Preventing the Finance of Online Sexual Exploitation

The ongoing COVID-19 pandemic has contributed to increased online activity and more digital transactions for both licit and illicit purposes. Greater online activity in the midst of more tenuous economic situations poses risks to populations that are already vulnerable to trafficking and online exploitation. As more illicit actors operate online, the U.S. government can expect to see digital currencies used as tools for facilitating the financing of human trafficking, such as for purchasing and selling child sexual abuse material (CSAM) on both darknet websites and the open internet. Human trafficking poses a multifaceted threat to U.S. national security as criminals exploit vulnerabilities in the government’s ability to protect its persons, financial institutions, and economic integrity to their own monetary benefit. Moreover, these illicit networks operate at a transnational level and can often involve other forms of international crime such as sexual exploitation, forced labor, and drug trafficking.

As financial institutions and services continue to adopt cryptocurrencies as new forms of payments, U.S. policymakers must coordinate closely with relevant stakeholders, including financial institutions and online platforms providing sexually explicit material, to better identify specific responsibilities and expectations regarding the financing of online sexual exploitation and human trafficking. This commentary outlines key trends and risks within digitally enabled human trafficking financing and areas where the United States government can engage with private sector actors to combat these illicit activities.

What role does social media play in expanding the reach of human traffickers?

Social networking and dating applications such as Facebook, Instagram, Tinder, and Grindr give traffickers direct avenues to identify and lure victims online. According to a 2018 study by the Polaris Project, human traffickers recruited over 440 individuals in the United States over two years through social media alone. Twenty-six percent of respondents stated that their trafficker used their own personal social media accounts to sell, distribute, and advertise sexually exploitative material. As society’s dependence on the internet continues to rise during the pandemic, human traffickers will also continue to rely heavily on targeting their victims through online platforms.

Criminals have long used virtual chat rooms, encrypted messaging, and social media as platforms to share and consume sexually exploitative material. For example, South Korea, which has one of the fastest internet downloading speeds in the world and almost universal internet access among its population, has been grappling with a slew of online sexual exploitation cases related to file-sharing and social media applications. Traffickers are finding social media particularly useful because it allows them to instantly recruit and advertise among people across the world at minimal cost. And social media messaging facilitates quick and easy ways to share and market exploitative material.

How have cryptocurrencies facilitated web-based human trafficking?

Criminals engaging in the production, distribution, and sale of online sexual material exploiting trafficked persons rely greatly on cryptocurrencies as payment methods. Therefore, relying solely on fiat currency-based institutions to combat the financing of human trafficking is simply not enough. In a April 2020 study, Chainalysis reported that approximately $930,000 worth of Bitcoin and Ethereum transactions were sent to addresses associated with CSAM providers in 2019, a 32 percent increase from 2018. Chainalysis also noted in its February 2021 report that yearly revenue to CSAM websites continues to rise and, similar to other forms of cryptocurrency-based crime, CSAM providers send the majority of received funds to exchanges in order to convert cryptocurrency into cash. As COVID-19 increases online activity and digital transactions, and more financial institutions offer avenues to purchase cryptocurrencies, U.S. policymakers and financial regulators should prepare for higher levels of illicit crypto transactions.

Perhaps two of the most notorious cases of financing online sexual exploitation and trafficking through cryptocurrencies are Welcome To Video and Nth Room. Both previously operated by South Korean nationals, the former was the largest known darknet child pornography website by volume of content, and the latter sold myriad videos of young women and children engaging in dehumanizing sexual acts and forced self-mutilation. Prior to government seizure in 2019, both websites received substantial amounts of Bitcoin transactions. According to the U.S. Department of Justice indictment, the Welcome To Video website offered a million potential payment addresses. By tracing the flow of funds through its blockchain, U.S. and South Korean law enforcement helped rescue at least 23 child victims residing in the United States, Spain, and the United Kingdom. This operation seized approximately eight terabytes of child sexual exploitation videos, one of the largest seizures of its kind.

How will the COVID-19 pandemic affect human trafficking?

The economic impact of the ongoing COVID-19 pandemic will greatly contribute to current rates of homelessness and economic instability in the United States, two major factors affecting an individual’s vulnerability to human trafficking. The U.S. Bureau of Labor Statistics reported that the federal unemployment rate nearly doubled from 3.5 percent (5.7 million) in February 2020 to 6.3 percent (10.1 million) in January 2021. Limited hospital space and shelter resources, along with an insufficient supply of COVID-19 vaccines, will result in higher numbers of homelessness and prolonged economic instability which will likely contribute to human trafficking. Additionally, a 2018 Polaris project survey report claimed that 64 percent of all survivor respondents reported being homeless or experiencing unstable housing when they were recruited into their trafficking situation.

The economic instability brought on by the pandemic is already causing social changes that are likely to increase the risks of sexual exploitation. According to the National Center for Missing and Exploited Children, the total number of “online enticement” of children reported from January through June of 2020 increased by 90 percent. Potential traffickers will likely continue to exploit the combination of increased online activity by youths and reduced parental supervision due to job seeking to lure and coerce vulnerable persons into human trafficking. For example, the FBI stated in March 2020 that children are now at a greater risk for online sexual exploitation as widespread school closures force students to dramatically increase their online presence, heightening their chances of becoming prey to human traffickers.

Given the likelihood that the COVID-19 pandemic will continue to raise the threat level of human trafficking, the following recommendations are designed to highlight several potential avenues for the U.S. government to engage with the private sector to help stop its financing.

Recommendations

1. Congress should introduce legislation requiring all pornography websites to disable download and share functions for videos and images to reduce the risks of users saving and reselling illegal content on other platforms.
   
   Pornography websites are some of the most highly frequented and ad-heavy websites in the world, which presents a major opportunity for sexual exploitation-linked financial crime. For example, Pornhub accrues roughly three billion advertisement impressions a day and has a net worth of around 1.5 billion USD. Although Congress recently passed bipartisan legislation to strengthen punitive measures against pornography websites for hosting and selling sexually exploitative content of trafficked persons, traffickers still can exploit technological loopholes that allow them to exploit victims even when sites remove videos. Congress should introduce legislation requiring all pornography websites to disable download and share functions so that users cannot simply save and resell illegal content on other platforms and continue to incentivize abusive videos.
2. Congress should allocate additional funds and resources to the Department of Justice and Financial Crimes Enforcement Network (FinCEN) working on anti-online sexual exploitation and internet-related human trafficking finance.
   
   Congress should expand the workforce in investigative units processing suspicious activity reports related to human trafficking within the Departments of Justice and the Treasury, especially FinCEN. Increasing the number of trained professionals in these agencies would aid the U.S. government’s efforts in identifying human trafficking-related financial activity and strengthen coordination with law enforcement.
3. The Department of the Treasury should consider extending safe harbor protections to pornography websites participating in information sharing and anti-human trafficking finance training.
   
   Similar to safe harbor protections granted to financial institutions in compliance with Section 314(b) of the USA Patriot Act, the Department of the Treasury should consider offering similar legal protections to participating pornography websites. In particular, FinCEN can offer joint anti-money laundering and anti-human trafficking finance trainings and workshops to financial representatives from financial institutions, cryptocurrency exchanges, and pornography websites. Through these workshops, participating organizations will receive in-depth training on how to flag, report, and prevent the upload, sale, and distribution of human trafficking-related material through various software programs and red flag indicators denoting possible trafficking activity.
4. The Department of the Treasury should require U.S. financial institutions, websites, and cryptocurrency exchanges receiving safe harbor protections through 314(b) to provide mandatory anti-human trafficking finance identification training to all employees.
   
   FinCEN should stress that all financial institutions including banks, casinos, loan companies, insurance companies, cryptocurrency exchanges, credit card companies, and pornography websites receiving safe harbor protections should incorporate FinCEN advisories on identifying and reporting human trafficking activity into their company-wide anti-money laundering trainings. As human trafficking is often a predicate offense to other money laundering activity, these trainings should include key transactional indicators of human trafficking and sexual exploitation. If financial institutions detect this transactional behavior early and notify local law enforcement, this could provide ample time for legal authorities to delegate the proper resources to locate the trafficked person(s) and intervene prior to further exploitation.
5. The private technology sector and non-governmental organizations (NGOs) should collaborate to share information about human trafficking behaviors and typologies.
   
   If used responsibly and in line with legally required privacy protections, the private sector can leverage artificial intelligence to help detect, deter, and dismantle human trafficking networks. Technology companies, especially those providing online chat rooms, mobile phone applications, and encrypted group messaging services should deploy machine learning to identify patterns of human trafficking on their platforms. These typology-detection efforts should be informed by insights from anti-human trafficking NGOs who work with trafficking victims. There are good examples of such technology information-sharing collaborations that should be expanded.
   
   For example, the Technology Coalition is a group of financial technology leaders from major U.S. companies including Google, Facebook, Twitter, PayPal, and VSCO, that have successfully collaborated on combating online sexual exploitation of children through the use of artificial intelligence such as PhotoDNA and Google’s Content Safety API. These technologies can further assist law enforcement, social media platforms, and anti-human trafficking NGOs in reviewing, identifying, and tracking online sexual exploitation and child abuse. By adding non-financial technology companies to these collaborations, law enforcement and financial institutions can better identify behavior indicative of online sexual exploitation and human trafficking finance.

Jason Bartlett is a Research Assistant for the Energy, Economics, and Security Program at the Center for a New American Security. The author would like to thank Yaya J. Fanusie and Ilan Goldenberg for their peer review of this piece.