The Dark Nexus of Fraud and Human Trafficking in the Private Sector

Tuesday morning of the 35th Annual ACFE Global Fraud Conference, Matt Friedman, CEO of The Mekong Club, an organization of Hong Kong’s leading businesses joined to end all forms of human trafficking, took the main stage. Friedman explored the violent and terrifying reality of human trafficking schemes around the world, including his own interactions with victims and their stories. But, where do we, as fraud examiners, come in? Where do we find the intersection of fraud examination and the dark reality of modern slavery? Friedman says it is not as far as we think. 

Human Trafficking Is Closer Than You Think 

Companies around the world use the exploitation of underprivileged peoples to pad their profits and increase their production. Friedman posits, where there is the ability to exploit people, there will be exploitation. Many of these human trafficking schemes and situations of modern slavery do not begin as cases of kidnapping but as false promises of opportunity for people to improve their lives and the lives of their families. In fact, Friedman states that of the known human trafficking cases, 60% are associated with product supply chains. 

Young men and boys are offered the opportunity to earn money for their futures and the futures of their family through fishing jobs. What first appears to be their ticket to a better life turns out to be jobs lasting years on a boat where they are forced to pay more for their food and shelter than they earn, imprisoning them to a life of debt with no way out. 

When criminals in Cambodia learned they could make money online scamming, they began to target low-income populations in Asia. Not to scam them, but to enslave them to scam others. Friedman states that in these rings, a quarter of a million people are forced into scamming compounds with threats, and often more than threats, of violence.  

Where Fraud Examiners Can Make a Difference 

But as Friedman said, these are not isolated incidents, and it is in our line of work that we choose to not be complicit. He states that there are only approximately 30,000 people around the world whose work is dedicated to fighting human trafficking, and they are burdened by rules and regulations. And of the rest of the population, our lack of awareness of the problem allows these criminals to continue their work. Friedman asked the audience, “How many of you in this room knew 25% of what I was talking about today before I said it?” Glances at fellow attendees saw few, and far between, hands in the air. He continued, “If you don’t know about an issue you’re not going to care, and if you don’t care you’re not going to do anything.” 

This is where the private sector takes the onus of combatting human trafficking. While government entities and organizations work to combat this issue, they are burdened with limited resources and political discourse. Friedman points out the conflicting motivations of companies in the private sector, such as the annual profits from modern slavery amounting to $236 billion.  

However, private organizations around the world are being held to higher and higher standards every year. Starting 2012, regulations were put into place across countries to require companies to combat human trafficking through different supply chain legislature. Class action lawsuits against companies have also forced companies to adjust their practices to align with regulations. Friedman states that while these cases are not often won, the reputational damage is enough to monetarily hurt the companies. This media coverage extends outside of lawsuits. Friedman states that media coverage of human trafficking has doubled every year for the past 10 years. Non-government organizations also will target large companies to publicize their use of modern slavery to get them to change. Environment, social and governance (ESG) has been a large focus both before Covid and after; however, there has been a larger focus on the social element, and studies have found that 84% of millennials value ESG impact. His message was clear: combating human trafficking is not only a moral imperative but also a business necessity, and the time for action is now. 

Friedman closed his session with a story of a banker who approached him at a previous event. The man told Friedman about how he had saved a young girl from a human trafficking situation after seeing her being victimized at a motel on a road trip. He called law enforcement and the offender was captured. He told Friedman that he works in banking in anti-money laundering and anti-fraud and has worked on reports for human trafficking cases. Friedman said to the banker, “Don’t you realize you’ve been doing this work all along? By you doing that work to protect the bank and getting those suspicious transaction reports, you’re making the world a better place.”  

Friedman then walked off the stage and into the audience before telling everyone in the crowd, “The work you do protects your organization. It protects the government, but it also protects the people who are out there in these vulnerable situations. It’s heroic.”