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Surging migration and falling state-level oversight is driving minors into hazardous, legally restricted jobs in the United States, where, according to analysts, most financial institutions lack controls to identify and act against the parties who employ them.

Over a five-week span in June and July, three 16-year-olds died in prohibited occupations: Duvan Perez, a Guatemalan national, became entangled in machinery at the Mar-Jac Poultry plant in Mississippi; Michael Schuls passed away after getting dragged into a wood stacker at the Florence Hardwoods sawmill in Wisconsin, and Will Hampton was crushed between a diesel rig and a trailer at Lee’s Summit Resource and Recovery Park, a recycling center in Missouri.

“These children died doing jobs they should never have been doing,” Rafi Aliya Crockett, director of financial intelligence at Polaris, an anti-human trafficking group in Washington, D.C, told attendees of The Assembly Las Vegas on Oct. 4.

Polaris uses public records of violations and tips from whistleblowers to evaluate a company or individual employer’s reliance on illegal labor. An unusually high number of claims for workers compensation often tracks with underage employment, for example, as do citations for unpaid wages or unsafe working conditions.

The Financial Crimes Enforcement Network, or FinCEN, listed finances linked to human trafficking, which includes child labor, as one of eight anti-financial-crime priorities in June 2021, pursuant to the Anti-Money Laundering Act of 2020.

But most financial institutions have yet to incorporate the crime into their risk ratings, Crockett said.

Vulnerability

Some may associate child labor with other countries, but surging migration has helped the crime expand domestically.

U.S. Customs and Border Protection logged a record-high of nearly 153,000 encounters with unaccompanied minors, who top the list in terms of their vulnerability to exploitation, in fiscal year 2022, up from the previous record of 148,000 encounters set one year prior and more than double the 76,000 logged in fiscal year 2019.

“The sad reality is that some of these children are exploited and abused, including being forced to work in violation of labor laws in order to pay off their smugglers,” then-Sen. Rob Portman (R-OH) said in congressional hearing in May 2021.

In a number of cases, insufficient vetting of sponsor families and organizations authorized to take unaccompanied minors into their custody left children in the clutches of human traffickers.

“Some … were placed into forced labor at an egg farm in my home state,” Portman said in an apparent reference to Haba Corporate Services, an employment agency whose owner was convicted in September 2018 of forcing eight boys, ages 14 to 17, who migrated from Guatemala to work at Trillim Farms in Ohio by threatening them with violence and deportation.

Trillim Farms paid Haba Corporate Services $6 million over a two-year period for providing labor.

In February, the Labor Department fined Packers Sanitation Services, a cleaning contractor in Kieler, Wisconsin, $1.5 million for placing 102 minors, most of whom trekked to the U.S. from Guatemala and Honduras, in hazardous occupations at 13 meat-processing plants in eight states.

Labor contractors were the direct employers of underage workers at two Hyundai-affiliated parts plants in Alabama that were found in 2022 using as many as 50 underage workers to operate heavy equipment.

Typology

Employment agencies and other contractors that supply labor to high-risk industries such as construction, agriculture, and meat and poultry processing warrant more thorough screening and monitoring by financial institutions, Crockett told ACAMS moneylaundering.com in an interview.

They tend to not only hold accounts, but also obtain loans, providing the bank’s credit department a wealth of information about their operations, including their headcount, annual revenue, corporate officers and investors, that anti-money laundering personnel can review.

A senior compliance officer for a Midwestern lender with $25 million in assets on the books told moneylaundering.com that his institution automatically flags suspected attempts by corporate clients in high-risk sectors to distribute substantial amounts of their payroll in cash, then reviews their accounts for indications of forced labor, child labor and tax evasion.

“We will attempt to learn a little more about the business’s employees and, if reasonable, file a SAR [suspicious activity report],” the compliance officer said on condition of anonymity.

The bank also trains frontline staff to notify compliance officers when construction workers attempt to cash large checks that do not appear linked to a salary or hourly wage. Such checks may indicate payroll tax evasion, which in turn heightens the risk that the business in question uses trafficked labor.

“It can be difficult to identify situations where individuals may be subject to hazardous work or forced, underage labor using normal monitoring software,” the compliance officer said.

Regression

In addition to subjecting high-risk industries and labor contractors with a history of violations to deeper scrutiny, financial institutions should also consider re-rating employers in states seeking to roll back prohibitions against child labor as higher risk, said Crockett.

Depending on the financial institution, a higher risk rating could trigger more-thorough vetting procedures, such as closer examinations of an employer’s business model and an onsite inspection of their operations during the onboarding process.

The federal government bans individuals under 18 years of age from 18 designated hazardous occupations, and limits children under 16 to no more than three hours of work on a school day and 18 hours of work per week when school is in session.

But, with the encouragement of business groups such as the National Federation of Independent Business, U.S. Chamber of Commerce and National Restaurant Association, several states have either loosened employment restrictions for minors or are planning to do so.

As of Aug. 1, Arkansas no longer requires minors to verify their age—important because 16-year-olds can work more jobs and longer hours than younger teenagers—and provide written permission from a parent or guardian to work.

Missouri, where high school sophomore Will Hampton died on the job in June, is considering a similar measure, while Iowa, Minnesota, Nebraska, New Hampshire, New Jersey, Ohio, South Dakota and Wisconsin have proposals on the table that would allow minors to work longer hours or permit them to hold previously barred jobs.

Contact Fred Williams at fwilliams@acams.org