Code 8.7: FinTech

30 March 2019
Research Innovation

Kilian Moote  | Project Director, KnowTheChain

Too frequently people are treated like commodities in our technology-powered world. In most instances, the exploitation of an individual generates a financial transaction, and/or contributes to the financial gain of an individual or company. This hothouse looked at different ways these financial flows could be identified and disrupted, making the act of exploiting someone too costly, and eliminating the financial gain from trafficking.

Maria Mahl, from Arabesque, a specialist environmental, social and governance (ESG) quant asset manager; Liz Barrick from the Transaction Record Analysis Center (TRAC), a centralized searchable database of the financial transactions of global money services business; and Bill Peace from STOP THE TRAFFIK, a campaign coalition that aims to bring an end to human trafficking worldwide discussed three different types of data that could be used to shift this paradigm:

  • Structured data (commonly in the form of suspicious financial transactions);
  • Unstructured data (information provided by civil society groups or service providers working with victims); and
  • Publicity available information (social media data or news).

From left to right: Maria Mahl (Arabesque), James Cockayne (UN University Centre for Policy Research), Liz Barrick (Transaction Record Analysis Center).

Structured Data

Structured data is collected in a consistent way, regardless of the institution collecting the information. Financial institutions have heavily regulated processes to collect information in common and shareable formats. Banks are able to use this information to help construct typologies of risk in order to improve their systems for identifying suspicious activities, ensuring higher rates of compliance with Know Your Customer regulations. The collected data is also made available to law enforcement for use in investigating and identifying instances of trafficking. For example, the telephone numbers provided for wire transfers can be cross-referenced with the phone numbers listed on websites advertising commercial sex.

However, while there is some nascent interest in using structured financial transactions to better identify where workers are paying exploitative recruitment fees, the ability to do this type of analysis is still unproven. One tool that has shown great potential is Southwest Border TRAC, which has used more than 80 million points of data from financial transactions to identify instances where traffickers are using financial institutions to transfer money. Although this type of information is incredibly valuable and provides interesting opportunities for sophisticated data analysis, the scope is limited to trafficking transactions that touch formal financial institutions. The tool also often depends on a commercial advertisement or some other piece of information that validates the financial transaction likely related to trafficking. Therefore, the tools that are currently best used to identify sex trafficking or other forms of exploitation have a direct commercial connection.

Unstructured Data

Building on the aggregation of structured data, organizations like STOP THE TRAFFIK are working with technology providers such as IBM to layer in data from frontline organizations. This provides an additional layer of intelligence for understanding trafficking patterns. Such information can be used to create a more sophisticated form of trafficking typology, providing greater context around the types of populations in a given region that may be at-risk to trafficking. Better integration of unstructured data from civil society groups or service providers strengthens tools used to identify or predict where trafficking routes may be occurring.

Unlike structured data, collecting and integrating unstructured data can be quite labour intensive and can be difficult to compare. Creating common collection processes for this unstructured data is critical, and collaborations like the one between STOP THE TRAFFIK and Liberty Shared to help frontline service providers input case data in a consistent and comparable way are a positive step.

To expand this type of data collection, barriers related to data security and labour intensity will need to be overcome. Service providers working with survivors and at-risk populations may be hesitant to collaborate on these types of tools, as risks to their beneficiaries may exist. Trust among these partners is paramount to greater adoption of data collection and sharing tools.

Publicly Available Information

The billions of pieces of publicly available data generated every day by individuals using social media as well as the daily onslaught of news produced globally is another resource in the fight against modern slavery. Effectively harnessing this information requires utilizing machine learning and sentiment analysis to identify the helpful nodes in a sea of billions of disparate data points.

The sustainability quant firm Arabesque presented on the ways in which they use this type of information to screen investments to better understand if trafficking may have an impact on their investments. To fully harness this type of information requires a technical sophistication and capacity to utilize machine learning. It is also difficult to connect social media information to financial risk for companies. Similarly, in an age of “fake news”, analysis of news sources may be based on inaccurate information. Similarly, “headline risk” is more acute for consumer-facing or well-known brands, not those actors that are more likely to be using forced labour to a significant degree.

Beyond utilizing data and technology to intervene, participants also discussed other ways that the financial and investment system is connected to human trafficking, including how to better control access to financial markets for different actors. For example, might there be other ways to use financial technology to increase financial inclusion for survivors and at-risk populations? Financial security is commonly seen as one of many vulnerability factors for at-risk communities. In a similar way, might there be other ways to limit the ability of actors taking advantage of people from accessing the financial system?

While the financial sector has been using structured financial transactions to combat trafficking, there has been limited consideration of how to use technology in other ways. The breadth and depth of the discussion during the FinTech hothouse clearly illustrates that there is a greater need and opportunity to explore this topic more closely in the future.

Kilian Moote is the Project Director for KnowTheChain.

This piece has been prepared as part of the Code 8.7 Conference Report. Read all the contributions here. Download the full PDF report here.

This article has been prepared by Kilian Moote as a contributor to Delta 8.7. As provided for in the Terms and Conditions of Use of Delta 8.7, the opinions expressed in this article are those of the author and do not necessarily reflect those of UNU or its partners.

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