat and things of this nature, it is an evolving 

and fast moving technological world that we are in. 

Mr. Banafa, what you had to say about Cyprus and some of the 

domestic platforms, financial systems that are really enabling the 

money to be had, popup shops, the credit score issues. I look at 

vacator laws that we fight for to allow a judge to be able to say, 

‘‘If you were accused of a crime, by virtue of the fact that you were 

a human trafficking victim, perhaps that crime should have the opportunity to be vacated so that you can get an apartment, find a 

job, go back to schools.’’ But the credit score issue is something that 

I do not think we have looked at either. 

mcarroll on FSR431 with DISTILLER

26 

I want to thank you all. I know that the Ranking Member has 

something he would like to add to the record. 

Mr. GREEN. Yes. Thank you, Madam Chair. 

I have a letter from Ms. Christina Bain. Ms. Bain is an expert 

on human trafficking and has focused on addressing the role of 

business and entrepreneurship in the fight against such trafficking. 

With unanimous consent, I would be pleased to place this in the 

record. 

Chairwoman WAGNER. Without objection. 

I would like to thank our witnesses again for their testimony 

today, but more importantly for being on the front lines. We look 

forward to working with you as this committee and this Congress 

delves into these issues that are cutting-edge, things that are 

evolving quickly. We want to call upon your expertise, your advice, 

and your support and thank you for the work that you are doing 

to fight this horrific crime. 

Without objection, all members will have 5 legislative days within which to submit additional written questions to the Chair which 

will be forwarded to the witnesses. I ask our witnesses to please 

respond as promptly as they are able. 

I thank you again for your testimony here today, and most of all 

for what you are doing to fight the scourge of human trafficking 

here in the United States and frankly across the world. 

This hearing is now adjourned. 

[Whereupon, at 4:07 p.m., the subcommittee was adjourned.] 

mcarroll on FSR431 with DISTILLER

(27) 

A P P E N D I X 

January 30, 2018 

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mcarroll on FSR431 with DISTILLERInsert offset folio 1 here 31327.001

WRITTEN STATEMENT OF 

BASS EM BANAF A 

CPA, CFE, ABV, CGMA, CAMS, CFCS, CFF, EnCE 

FINANCIAL FORENSICS CONSULTANT 

BEFORE THE 

U.S. HOUSE OF REPRESENTATIVES COMMITTEE ON FINANCIAL SERVICES 

SUBCOMMITTEE ON OVERSIGHT AND !NVESTIGA TIONS 

JANUARY 30,2018 

Madam Chairman, Ranking Member Green, and Members of the Subcommittee, thank you for 

the opportunity to testify before the Subcommittee on Oversight and Investigations. 

My name is Basscm Banafa. I am a Financial Forensics Consultant and Expert Witness at my 

firm, Basscm Banafa, LLC, and for PlainSite, an organization that works on legal transparency, 

among other issues. 

I previously served as a Forensic Accountant with the Special Operations Division of the Contra 

Costa County District Allomey's Office in Martinez, Califomia. I assisted investigators and 

prosecutors with complex cases involving large-scale fraud, human trafficking, drug trafficking, 

money laundering, and other criminal activities. In those investigations, I personally reviewed 

tens of millions of dollars in tnmsactions conducted by human trafficking organizations. 

Prior to my time at Contra Costa, I served as a Financial Crimes Consultant with Wells Fargo's 

Financial Institution Investigations Group ("FHG"). Wells Fargo created FIIG in response to the 

findings of a 22-month long investigation by the Drug En!orcement Administration, the Jntemal 

Revenue Service and other agencies regarding Wachovia's 1 handling of$373 billion in wire 

transfers, $4 7 billion in remote deposits2, and nearly $5 billion in bulk cash deposits processed 

on behalf of"Casas de Cambio." high-risk currency exchange businesses operating in Mexico. 

The investigation concluded that these transactions were conducted with limited or no antimoney laundering oversight by Wachovia and at least $110 million of the funds processed were 

directly related to criminal drug trafficking activity3 FIIG was tasked with investigating 

1 In 2008, Wells Fargo acquired Wachovia, knowing that the bank was being investigated for failures in its 

money laundering oversight. J understand that Wells Fargo cooperated with authorities throughout the 

investigation of Wachovia. 2 Typically, a set of check images collected off-site and transmitted to the financial institution for processing. 

These types of transactions were used to disguise the parties to a transaction by presenting images, which 

require manual processing for anti-money laundering analysis, rather than transaction data, and by 

combining multiple checks to perform a single transaction that would list the originating financial 

institution as the payor. 

'The Mexican finance ministry, Secretaria de Hacienda y Credito Publico de Mexico, responded with extreme 

restrictions on the amount of U.S. Dollars that Mexican financial institutions can process for their 

customers. For many individual Mexican customers, Mexican financial institutions could no longer accept 

more than $4,000 in U.S. Dollars in a given month. 
29 


mcarroll on FSR431 with DISTILLERInsert offset folio 2 here 31327.002

Wachovia and Wells Fargo's relationships with other financial institutions to the extent that 

Wells Fargo was processing transactions on their behalf. 

I also spent several years as a Litigation Consultant with TM Financial Forensics, a consulting 

firm in San Francisco, where 1 assisted in consulting engagements on disputes stemming from 

processing, agency, custodial and other relationships between major financial institutions. 

Specific failures by those institutions related to oversight and verification of their relationships 

with other institutions have resulted in ongoing losses in excess of $10 billion. 

I have presented on the topics of financial and computer forensics, human trafficking, and 

organized crime for the Association of Certified Anti-Money Laundering Specialists, the 

California Narcotic Officers' Association, and the Southwest Border Anti-Money Laundering 

Alliance. 

I was asked to provide the committee with an assessment as to how financial institutions 

monitor, review and verify depository relations with payment processors. I would like to begin 

by identifying the scope of these relationships. 

Financial institutions may directly facilitate outside payment processing through several 

channels, including: 

• Engaging a third party to process payment card transactions. 

• Engaging a third party to process Automated Clearing House ("ACH") transactions. 

• Maintaining accounts f(lr money service businesses that facilitate payment card 

transactions. ACH transactions. wire transfers. e-checks, or remote deposits. 

• Maintaining accounts for money service businesses that facilitate alternative payments. 

such as gift card redemptions or cryptocurrency. 

Financial institutions may indirectly facilitate outside payment processing by associating with 

other financial institutions that arc engaged in these activities. 

Evaluation Types 

Evaluation of payment processor activity by financial institutions is usually siloed by group 

depending on the purpose of the evaluation. The silo also informs the standard the financial 

institution uses to evaluate the payment processor. 

• Undenvriting/Risk Assessment 

o The standard for this type of evaluation is "a credible challenge'' 

Underwriting/risk assessment teams prepare an evaluation that is sufficient to 

respond to a credible challenge of a payment processor's suitability for the 

financial institution. 

o This type of evaluation is pcrforn1cd as part of the ordinary management o[the 

relationship between a financial institution and a payment processor. Members of 

a financial institution's business development team will assist the 

underwriting/risk management team in obtaining information about a payment 

processor's background, principals, creditworthiness, customer base, and 

expected transaction volumes. 
30 


mcarroll on FSR431 with DISTILLERInsert offset folio 3 here 31327.003

o In some cases. such as with payment processors operating in high-risk 

jurisdictions or that maintain a high-risk customer base. additional scrutiny is 

applied to the potential relationship in a process referred to as Enhanced Due 

Diligence ("EDD''). 

o EDD may include in-person interviews, on-site audits, extensive historical 

transaction data reviews, deep investigation of principal backgrounds, or other 

procedures that may not have been applied during the standard underwriting 

process. 

o These evaluations are reviewed periodically and updated with new information 

based on actual transaction activity and updates provided hy payment processors. 

• Fraud Investigation 

o The standard for this type of evaluation is '·potential loss." Fraud investigation 

teams evaluate a payment processor relationship and determine whether the 

relationship will result in a potential loss to the financial institution. 

o Initial investigations arc focused on transaction participants rather than their 

payment processors. 

o After a financial institution determines that a payment processor has been 

identified with significant losses to the financial institution, an investigation may 

be opened on the processor itself. This kind of escalation is exceedingly rare, in 

large part due to the work of the underwri ling/risk management investigators. 

Losses would need to rapidly increase in a short period of time to route the 

evaluation of a payment processor to a fraud investigation team rather than the 

risk management team. 

• Financial Crime 

o The standard for beginning this kind of investigation is identification of "unusual 

activity.'' The standard for making a negative finding is identification of sufficient 

"suspicious activity.'' Financial crime investigation teams evaluate payment 

processor relationships and determine whether the relationship has been 

compromised by money laundering or terrorist financing activity. 

o Much like fraud investigations, initial financial crime investigations arc focused 

on transaction participants. 

o After a financial institution determines that a payment processing relationship has 

deteriorated such that a payment processor's assertions regarding transactions arc 

no longer reliable, an investigation may be opened on the payment processor 

itself. This kind of escalation is also exceedingly rare. However, unlike fraud 

investigations, these escalations are rare because money laundering does not 

typically result in a loss to the financial institution, even after payment of 

sanctions, fines, or penalties. 

o Jerry Robinette, a former Homeland Security Investigations Agent and bank 

compliance officer put it best, "Until.vou start sending people to jail, the pockets 

are there to satisfy penalties ... " 
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Payments to Websites Facilitating Commercial Sex 

To support an assessment of financial institution relationships with payment processors, I 

reviewed currently available payment options on four wcbsites associated with the commercial 

sex trade: Humaniplex, The Erotic Review. Nightshift, and Rubmaps. 

• Humaniplcx is a classifieds site that allows users to purchase "FXPoints" to access most 

of the website's features. Although there are ad sections related to employment, goods, 

housing, and personals, substantially all of the advertisements listed are in the escorting 

sub-section. 

• The Erotic Review provides a platform for users of commercial sex to describe their 

experiences in great detail, including measurements, specific acts, and ambience. Access 

to detailed descriptions of sex acts is limited to paid users. 

• Rubmaps4 is a review platfom1 specializing in "erotic massage parlors." Access to most 

descriptions on Rubmaps is limited to paid users. 

Nightshift is a combined classificds and review platform. Unlike Rubmaps and The 

Erotic Review, advertisers contribute much of the information related to the individuals 

being advertised. Early access to reviews. enhanced classifieds, and other benefits are 

limited to paid users. 

Nightshift, Humaniplex, and The Erotic Rcview5 accept payments through CCBilL LLC6

, a 

payment processor based in Tempe, Arizona. CCBill has had a payment processing relationship 

with Merrick Bank, based in South Jordan, Utah, for over a decade. 

The Erotic Review offers a second credit card payment option through Rocketpay, a service 

provided by Rocketgatc PR, LLC,7 a payment processor8 based in Puerto Rico. 

Nightshirt and The Erotic Review also accept cryptocurrency. Nightshift accepts multiple 

cryptocurrencies through Coinpayment, a cryptocurrcncy processor based in Vancouver, 

Canada9 The Erotic Review limits cryptocurrency payments to Bitcoin and accepts payments 

through Bitpay, a cryptocurrcncy processor based in Atlanta, Georgia. 

4 Rubmaps is also associated with Aaampmaps, an "Asian erotic massage" review site, Rubads, an escort 

classifieds site, and Eroticmonkey, an escort revie\v site. Ruhmaps appears to be the only site that currently 

accepts payments. 5 Nightshifl and Humaniplex only accept payment cards. The Erotic Review accepts payment cards and ACHbased transactions. 6 CCBill was fmmded by Ira Ron Cadwell, a chiropractor, and currently processes over a billion dollars in 

online transactions per year. CCBill is widely used in the adult online entertainment industry and was 

described by The Independent as "the Pay Pal of porn and go-to online billing company for porn sites." 

'Rocketgate PR, LLC is the successor to Rocketgate, LLC, originally formed in Las Vegas, Nevada by Jason 

A. Bums, a software engineer, and o·arcy Tyrell, a former NASA engineer. 8 Here, I refer to payment processors generically. Rocketgatc provides payment gateway services, which 

process payments for one or more merchant accounts opened through a financial institution or their sales 

agents. 9 Coinpayment was founded in Atlanta, Georgia by Pawel Chrostowski and others. Aller FinCEN identified 

them as a money service business, the company was moved to Canada through a series of over the counter 

stock transactions. 
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mcarroll on FSR431 with DISTILLERInsert offset folio 5 here 31327.005

Both Coinpayment and Bitpay offer their merchants the option of converting customer 

cryptocurrcncy payments to fiat currency. Bitpay settles U.S. Dollar transactions through ACH 

transfers sponsored by at least one U.S. financial institution. although Bitpay's CTO has publicly 

staled that those financial institutions requested that they not be named publicly. 10 

Coinpayment settles U.S. Dollar transactions through Coinbase, a cryptocurrency processor 

located in San Francisco, California. Coinbasc li1cilitates these conversions using ACH transfers 

sponsored by Silicon Valley Bank in Santa Clara, California. 

The Erotic Review also accepts payments through store-branded gift cards intended to be used at 

a single merchant through Pay garden, a gift card processor based in San Francisco, California. 

Pay garden publicly states that they are "integrated with USA gift card networks" and that they 

use those networks to '·do real-time balance lookups and to reclaim the value on popular gift 

cards.'' 

In other words, just as Safeway is able to load value onto a Starbucks gift card by virtue of its 

access to these gift card networks, Pay garden is able to extract value from those same Starbucks 

gift cards using its own access. Cashstar, currently owned by Blackhawk Networks, appears to 

be one of the networks being used by Pay garden. Cashstar's terms of service state the following. 

"Gzji Cards cannot be reloaded, resold. or trans(erredfor mlue. Void if reloaded, resold, 

or trans(erredfor value. Unused Gift Cards may not be tran.~(erred ... Gift Card is not 

redeemable/or cash'' 

Pay garden's terms of service appear to conflict with Cashstar's terms, 

"Redeeming Gift Cards ... Once you confirm a sale of a Gifi Card to PayGarden. you 

agree to transfer ownership oft he Gift Card and any interest therein to PayGarden" 

Blackhawk Networks, Cashstar's parent company, has relationships with multiple financial 

institutions that are ultimately responsible for these transactions. 

Rubmaps accepts credit card payments through Euro Payment Group GMBH nka EPG Financial 

Limited, a German payment processor. The transaction appears to take place entirely outside of 

the United States. 

Money Laundering Red Flags 

• Nightshift appears to be using a Cypriot shell company to accept credit cards through 

CCBill. 

o Nightshift's billing page states that "CCBill LLC is a designated payment 

processor for 1-limoto Limited." 

o Himoto Limited was formed in Cyprus and lists its sole shareholder as Altus 

Services Limited. 

o Altus Service Limited is owned by the Cypriot law firm, Chr. P. Mitsides & CO 

LLC. This law firm docs not appear to be the ultimate beneficial owner of 

Nightshift. 

10 Newsmax Finance, December 6, 2013, "Bankers Balking at Bitcoin in US as Real-World Obstacles Mount". 

"[Stephen Pair, co-founder and chief technical officer ofBitPay Inc.] said BitPay has relationships with 

banks in the U.S., Canada and Europe; he declined to name them at the banks request." 
33 


mcarroll on FSR431 with DISTILLERInsert offset folio 6 here 31327.006

• The Erotic Review appears to be using a Cypriot shell company to accept credit cards 

through CCBill and Rocketgate. 

o The Erotic Review's Tem1s of Service state that, 

"Subscriptions toTER will be processed by THP lntemet Resources or by 

such Third Party credit card processors (Such as CCBill or SegPay) with 

which THP Internet Resources may contract.'' 

o THP Internet Resources Ltd.'s latest annual report indicates that Treehouse Park, 

S.A. 11 , based in Anguilla, is a related party, and that THP Internet Resources Ltd. 

owed several hundred thousand euros to Tree house Park, S.A. Substantially all 

funds received by T.l I.P Internet Resources Ltd. are passed through to Trcehouse 

Park, S.A. 

o The CCBill payment page states that CCBill is the payment processor for 

Trcchousc Park, B.V .. the Dutch subsidiary ofTrcchouse Park, S.A. 

o The Rockctgate payment page states that Rocketpay is the payment processor for 

T.H.P Internet Resources Ltd. 

o T.H.P Internet Resources Ltd. was formed in Cyprus and lists its sole shareholder 

as Richard Reideman, a Dutch national residing in Cyprus. 

o Trcehouse Park, S.A. is wholly owned by another Anguilla entity, The Sycamore 

Trust, which is controlled by individuals other than Richard Reideman. 

o Reideman does not appear to be the ultimate beneficial owner ofT.H.P Intemet 

Resources Ltd. 

• Rubmaps appears to be using a Cypriot shell company to accept credit cards through a 

foreign payment processor. 

o The Rubmaps logo on the billing page is a map of the United States with a white 

hand over it and the slogan "Find Your Happy Ending''' 

o Rubmaps' billing page states that transactions will appear as "Miracomm R-Maps 

+ 1888:2246844." "888'' numbers arc only toll-free in North America. 

o Miracomm is identified in Rubmaps' terms of service as Miracomm Holdings Ltd 

in Cyprus. Miracomm Holdings Ltd currently lists Georgios Veniaminidis, a 74-

year old resident of Cyprus, as its sole shareholder. 

o Miracomm Holdings Ltd was formed by CDP Media AG, a Swiss entity 

controlled by individuals other than Veniaminidis. 

o Veniaminidis does not appear to be the ultimate beneficial owner ofMiracomm 

Holdings Ltd. 

• Humaniplcx allows users to transfer '"FXPoints" to other users, effectively creating its 

own internal currency that is being used to pay advertisers for access to individuals being 

advertised on the site. 

11 Trcchouse Park is a reference to an upscale part of Amsterdam in the Netherlands and the former location of 

The Erotic Review's physical operations. 
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o One user stated bluntly, '· ... anyone sending me a [private message] from here are 

on must transfer me 40 fx points before I will ever respond to you" 

o A photo-sharing "club., on the site has several requirements for admission, 

including a "One time fee of 580 FX points transferred to [the club owner] for use 

as prizes to the ladies that post.'' 

• Coinpayment moved its operations to Canada and publicly stated that this was done in 

order to evade FinCEN money service business requirements. 

o Coinbase and Silicon Valley Bank appear to be allowing Coinpayment to settle 

U.S. Dollar transactions. 

• Paygarden' s business model does not appear to be consistent with the expectations of 

financial institutions participating in Blackhawk Networks' gift card network. Pay garden 

specifically identifies Target and Bestbuy as sources of gift cards to facilitate anonymous 

payments. Target's gift card purchasing site indicates that use of these gift cards to 

anonymously purchase subscriptions to The Erotic Review is inconsistent with Target's 

expectations, 

"Target Gifi.Cards arc solely for use at Target stores and on Target.eom. If 

someone claims that you should pay them in Target GifiCards. please report it at 

.ficcomplaintassistant.gov." 

Financial Institutions Cannot Replace Law Enforcement 

Financial institutions have an excellent grasp on fraud prevention, detection, and mitigation. The 

threat of a potential loss justifies the resources required to address fraud effectively. The threat 

also creates a clear performance indicator higher losses are bad, lower losses arc good. 

This is not the case with money laundering, and consequently not the case with payments 

processed for human trafficking rings and other criminal organizations. There is no clear benefit 

to the institution other than the vague idea that they've avoided reputational risk and trivial 

sanctions and penalties. 

As we saw earlier, an examination of just four websitcs reveals that payment processors are 

extremely vulnerable to money laundering risks, and that those risks are not readily apparent to 

their sponsoring financial institutions. Those same financial institutions have limited incentives 

to invest in additional anti-money laundering infrastructure. I often hear the complaint from these 

institutions that they do not wish to take the place of law enforcement and that they feel 

regulators are increasingly requiring financial institutions to fill that role. 

I do not dispute the need for someone to fill that role, but I believe that should be law 

enforcement rather than bank investigators. At some point, we have to realize that, years after the 

Bank Secrecy Act was implemented, we are still discovering billions of dollars being laundered 

through U.S. !inancial institutions. 

A colleague of mine coined the tem1 "subpoena surface area," referring to all the potential 

exposure that a particular suspect or organization has to third party data collection. An effective 

understanding of an individual's or an organization's subpoena surface area can mean the 

difference between dropping a case and being able to advance a case by identifying, obtaining, 
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and analyzing data from any of hundreds of server farms. transaction processing systems, 

marketing databases, security systems, third-party software and service providers, intermediaries 

involved in creating or maintaining any of these. and other sources that remain untouched, even 

by intelligence agencies. 

I would ask the committee to consider the following: the most consistent request for assistance 

that I have received from law enforcement at any level has been a request to identifY what data is 

available at an institution and where it is available. The only reason I am able to provide that 

information is because I was previously a bank investigator. 

Rather than ratchet up the pressure on financial institutions to capture more and more instances 

of money laundering or human trafficking. I would request that we take our next cue from a 

relatively recent California state law. SB 272. 

This law requires local agencies to create catalogs of enterprise systems describing the data 

collected, application used to collect the data. the vendor, the system's purpose, the department 

responsible, and the frequency that the data is updated. 

A database of catalogs describing thcsl: kinds of systems at financial institutions would provide 

the information on subpoena surface area necessary to conduct complex money laundering 

investigations, it would protect consumer privacy by allowing law enforcement to narrowly craft 

subpoenas and search warrants, and it would reduce inordinate pressure on financial institutions 

to police their own customers beyond what current law requires. 

Thank you again for this opportunity. I would be happy to answer any questions. 
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Madam Chairman, Ranking Member Green, and Members of the Subcommittee, thank you for 

the opportunity to testify before the Subcommittee on Oversight and Investigations. 

My name is Tina Frundt and I am Executive Director/Founder of Courtney's House. Courtney's 

House is based in Washington, DC and provides direct services to both male and females of 

sex trafficking between the ages of 11-21 and our current caseload is 13 to 19 years old. I 

currently sit on the White House Advisory Council on Human Trafficking and serve as co-chair 

of the Rule of law committee which is responsible for developing a uniform set of investigative 

protocols for all federal law enforcement agencies. I have extensive experience providing 

expert witness testimony in federal and local cases on Human trafficking and since Courtney's 

House inception, I have helped over 1000 survivors to get out of their trafficking situation. 

I have previously spoken at many hearings in respect to sex trafficking. I am also a survivor of 

child sex trafficking so my prospective today will be very different. Sex trafficking is something 

that I not only experienced first hand for 20 years, but also in my daily work as a service 

provider for sex trafficked youth. The population I serve can speak directly about what goes on 

today on the financial side of sex trafficking and the long effects of not just emotional and 

physical trauma but long standing financial insecurity. 

My testimony will not only touch on what happened to me but the importance of increasing the 

effectiveness of the financial industry as a tool to combating human trafficking. Passage of H. R. 

2219 to Increase the Role of the Financial Industry in Combating Human Trafficking will provide 

an important step in the right direction if it is combined with efforts to focus on proactive rather 

than merely reactive measures. Survivors of sex trafficking should be apart of the training to 

financial institutions so that these institutions can strengthen their knowledge to get all of the 

traffickers and others involved in human trafficking. 

When I was a 13 Yz I met a man that was 15 years older than me. During my trafficking 

situation, I survived manipulation, torture and mental abuse but due to time, I will focus my 

remarks today on the long standing financial insecurity and financial abuse I experienced first 

hand, because of my trafficking experience. 

Most of my population is under the age of 19 years old, and are sold on lnstagram, Facebook, 

Snapchat and Tagged (especially our boys)(facebook owns tagged). There are a few ways 

survivors are recruited on social media; through "Facebook Live" and "lnstagram Live". 
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) ttou e 

EMBRACING THE CHILD HURT IN SEX TRAFFICKING 

"Facebookllnstagram Live" is used heavily to sell survivors because you can screen who you 

allow to view your "Facebookllnstagram Live" and who has access to view an individual's full 

profile (you can make profiles private). Additionally, pimps and traffickers use Facebook's 

"boost" feature to promote private groups that pimps/traffickers use to recruit young girls/boys. 

(this means they pay a fee with a credit card to boost specific posts and private facebook 

groups). Survivors referred to Courtney's House, who are minors, were all sold on social media 

- traffickers are moving away from backpages and recruiting children and youth on social media, 

which is easily accessible. Since January of 2017, 100% of all of our survivors we're sold online 

on the sites I previously mentioned. 

Street, online and Hotels/Motels 

It's a popular misconception that trafficking does not occur on the street anymore, if that was 

true, traffickers would miss a population of buyers who still prefer to buy sex on the street. I 

think that it's hard for people to see and understand street based sex trafficking. Most 

traffickers do not have one person they sell. Like any good business person, pimps/traffickers 

focus on many avenues to increase their weekly profits, children and youth are placed on the 

street, in hotels/motels, stripclubs, online and private homes. Children and youth are forced on 

the street during specific hours of the day and night - only some locations are trafficking 

controlled. 

Survivors who are 13 to 15 years old are advertised on lnstagram and Face book but also strip 

clubs, private barber shops and tattoo shops - this means traffickers are renting spaces in a 

building for "pop up shops" for one day and they rent out different locations all around cities and 

states. Hotels and motels are still being used, but did you know that traffickers get green dot 

visa cards for the survivors and have them put hotels in their name? This is intentional as 

pimps/traffickers know it is harder to prove and police will find difficulty in pulling suspects 

financial information. 

What you need to know: 

When you are with a trafficker and are a U.S. Citizen, survivors must hand over their bank card, 

SSI check and other government assistance received. Most banking institutions don't know this 

and screening measures are not in place in low income areas to flag suspicious banking 
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activities. Pimps/traffickers take survivors social security cards and birth certificates as another 

form of control over their finances. 

Well, that brings us back to me and why this is an important issue to survivors. When I was 

14yrs old, I had property in my name, I had cars in my name. Of course I didn't find this out until 

I was in my 20's when I was homeless and applied for a transitional housing program. I was told 

that I could not be in this program due to my credit - although I was approved by the govt 

funding program to get rental assistance but I didn't qualify due to my credit. There were no 

laws for protecting victims credit( and still isn't). It took me many years to prove that my identity 

was stolen. I don't think people truly understand how not only are you tortured mentally and 

physically, but your credit history is a collateral consequence of being trafficked and creates 

barriers to regaining your independence. 

Although this happen to me long ago this is still happening the same way today. 

1. We need to fix the gaps - I'm going to jump out there and say - today may of been the 

first time hearing in depth about the various financial ways survivors are taken for 

granted - this is because more survivors need to train financial institutions so they get a 

better understanding how to stop this on the ground. 

2. It was very hard for me to try to figure out how to contact financial institutions that said I 

owned these items that I didn't own - institutions should advertise better on their website 

about what to do if your information is stolen and give examples that say if you were sex 

trafficked and this happened who to contact. 

3. Online institutions like paypal and google wallet,cash app all should have the same 

mandatory trainings on human trafficking as traditional financial institutions. 
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Hearing entitled "Following the Money: How Human Traffickers Exploit U.S. 

Financial Markets" 

Statement of Louise Shelley, Orner L. and Nancy Hirst Endowed Chair 

Founder and Director, Terrorism, Transnational Crime and Corruption Center (TraCCC) 

University Professor, Schar School of Policy and Govemment 

George Mason University 

This testimony will assert the importance of increasing the effectiveness of the financial 

industry as a tool to combating human trafficking. The analysis will focus on trends in 

human trafficking, measures the financial community can implement to improve the 

detection and prosecution of human trafficking, and how research and analysis can 

contribute to improved effectiveness. Passage of H. R. 2219 to Increase the Role of the 

Financial Industry in Combating Human Trafficking will provide an important step in the 

right direction if it is combined with efforts to focus on proactive rather than merely 

reactive measures. 

Recent trends in human trafficking are characterized by: 

1) Increasing presence online and use of social media 

Human traffickers are increasingly operating online because criminals are rapid 

adapters of new technology. Between 2010 and 2015, the National Missing and 

Exploited Children Center reported an 846% rise in reports of suspected child sex 

trafficking-an increase found to be "directly correlated to the increased use of the 

Internet to sell children for sex." 1 DARPA (Defense Advanced Research Projects 

Agency), that developed the lntemet, analyzed the temporary sexual advertisements 

and peer-to-peer connections within the Deep Web. The research showed that "Over 

a two-year time frame traffickers spent about $250 million to post more than 60 

million advertisements." This extensive advertising budget is justified by the large 

numbers of victims and the high profits made. 2 

1 United States Senate, Permanent Subcommittee on Investigations, Backpage.Com's 

Knowing Facilitation of Online Sex Trafficking, 7. 

https:!/www.mccaskill.senate.gov/imo/media/doc/20 I 7.0 1. 1 0%20Backpage%20Report.p 

df. 

2 Larry Greenmeier, "Human Traffickers Caught on Hidden Intemet," February 8, 2015, 

https://www.seientificameriean.com/article/human-traffickers-caught-on-hidden-intemet/ 

and also the accompanying visualization that reveals the intemationallinks, Scientific 

American Exclusive: DARPA Memex Data Map. 

https://www.scientificamerican.com/slideshow/scientific-american-exclusive-darpamemex-data-maps/ (especially map 4). 

1 
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2) Movement of human trafficking away from the streets to locales where it is less 

visible 

Social media and the Intemet have made it possible for sellers and buyers to connect 

without personal contact. The investigations behind Backpage have revealed the 

company's centrality to human trafficking. Therefore, there are many fewer women 

and girls who solicit customers on the street; rather, their customers arrange meetings 

in hotels and homes. Therefore, human trafficking leaves its footprint in cyberspace, 

and often in financial systems. Low-level hotels are hubs for the sale of drugs and 

people, knowing the beneficial owners of these establishments is key to combating 

human trafficking. 

3) Increasing convergence of human trafficking with the current opioid epidemic 

The opioid epidemic increasingly converges with sex trafficking as pimps use 

opioids to entrap and maintain control over girls. 3 Individuals who have become 

addicted to opioids often need money for future purchases of drugs and become 

trafficked after entering into sex markets. Therefore, implementation of best 

practices as the proposed legislation H.R. 2219 suggests, is key to stemming the 

growth of human trafficking, and might have a positive collateral impact on the 

opioid epidemic. The key is identifying best practices and establishing a regulatory 

system that allows bankers to be flexible and responsive to the ever-changing 

practices of the agile human traffickers. 

4) Payment in Cryptocurrencies 

There is an increasing problem of criminals employing cryptocurrencies 4 such as 

FBTC Exchange, WebMoney, Bitonic and xmlgold.eu. Some of these currencies 

intersect with traditional financial service providers, as the criminals convert their 

3 A few recent cases of this are given as a representative sample: "Attorney General 

Schuette: Four Sentenced for Their Roles in Southeast Michigan Opioid and Human 

Trafficking Ring." State of Michigan. December 19, 2017. Accessed January 23, 2018. 

http://www.miehigan.gov/som/0.4669. 7 -19?-47796-455935--.00.html; "Major Gang 

Case Results in 37 Bloods Members Sentenced to Over 415 Years in Prison." U.S. 

Department of Justice, September 4, 2015. https:/iwww.justice.gov/u~IJo-edvalpr!t:najorlli!Ilg-cas_Q:re[tJjts-37-bloods-members-sentenced-over-415-years-prison;"Uncasville Man 

Sentenced to 8 Years in Prison for Child Sex Trafficking and Heroin Distribution 

Offenses." U.S. Department of Justice. December 12, 2017. Accessed January 23, 2018. 

https://www.justice.gov/usao-ctfm:Luncasville-man-sentenced-8-years-prison-child-scxtrafficking-and-heroin-distribution. 

4 Marc Goodman, Future Crimes: Everything if Connected, Everyone is Vulnerable and 

What Can We Do About it? (New York: Doubleday, 2015), 209-11; Anser, Risks and 

Threats of Virtual Currencies, 2014. Accessed July 14, 2017, 

https://www.anser.org/docs/reports/RP14-01.03.03-

02 _ Cryptocurrcncies%20508 _31 Dec2014.pdf 

2 
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cryptocurrences into standard currencies. Therefore, it is important that the financial 

community stays vigilant about its intersection with the world of cryptocurrencies 

and develop algorithms and best practices to understand illicit activity in this arena, 

as some human traffickers arc receiving payments through them. 

These four trends of recent years all have important implications for the banking 

community because trafficking is even less visible, except in cyberspace and in the 

financial traces it leaves there. To combat human trafficking we need to be ever more 

reliant on the emerging capability of the banking community to analyze its data in a 

proactive way, to help locate cases of human trafficking. Following the money and the 

patterns of human trafficking in big data allows law enforcement to build effective cases 

without placing victims in jeopardy. This is cost effective, as banks are already allocating 

significant resources to countering money laundering. This new approach requires 

public-private partnerships of which we already have several excellent examples to 

build on. 

Proactive data mining would have a very positive impact on the capacity of law 

enforcement to combat the problem. It would also have the additional benefit of helping 

to combat the opioid epidemic, with which sex trafficking is currently closely linked, 

according to preliminary analyses of financial data by a banker at a major Midwest 

institution interviewed for this testimony. 

The Financial Community and Mining of their Data 

In late 2014, in a report that I co-authored for the World Economic Forum entitled, 

"Hedging Risk by Combating Human Trafficking: Insights from the Private Sector," we 

discussed the efforts of J.P. Morgan starting in 2010 to use typologies to mine their data 

for signs of human trafficking. 

The team partnered with the Department of Homeland 

Security to create typologies that could identify financial 

transactions and certain account attributes that were worth 

investigating. Certain geographic locations and types of 

businesses -nail salons, non-unionized stores, restaurants 

were viewed as a higher risk for trafficking activity based 

on publicly sourced information. Coupled with types of 

transactions credit card charges at certain hours of the 

night, for example-- JP Morgan's Financial Intelligence Unit 

began to sec distinct pattems emerging. 

"For instance, we found $100 manicures between 23.00 

and 04.00 in Manhattan," he says. "Nobody is getting a 

manicure that late, and whoever is getting a manicure is not 

paying that amount of money ftlr it." Viewed separately, 

none of the variables seemed remarkable. Yet viewed 

in aggregate, they created an anomaly or pattem worth 

3 
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investigating. 5 

Unfortunately, the regulatory problems that followed J.P. Morgan's role in the 

housing crisis led to the departure of most of the innovative team that was behind this 

effort and the return to more reactive patterns, such as filing SARs, rather than creative 

new proactive forms of detection of human trafficking. 

In my research and analysis for this testimony, I have learned that alumni of this 

innovative team arc currently working at other banks on proactive data analysis to detect 

human trafficking at the Supcrbowl 2018 that will be held in Minneapolis, Minn. on Feb 

8'11 • With several important banks participating, and based on the success of the 

algorithms constructed to mine data and past experience with monitoring human 

trafficking at Superbowls, it can be anticipated that many dozens of well-founded cases 

of human trafficking will be identified during this period. This is the kind ofbcst practice 

that the proposed legislation should be referring to, and providing a regulatory framework 

to encourage. 

For those who are not data specialists, let me expand a little more on the 

composition of the teams working to construct the algorithms, the underlying 

mathematical tools that will be used to mine the extensive financial data possessed by 

members of the financial community. In the best example I found of innovation in the 

banking sector, a major bank, used computational data analysts, social scientists, and law 

enforcement investigators to construct their algorithms. This was done after reviewing the 

most recent trends in human trafficking patterns. In contrast to many anti-money 

laundering units that rely only on personnel with investigative experience, the addition of 

personnel with social science skills that understand human behavior and data patterns was 

key in improving the success rate for detection. lt was also critical to translating law 

enforcement practice and insights into the patterns that can be searched for in the data. 

In the best existing practices I identified, I did not find the application of new 

online tools by the banking community that could be combined with existing algorithms. 

At Carnegie Mellon University, a leading and long-time researcher of human trafficking, 

is using text based computational learning tools to analyze the texts of hospital and police 

data to mine large amounts of data effectively. This new analytical technique should be 

combined with the numerical based analysis of the banking community, as the ability to 

use different types of data would increase the success in uncovering human trafficking 

networks, and to increase the infonnation available to law enforcement to make their 

prosecutions. 

5 Louise Shelley and Christina Bain, "Hedging Risk by Combating Human Trafficking: 

Insights from the Private Sector," December 2014, 

http://www3. weforum.org/docs/WEF_Human _Trafficking_ Report_ 2015 .pdf. 

4 
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The Financial Community and Beneficial Ownership of Real Estate 

White attending a human trafficking conference in Congressman Pittenger's 

district in North Carolina, I learned of an innovative and important way to work with the 

banking community to address the facilitators of human trafficking. Unfortunately, 

according to the HSI investigator who spoke at the meeting, human traffickers operate 

along the 1-95 corridor in North Carolina, and arranged for meetings of their trafficking 

victims with clients in low-level hotels in a North Carolina city that was also a locale of 

drug sales. The hotels were not complying with North Carolina regulations-they were 

not properly registering customers, learning their identities, and observing the codes of 

operation for the state. Law enforcement was not provided with an effective response 

from the owners of the hotels where the human trafficking was going on. Therefore, as 

innovative professionals they took another approach. The hotels where the trafficking 

was going on had mortgages from banks, and, therefore, it was possible to know the 

identity of the owner because of the beneficial ownership. As a result, law 

enforcement could explain to the banks that the hotels whose mortgages they held, might 

be closed for violation of state re!,'lllations. The banks, concerned that these mortgages 

might then go into default, pressured the hotel owners to change their modus operandi 

and require accurate hotel registries etc. There was a marked improvement both in the 

reduction of sex trafficking and drug sales after this pressure applied by the financial 

community. If the beneficial owners were not known, this best practice oflaw 

enforcement investigations would not be possible to implement on a larger scale. 

Where are we now and where should we be going? 

At present, there is not enough being done in the financial community to detect 

human trafficking. There are many employees of banks willing and eager to fight human 

traflicking. But many banks have rcputational concerns that prevent them from being 

more forth1ight or activist in pursuing the traces of human trafficking within their large 

financial data. Moreover, we have a system of financial reporting that is not conducive to 

maximizing the results obtainable from the financial community. Banks can be penalized 

for not completing a sufficient number ofSARs on time, and are not rewarded for 

innovative practices that help law enforcement find and make human trafficking cases. 

Existing fine programs could be expanded, such as that which will be discussed by Cyrus 

Vance, but even more can be done to provide a proactive response to targeting human 

trafficking cases. 

The good news is: 

l) Human trafficking still leaves a significant financial footprint that can be found 

with an in-depth understanding of how human trafficking operates and the 

development and use of effective data mining tools for large sets of financial data 

that the banking community possesses. 

2) The availability of existing resources in banks, if used more effectively, would 

make it possible for human trafficking to no longer be a low-risk crime for 

traffickers. 

5 
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3) Rather, existing tools, now available to bankers, can make the work oflaw 

enforcement easier, can help construct tighter cases, and can do this without 

compromising victims. 

4) Modem social science methods, such as network analysis, data analytics, and textbased learning, are now available to improve the way that financial institutions 

operate. 

5) Implementing these new measures can move reporting rates on human trafficking 

cases from a 15% success rate with standard SAR reporting to an 85% success 

rate in case detection, using existing personnel. Key to this is the proper mix of 

skill sets on an anti-money laundering team, and a response by the bankers to the 

ever-changing and flexible traffickers, who are always modifying their methods to 

reduce risk and evade detection. For this change in effectiveness to be achieved, 

banks need to adjust their mix of personnel, and regulators need to recognize 

other success measures than just the number of SARs filed. 

6) Public-private partnerships exist between law enforcement and the banking 

community. They are working and need to be enhanced 

What are the problems? 

1) The regulation of the banking system favors reactive, rather than proactive 

responses, to the problem of money laundering. Therefore, many institutions play 

it safe. They follow the existing procedures for reporting suspicious transactions, 

they fail to innovate and identify the networks, the routes, and the victims of 

trafficking. 

2) Existing systems of data mining oflarge financial data focus, far too often, only 

on the names of potential traffickers, rather than the broader range of information 

now available for analysis through the latest techniques in data analyties. 

3) The existing system of filing only large numbers of SARs rather than engaging in 

innovate techniques is all too pervasive 

Where do we go from here? 

1) Passage of the H.R. 2219 is only the first step as there must be changes in 

regulatory practices and evaluations to allow the best practices to flourish. 

2) In the period after the passage of the law, there must be a trial period in which 

there is regulatory relief from standard SARs filing for financial institutions with 

developed plans to engage in a proactive response to human trafficking. 

3) There will be a need to expand public-private partnerships on the national level 

4) There will be a need to incorporate text-based learning into the existing practices 

of data mining to help improve the data analytics. 

5) There will also need to be mechanisms to encourage exchanges of best practices 

such as via workshops, conferences, and webinars, to communicate these best 

practices in secure ways. 

6) There needs to be a way to ensure that best practices do not stay static as the 

criminals change their modes of behavior. Social scientists should play a larger 

6 
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role in the future in helping the banking community understand the changes in 

behavior that will manifest themselves in new patterns in financial data. 

7) Cryptocurrencics are being used to pay for human trafficking, and the banking 

community must develop techniques to detect these forms of payment for human 

trafficking. Analyses facilitating this are under development in top university 

computer science departments, and should be incorporated into banking practice. 

8) As a member of the scientific committee of the Homeland Security Center of 

Excellence on Network Analysis (CINA) and someone leading its outreach 

function, I suggest that we can assume a larger role as a platform to communicate 

existing best practices, and to focus the tools we and those we work with arc 

developing, to mine data. In this way, we can work with the banking community 

in fighting human trafficking more effectively. 

7 
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Cyrus R. Vance, Jr. 

New York County District Attorney 

January 30, 2018 

Good afternoon, Representative \\iagner and members of the House Financial 

Services Committee's Subcommittee on 0Yersight and Im·estigations. I am New York 

County District 1\ttorncy Cyrus R. Vance, .Jr. Thank you for the opportunitv today to discuss 

the shifting economic aspects and implications of human trafficking. 

The nature of human trafficking in Manhattan, the United States, and around the 

globe has transfonned dramatically in the 21 ''century. The illicit transactions that ha\T 

historically comprised the backbone of this economy are no longer confined to street 

corners. Today, advances in technology and finance ha,·e pushed human trafficking online, 

hidden and protected by cryptocurrcncy, laundered money, foreign internet scn·crs, and 

anonymous messaging applications. 

As a result, those who investigate and prosecute these crimes have been forced to 

play catch-up with traffickers who arc increasingly skilled and evasive. In 2014, my Office 

announced the creation of our Human Trafficking Response Unit. Tasked with tackling an 

incredibly complex issue, the Unit is housed within our Special Victims Bureau and has a 

dedicated social worker to address the needs of severely traumatized victims. Howc,·er, in 

addition to addressing the violent nature of trafficking, the l'nit also recognizes the necessity 

of focusing on the intricate financial and technological aspects of this crime. To this end, the 
47 


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Unit employs a forensic accountant and a dara engineer to develop new approaches to 

emerging issues, such as tracing money movement across industries and jurisdictions, 

idcntif}·ing the online footprints of sex trafficking operations, and using innovative 

technologies to proacti,·cly screen cases and the online market for commercial sex for signs 

of human trafficking. We arc also one of the first prosecutor's oftlcc in the country to usc a 

ground-breaking search tool called f\femex, a technology that extends beyond the reach of 

commercial search engines into the "dark" or "deep web." Created by the U.S. Dcparanent 

of Defense's Defense Advanced Research Projects Agency (DARPI\), J\fcmex's suite of 

tools quickly and thoroughly organizes intelligence from online prostitution alkertisements 

to aid human trafficking investigations and prosecutions. 1\femex is now used in every 

human trafficking investigation and prosecution brought by my Office. Last year, we 

screened more than 6,000 arrests for signs of human trafficking using J\Iemex tools. \V'e also 

used J\fcmcx in 271 human trafficking investigations and in six new sex trafficking 

indictments that were brought in 2017. 

Currently, a significant portion of the human trafficking economy exists online. In 

December 2017, more than 7,000 prostitution advertisements were posted on Rackpagc.com 

for Manhattan alone. (),Tr the past decade, tens of thousands of clients have posted crass 

and detailed reviews of prostitution encounters on The Erotic Re,-iew. But trafficking's 

online presence extends far beyond just Hackpage and The Ecrotic Rc,·icw. On the supply 

side, the list includes Craigslist, Citj'Yibe, ECClE Worldwide, and Escorts In College, in 

addition to smaller independent operations that conduct business on wcbsitcs hosted by 

GoDaddy, Wix, and Squarespace. On the demand side, clients use websites like Utopia Guide 

and Spa Hunters to identify and discuss sen·iccs, even going so far as to leave reviews on 

sites like Yelp. 

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Financially, the human trafficking cconomv is just as expansive and intricate. 

Traffickers employ sophisticated techniques to mm·e money rapidly and conceal it 

efficiently. Moving beyond traditional methods such as wire transfers, traffickers have turned 

to companies including money service prm·iders to arrange transportation for their victims, 

pay members of their operations, and mm·e tl1eir ill-gotten gains abroad to countries like 

Russia and China in the blink of an eye. Traffickers also conunonly launder money by 

opening mulliplc business accounts at diffcrem banks, as well as transferring checks and 

cash between accounts to cover their tracks. In many cases, tens of thousands of dollars 

have already been moved before investigators c\·en have a chance to rc,·icw bank records. 

But not all financial techniques arc so extensh·e. As more and more banks and credit 

card companies refuse to do business with those who knowingly facilitate sex trafficking, 

criminals have turned to prepaid gift cards, which essentially function as credit cards while 

enabling the traffickers to maintain anonymity. These cards can be used to register wcbsites, 

obtain cryptocurrency, and e\'en purchase sex. In one J\fanhattan District ;\ttorney's Office 

investigation, a Visa Vanilla card was used to register an escort website on GoDaddy, 

allowing the operator to remain nameless. 

Another conse<Juential shift we have witnessed in our investigations has been the rise 

of cryptocnrrcncy. In most cases, we do not see traffickers accepting cryptocurrcncies from 

buyers of sex. Instead, the most significant in1pact of these currencies in sex trafficking 

investigations has been their role in the online economy. They arc used both by traffickers to 

purchase advertisements and by sex buyers to purchase premium memberships on review 

board websites. The volume of advertisements and memberships, alongside the drastic 

increase in the value of digital currencies such as Bitcoin, has caused the profits of those who 

operate websites that facilitate both the supply and demand side of the economy to 

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skyrocket. Over the last year, the increase in the value of Bitcoin has generated several 

million dollars in profit for one popular review site. 

This trend is, of course, dri-...en by the fact that mainstream credit card companies 

such as Visa and MasterCard ha,·e refused to do business with Backpage. Therefore, without 

cryptoeurreneies, the site would be relegated to using unreliable processors as a last resort. 

These processors charge steep fees sometimes 30 to 40 percent of the transaction amount 

to process transactions, thereby decreasing the site's profits. 

Also of note, some members of the cryptocurrency community appear to cater to 

traffickers who are trying to post advertisements on Backpage and other sites. Paxful, a peerto· peer marketplace where users can exchange gift cards for Bitcoin, explicitly publishes 

Y ou'Tube videos laying out step-by-step instmctions for turning these cards into 

cryptocurrencies to pay for Backpagc ads. One such video can be found here: 

There is no question that the technological and financial em·ironment that I have 

described presents challenges for investigators and prosecutors. I lowever, the Manhattan 

District Attorney's Office is taking several steps to address these critical issues. First, in 2013, 

we formed a working group with the Thomson Reuters Foundation, several banking 

institutions, and leading anti-trafficking NGOs aimed at helping the wider industry to 

identify and report irregularities in fmancial transactions that might be linked to human 

trafficking activity. We are a member of the North America Banks Alliance, a partnership 

between financial institutions, non-profit organizations, and law enforcement coordinated by 

the Thomson Reuters Foundation. This organization seeks to develop strategies and best 

practices around the economic aspects of human trafficking. 

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Second, we ha'T den,lopcd relationships with banks like JP !\forgan Chase and Bank 

of America, working with their compliance and internal investigation teams to proactively 

seek out trafficking indicators. Relationships with such institutions allow our analysts to 

quickly target and investigate potentially illicit financial activity. Lastly, we collaborate with 

money ser\'ices providers to create preemptive alerts on target accounts and aliases so that 

our investigators can intercept and identify those individuals when they send or recei,·c 

money. 

Despite these positive developments, se,-eral roadblocks have the potential to 

impede human trafficking investigations. One of these roadblocks is the emergence of 

encrypted communications technologies, including \VeC:hat, \VhatsApp, and Viber. These 

applications allow users to communicate over tl1c internet, as opposed to traditional 

telecommunications networks. On the ground, this means that traffickers can communicate 

in complete privacy. The companies themselves are also not re(1uired to maintain call records 

or text content. As a result, it is impossible to view or obtain these records without physically 

sei:zing tl1e device. Further, a number of these companies arc hcad<juartercd abroad, such as 

the Chinese company WeChat or the Canadian company TextNow, which prevents my 

Office from receiving vital support and cooperation from their compliance departments. 

In addition to cnC1'ypted applications, a significant challenge we encounter is that the 

smartphones themseh-es are often encrypted. Tlus a topic iliat I ha,·e testified about several 

times before Congress because it has had an enonnously negati,·e impact on the ability of 

law enforcement to do our jobs. Since 2014, Apple and Google haYe engineered their mobile 

devices so that law enforcement cannot access critical evidence on those devices, eYen with a 

court order. Crinllnals including htunan traffickers - know that smartphones now enable 

them to communicate wirh impunity about tl1eir crimes. In a real example from a case 

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involving Promoting Prostitution charges prosecuted by my Office, an incarcerated 

defendant tells his friend on a lawfully recorded landline phone from jail, "Apple and Google 

came out with these softwares [sic! that I can no longer be [un[encrypted by the police ... [ilf 

our phonefs arc] running on iOSR software, they can't open my phone. This may be 

fa]nother gift from God." That is not a gift from God, hut an unintended gift from two of 

the largest technology companies in the world. In the investigation against this defendant, 

there was evidence that he engaged in force, fraud, and coercion during his operation, and a 

search \Varrant was issued authorizing a search of his device. He spoke repeatedly of how 

much evidence was on his phone, stating that the government was trying to get higher 

charges on him and there was evidence on d1e phone. Howe,~er, without access to his 

encrypted phone, we could not bring sex trafficking charges. Instead, the top charge we were 

able to bring was a much lco;s serious crime, Promoting Prostitution in the Third Degree, to 

which he pleaded guilty. 

Our human trafficking investigations arc also hindered by delayed search warrant and 

subpoena returns. As the trafficking economy shifts to an instantaneous online environment, 

it has become increasingly critical that prosecutors receive records in a timely manner to 

avoid falling behind in investigations. Although many companies, such as V crizon and 

AT&T, are quick to respond, there arc many more that routinely fail to pro,,ide records 

within a reasonable timeframc. And while I certainly recognize the ,~o]uminous workload 

that these companies face, overly lengthy delays are sin1ply unacceptable. For instance, some 

companies -- including Go Daddy and T-!Vfobilc-takc as long as six months to provide 

records, while others-including Craigslist-takc even longer. In cases of human trafficking, 

six months can feel like an eternity to ,-ictims of sexual violence and coercion. Furd1er, 

certain companies like Airbnb will not comply with subpoenas that include legal 

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nondisclosure orders unless the length of nondisclosure is enumerated. In a recent case, 

Airbnb infom1cd my Office that it would not comply with a subpoena unless that period of 

nondisclosure was 90 days or fewer. Some of the more complex human trafficking 

im·estigations can take much longer than that. Thus, disclosing the existence of subpoenas 

after 90 clays threatens to compromise long-tern< im·estigations, tllereby invalidating the hard 

work of our investigators, analysts, and prosecutors. 

Another challenge we face in our human trafficking cases is obtaining data from 

outside the United States, particularly because many data servers that contain critical 

evidence of trafficking reside in other countries. 11utuallegal assistance treaties (MLA. Ts), 

which are agreements between countries that create obligations to assist one another with 

criminal investigations, have struggled to keep pace with the complexity of data transfers 

across foreign jurisdictions. The MLAT process is outdated and not compatible with the \Vay 

financial transactions occur in the modern age. For example, while money can be mm·ed 

through various countries at the speed of a computer, it takes us many months if at all to 

obtain documents regarding that money movement when we must go through the ML\T 

process. One of the problems is that MLATs require full administrative legal processes in 

each country involved, and even ML;\Ts between countries with existing special 

relationships can be byzantine, dramatically slowing down the transfer of important 

information. Consequently, by the time we eyentually get the evidence, a case may no longer 

be prosecutable, or tl1e harm caused to ,·ictims is no longer reparable. 

Finally, obtaining data on financial transactions can be challenging because our 

country's lax incorporation laws make it easy for criminals to hide money behind anonymous 

shell companies and launder it through U. S. and foreign banks and their branches. It is 

almost a certainty that, at tl1is Yery moment, a human trafficker, terrorist cell, drug cartel, or 

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corrupt gmTtnment official is using an anonymous U.S. shell corporation to fmancc illicit 

acti,·ities. On a near-daily basis we encounter a company or network of companies involved 

in suspicious acti,·ity, but we arc unable to glean who is actually controlling and benefiting 

from those entities, and from their illicit activity. In other words, we cannot identify the 

criminal because the criminal has used layers of shell companies to frustrate investigators 

and protect himself from prosecution. 

It is clear that our laws must keep pace with these rapid changes in both fmance and 

technology. To fail to do so would lcm·c law enforcement trailing behind sophisticated 

criminals who seek to operate anonymously beyond the existing legal framework. But we 

must remember that, behind these walls of encryption, laundering, and anonymity, there 

exist trafficked victims living in fear of force, fraud, and coercion. Traffickers seek to exploit 

the vulnerable without conscguence, and our laws must not facilitate their ability to do so. 

Thank you. I am happy to take your c1ucstions. 

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CHRISTINA BAIN 22 Ravmond Street+ Manchester, lvL\ 0194-t + (978) 317-2088 + christinaarcherbain@gmail.com 

January 30, 2018 

Commit tee on Financial Sen,ices 

United States House of Rcprcscntati\'CS 

\'<iashington, DC 20515 

Dear tvfembers, 

I atn to you today as an expert on hun1an trafficking to add further discussion points to your hearing, 

"Follo'\ving .:\1oney: Ho\v Hun1an Traffickers lixploit L'.S. Financialivfarkcts." l want to cornmcnd the 

Committee for taking on this important 1ssuc. 

The engagement of the private sector in the fight against hun1an trafficking is criticaL In order to address and 

effectively combat this to include the business community as a key 

stakeholder. The a cniCial role. 

Banking institutions and the broader financial have the ability to detect h1m1an trafficking cases 

through data collection and analytics. Through and targeted monitoring, coupled with innoyatiYe 

public-private partnerships that \v-ill he discussed at the hearing today, the financial industry is poised to be at 

the forefront of this issue. 

Partnen;hips and targeted coalition~ in this effort arc essentiaL Initiatives here in the United States like the 

U.S. Bankers Alliance Against Iluman Trafficking should be supported and replicated. Intetnational models 

like the European Bankers Alliance Against Human Trafficking and Canada's Protect Project, which includes 

representation from major Canadian financial institutions, the tech sector, law cnforcen1cnt. regulatory 

bodies, makers, and NG( )s, should also be looked to as cx::..mplcs of how can amplify 

as "\vell as increasing reporting of suspicious 

organlzations like the of Certified Anti-Lvtoney Laundering Specialists the largest 

intern::ltional membership organization that provides resourc<'S~ expertise, and convc-nings to its 1nembers 

around anti-money laundering and financial crime detection, continuing to highlight human trafficking as an 

irnportant issue through programming have been immensely valuable in further tnobilizing efforts and 

collaboration. 

Thank you for your time and consideration of this statement. If you require further information that 1 could 

provide regarding promising practices and partnerships to combat human trafficking by the financial industry 

here in the Cnitcd States anJ abroad, please do not hesitate to contact me at (978) 317·2088 or 

chri::.tinaarcl1erbain((:Vgmail.cnm. 

Sincerely~ 

Christina Bain 

Manchester, MA 
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children 

U.S. Rep. AI Green 

2347 Rayburn HOB 

Washington, DC 20515 

Dear Congressman Green, 

• 

1 

Speaking Out +Driving Change for Children 

January 26, 2018 

Thank you for highlighting the problem of sex trafficking and the efforts that CHILDREN AT RISK has 

made over the years to combat this crime. In 2007, CHILDREN AT RISK created our Center to End the 

Trafficking and Exploitation of Children to strengthen laws and policies on human trafficking and 

improve the response to children who have been commercially sexually exploited. CHILDREN AT RISK 

has worked with the state legislature for the last ten years to help create some of the toughest antitrafficking criminal laws in the nation, build robust civil penalties and remedies for victims, and provide 

training to key first responders and stakeholders. 

After years of legislative advocacy, education, and awareness-raising, in 2014 CHILDREN AT RISK began 

working to combat sex trafficking by focusing on the demand for commercial sex, which drives the 

market for sex trafficking. With CHILDREN AT RISK leading the helm Houston became one of originalll 

cities in Demand Abolition's CEASE Network. CEASE Houston works to reduce demand for commercial 

sex by studying the market and implementing innovative demand reduction tactics in close cooperation 

with local law enforcement, social service providers, and advocates. Through advocacy within our CEASE 

Network, the Harris County Sheriff's Office and Houston Police Department have dramatically increased 

the number of buyer arrests. HPD increased its buyer arrest from under 10% in 2014 to nearly 50% of 

arrest in 2017. With law enforcement setting the tone by holding buyers accountable, CEASE Houston 

deterred 500,000 sex buyers through text campaigns, cyber patrols, and targeted advertisements in 

2017. 

The illegal massage industry, which involves prostitution and sex trafficking along with a host of other 

criminal and civil violations, is rampant in Houston, Texas. There are an estimated 300 illegal massage 

establishments currently in Houston. To combat the illegal massage industry CHILDREN AT RISK created 

Project AWESOME (Attorney's Working to End Sexually Oriented Massage Establishments) in 

collaboration with the Harris County Attorney's Office and volunteer attorneys. 

To help engage business in the fight against human trafficking CHILDREN AT RISK helped establish the 

Human Trafficking Prevention Business Partnership Program in the 84th legislature. The program which is 

administered by the Secretary of State of Texas certifies businesses that take a zero-tolerance policy 

towards human trafficking. 

In the wake of Hurricane Harvey, working with the City of Houston, CHILDREN AT RISK convened antitrafficking advocates, law enforcement and service provides to specifically address ways to help prevent 
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and combat increase in labor and sex trafficking associated with the disaster and is still working closely 

with Mayor's office to continue outreach to those impacted. 

Despite all the hard work of CHILDREN AT RISK, the City of Houston, local law enforcement, service 

providers, and community advocates, human trafficking continues to persist within our city. Our focus 

moving forward is to increase demand reduction tactics, rid Houston of illegal massage establishments, 

increase human trafficking prevention trainings in schools and vulnerable communities, and improve the 

services available to those seeking to exit the commercial sex industry. 

Thank you again for taking to time to focus on this important issue. If you have any questions or need 

any additional information, please don't hesitate to ask. 

Sincerely, 

Emily 

~ Freeborn 

CHILDREN AT RISK Staff Attorney 

CEASE Network Houston Coordinator 

Office: 713.869.7740 

Fax: 713.869.3409 

2900 Weslayan • Suite 400 

Houston, TX 77027 

efreeborn@childrenatrisk.org 
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The Houston Mayor's Office, Mayor Sylvester Turner works to address human trafficking- both sex and 

labor by advancing systems change and filling service gaps through its anti-trafficking strategic plan 

which has 5 objectives, 28 strategies and 91 tactics. The objectives and a few examples of those 

objectives follow: 

Objective 1: Institutionalize the City of Houston's Response and Implement Trainings at Scale 

Trained all1,200 Health Department (HHD) employees including HHD's food establishment 

inspectors to recognize and report trafficking in their day to day functions. 

A recent trafficking tip was reported to the national hotline involving food truck workers that 

appeared anxious and were guarded by a pit bull. 

Mayor Turner signed an Executive Order called "Zero Tolerance for Human Trafficking in the City 

Service Contracts and Purchasing". 

Covering this EO, Bloomberg Law published an article in its White-Collar Crime Report stating 

that the City of Houston was on the "compliance vanguard". 

It is the first EO of its kind by any major U.S City and international organizations and cities have 

taken notice. 

Objective 2: Raise Awareness 

The Houston Mayor's Office ran a 6-month long media campaign on TV, radio, billboards, metro 

buses, taxis and printed thousands of indicator cards for the community. 

The campaign increased calls to the national trafficking tip hotline by 80% and increased cases 

confirmed by 61% during peak media saturation. 

The city received one report from a service provider stating that her client saw one of the ads 

and said to herself "that's me" and called the trafficking tip hotline to get help. 

Components of the media campaign were translated into Spanish, Mandarin, Vietnamese, 

Arabic and Urdu. 

Objective 3: Coordinate Services and Engage in Direct Outreach 

After assessing for gaps and finding gaps in emergency shelter, psychological and medical 

services, the city negotiated a shelter system agreement with The Salvation Army on behalf of 

the service providers that conduct direct outreach and often encounter potential victims in crisis 

and in need of often scarce emergency shelter. 
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Through this arrangement, the city pays the monthly bill and offers the outreach agencies the 

ability to place an unlimited number of people in the emergency shelters immediately, at no 

cost and with very little administrative burden to them. 

The Houston Mayor's office also placed a Human Trafficking Psychology Fellow, the first in the 

country, at the only 24-hour psychiatric hospital in the Houston area not only to screen patients 

for trafficking but to provide therapy for services in an outpatient setting. 

Regional and local law enforcement agencies distribute survivor informed cards during their 

investigations and inspections that are designed to prompt self-identification and are translated 

into multiple languages. 

Objective 4: Implement the joint initiatives of the Mayor's policy task force, HAC-HT 

The Houston Mayor convened a policy task force to support phase 1 of the strategic plan. 

The plan is currently 89% complete and this task force has been temporarily disbanded as the 

Mayor's Office develops phase 2 of the strategic plan. 

Phase two will continue post-disaster trafficking prevention work and aim to engage more 

corporations to address trafficking in their supply chains. 

Objective 5: Become a national model 

The city of Houston was the first to have a Mayor's Office position dedicated solely to 

combatting human trafficking. 

The Houston Mayor's Office takes an empowerment approach and makes the plan and all the 

materials we develop including the strategic plan available for download. 

To date the city of Houston plan has been downloaded 585 times in the US, Canada and Mexico 

and 4 other countries. 

The city recently learned that Humanity United and the Novo Foundation will announce 3 major 

U.S. cities that will support a human trafficking fellow. 
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PG 

Project Girls- Rescue and Advocacy 6910 Dillon St. Houston, Texas 77061 832.933.7419 

Dear Congressman AI Green 30th January 2018 

OVERVIEW- Project Girls is an all survivor ran program, located at 6910 Dillon St. HouTX 77061, off 

Telephone Rd. in Southeast Houston. Telephone Rd. is 1 of the oldest hubs known ever, to prostitution. 

Founder & Executive Director, Tracy Dudley was a victim herself to a life of crime, drug addiction and 

prostitution on Telephone Rd. She exited the life in 2003 and developed Project Girls for the purpose 

of reaching women and girls who are involved in the same lifestyle. Project Girls offers crisis 

intervention directly on the streets and in hi-risk areas of Houston· mainly targeting Telephone Road. 

These interventions include providing basic necessities, direct access to care for those exiting the life, 

advocacy, case management and aftercare. 

ACCOMPLISHMENTS: ·Developed the 1" Survivor ran Crisis Intervention team in Southeast Houston. 

Project Girls is a victim service provider for the Houston Police Department and the Harris County 

Juvenile Probation Dept. (CARE Court· serves only victims of trafficking) We have written a curriculum 

specific to the game called Disabling Dependency and working on our next curriculum. 

SIGNIFICANT FINDINGS: Southeast Houston is primarily Caucasian drug addicted females who do not 

have a pimp. The community at large in Southeast Houston has accepted Telephone Rd./ Southeast 

Houston prostitution as the norm and somewhat accepted that the girls on the street are "just 

prostitutes". Project Girls brings awareness to the community and solutions to the women/girls in the 

life. 

AREAS OF CONCERN: Need more direct access to safe/care facilities. Need$ funding to open a crisis 

center directly in hot spot areas of Houston that will serve as a bridge I safe place as services for those 

exiting the life can be coordinated. Respectfully 

Tracy Dudley, Founder & Executive Director 
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January 29, 2018 

Dear Congressman Green, 

The Landing serves victims of human trafficking and those in the commercial sex 

industry through outreach, protection and collaboration. Services are mainly provided through 

a drop-in center approach. Houston is known as a hub for human trafficking, prostitution, and 

commercial sexual exploitation. However, one of the main barriers in serving victims of human 

trafficking is that victims are hidden and underserved. Additionally, not every victim we 

encounter is ready to leave his or her trafficker or is ready for long-term care or shelters. On 

top of this, when a trafficked victim is ready to seek help, many agencies require that a 

trafficked victim be identified upon intake before servicing them. However, most trafficking 

victims will not self-identify and many are manipulated by their traffickers to tell lies, which 

prevents them from receiving help. 

Low identification rates and victims falling through the gaps are why drop-in centers are 

necessary: to provide a nonjudgmental. safe space where victims can access specialized, 

trauma-informed care while navigating their own victimization. That is why The Landing built 

the only drop-in center in Houston to serve this population, including services such as food, 

clothing, hygiene products, case management, licensed professional counseling, translation 

services, computer access, a resting room and additional programming. The Landing conducts 

street outreach at least four times per month, apartment outreach two times per month and 

municipal court outreach two times per month to let victims know about The Landing's drop-in 

center. 

Some issues we have identified when creating a safe space include the following: 

1. Trauma Informed Crisis Management- Managing trauma informed behavior is a 

challenge as we strive to create a safe, nonjudgmental space for all our clients. 

However, clients react to trauma in different ways, therefore there is not one clear 

solution in how to handle trauma-induced behaviors while we maintain a safe space. 

2. High Costs of Security- We work with the Houston Police Department and a private 

security company called S.E.A.L. Security- both of whom have generously given of 

their time for our security. However, we do see higher costs of security as a 

challenge as we look to expand services in the future. 

Serving this population does not come without its own set of unique challenges. The 

Landing's greatest obstacles include: 

1. Enough Trained and Consistent Staff and Volunteers- In order to provide quality 

services that will build trust, victims need to meet with and build relationships with 

the same faces. In addition, these staff and volunteers need to be trained to know 

how to provide support without re-traumatizing victims. This field is emotionally and 

physically tiring and training takes time and is costly, which is why it is hard to have 

committed, trained volunteers. In addition, at the pace that The Landing has 

increased drop in visits and clients, we are in need of more staff to serve this 

o ul ion. 
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2. little Recovery Capital- Victims of human trafficking are resilient, but often, the 

domestic victims we work with have little recovery capital. They have little support 

from family or friends for the changes they desire to make and they also face high 

barriers to accessing services in the community, especially because many service 

providers fail to see them as victims or know how to handle their trauma. 

3. Sustainable Financial Support- Both #1 & #2 from above need sustainable financial 

support to keep services going. However, with the amount of non profits in Houston 

seeking funding, grants having great restrictions on what their funding can be used 

for without truly understanding the population's needs, and the rapid rate at which 

our clientele are increasing, it is hard to keep up with achieving the financial support 

we need. 

The Landing opened its doors on January 11, 2016. We visited over 14 different drop-in 

centers around the country to learn from their models. Since opening, we have studied and 

learned from our clients while serving them. Our findings, which includes areas of concern: 

1. High percentage of those in commercial sex industry have red flags of being trafficked -

Out of the total169 clients we have served in the past two years, 73% have been 

identified by our case managers as victims of trafficking. This is not to say that the other 

27% were not victims, but just that the 73% had evidence of being trafficked. Now that 

they have reached adulthood and had fallen through the gaps as children, society has 

seen most of our clients as just prostitutes without realizing their history. They do not 

understand that since they were in the commercial sex industry as children, they were 

victims of human trafficking. 

2. Word of mouth is the best marketing tool - 42% of our clients visit The Landing because 

another client introduced them to our services. 27% came through referrals; 15% 

through outreach; 8% through law enforcement operations. 

3. While overall awareness of human trafficking has increased best practices are still being 

researched and developed- The anti-trafficking field is still young and therefore best 

practices are still being researched. In addition, there is no one solution that works well 

with every victim of trafficking. This is why various models are important to implement. 

4. Victims are scared to give information about their traffickers due to threats against 

them- Protection for victims is low, making it hard for them to testify against their 

traffickers. In addition, prosecution of traffickers is low, which does not instill 

confidence for victim service providers to have victims work closely with law 

enforcement. It is imperative that criminal justice system find other ways to gather 

evidence and prosecute traffickers rather than re-traumatizing and endangering victims. 

Sincerely, 

Natasha 

r~ Paradeshi 

Executive Director & Co-founder 

The Landin