IT leaders in financial institutions need to partner with their regulatory compliance officers to help stop human trafficking, says a Canadian who was just honoured for his work in trying to stop this abuse of people.
“My advice would be for [CISOs, CIOs, CTOs] to work closely with their chief compliance officers and their compliance departments,” Peter Warrack, chief compliance officer of the Toronto-based cryptocurrency exchange Bitfinex, who last month was awarded the Meritorious Service Cross by the Governor-General, said in an interview Tuesday.
The award comes for his work helping establish Project Protect in 2016, a partnership between banks, credit unions, and money services, and government agencies, that focuses on money laundering used by human traffickers. After two years, participants had submitted 4,200 reports to the federal anti-money laundering financial transaction tracking agency FINTRAC.
At the time Project Protect was created, Warrack was director of anti-money laundering advisory for the Bank of Montreal.
“CTOs can provide the data to drive the algorithms the compliance people can use to detect transactions of human traffickers moving through their environments,” he explained. “In many cases, in banks for instance, we still have these pillars of compliance, technology, corporate security et cetera, and very often those pillars don’t communicate very effectively. So for a CTO or CIO to go to [compliance] and say ‘How can we help fight trafficking?’, that’s huge. The technology side can do a lot to prevent and detect it.”
He disagreed with the idea that cryptocurrency facilitates a lot of crime, saying most criminal activities are still paid for in cash. The legitimate cryptocurrency community, including Bitfinex, does a lot to help fight the use of crypto for crime by working with law enforcement and regulators around the world.
Bitfinex belongs to the Anti-human Trafficking Intelligence Initiative (ATII), he noted, which works with law enforcement agencies around the world to raise awareness and tell police or regulators about activity possibly related to human trafficking and the sale of child sexual abuse material sold over the internet.
“What we’re doing already is making a huge difference,” Warrack said.
By coincidence, shortly before the interview the U.S. Justice Department announced a husband and wife were arrested in New York City for allegedly conspiring to launder cryptocurrencies stolen in 2016 from Bitfinex. At the time the coin was worth about $17 million. Today its worth about $4.5 million. Police recovered most of it.
Those arrests show “that crypto actually provides the ability to solve these crimes because it is traceable to a degree,” Warrack said. “There are ways of tracing these things. The large ransomware attacks in the U.S. last year [an apparent reference to Colonial Pipeline] the FBI cracked the case. Last year one of the biggest takedowns in child exploitation on the Internet was identified through the use of cryptocurrency as a payment mechanism. So we are doing a lot.
“More regulations are coming into place from governments around the world, which are designed to provide more information to enable us to prevent crime in the first place, and where crime does occur for law enforcement to detect it and bring people to justice.”
After serving in the British Army’s intelligence unit in Northern Ireland, Warrack joined Royal Ulster Constabulary in 1983, where he eventually worked in the economic crime bureau. In 2002, after speaking at a conference in U.S., he came to Canada after being asked by RBC bank to start and head its intelligence division for preventing financial crime and money laundering crime. In 2010 he was hired away by the Bank of Montreal to lead its anti-money laundering efforts, and in 2018 left to start his own company to follow his interest in cryptocurrency, which led to his position with Bitfinex.
It was a presentation by a victim of human trafficking at a 2015 anti-money laundering conference in Toronto that got Warrack involved in the problem. “I knew nothing about human trafficking at that point,” he recalled. But when the speaker asked for the audence to help, he stepped forward.
That led to Project Protect, in which banks and other regulated entities work with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) to identify and report suspicious information pointing to human trafficking.
That also led to the formation of related public-private groups: Project Shadow, to fight online child exploitation; Project Chameleon, to fight romance fraud; Project Guardian, to fight the trafficking of fentanyl; and Project Athena, to identify underground banking transactions that go through casinos.
Asked if Canadian governments and financial institutions are doing enough to stop money laundering, Warrack said that “in most cases we have a very robust system. I’m a great supporter of FINTRAC, which is the anti-money laundering regulator in Canada. They have in place robust mechanisms and regulations that banks and others have to follow.
On the other hand, he added, “Canada is criticized as a country because, unlike most other countries in the world, the legal profession is not required to report suspicious transactions to the regulator. Everyone else — the banks et cetera– have to report their suspicious transactions to FINTRAC … ”
Canada is one of the few countries where all international wire transactions above a certain level are automatically reported to FINTRAC,” he added. “So I think Canada does have a strong system, but there are weaknesses.”
As for the Canadian honour, Warrack said he’s just the custodian of the award for the thousands of others around the world who work to detect and report human trafficking.
