NEW UK REPORT: Preventing Modern Slavery & Human Trafficking in the Financial Sector
According to the International Labour Organisation, 40 million people are globally exploited through forced labour or commercial sex. And even though the profits of modern slavery continuously flow through our banks, over 36% of people working in the financial industry does not believe to have a role in disrupting such crime.
This is one of the key findings of the latest research project commissioned by The UK Independent Anti-Slavery Commissioner, Dame Sara Thornton, and carried out by Themis and the TRIBE Freedom Foundation. The report, launched on the 18th of January 2021, reveals the ties between our industry and modern slavery by analysing the levels of awareness, as well as the risks and challenges of modern slavery. It also provides practical steps and solutions and invites the industry to join forces and act. As a proud sponsor of this project, we have prepared some highlights for you.
UK Anti-Slavery Commissioner’s Report reveals low awareness at every corporate level.
One of the key findings of the report was the financial sector’s lack of awareness of the scale of modern slavery and human trafficking (MSHT) as well as of the possible solutions. In fact, the report indicates that over 40% of board-level managers and director-level employees either do not realise that the crime happens in their home country or do not know about the existence of policies to manage slavery risks. Many employees admitted they would not know how to flag suspicious activity and frequently the reason behind this is insufficient training regarding MSHT. On the bright side, over 77% of the surveyed employees believe that their companies could do more to improve this landscape. To this end, the report provides information and insights on how to achieve it.
The risks of modern slavery risks for financial institutions.
Business leaders cannot turn a blind eye on modern slavery anymore. From a moral to corporate perspective, the report highlights a number of key reasons why they should take steps to prevent it. Investors and lenders are exposed to reputational and financial damage if the business they invest in turns out to have modern slavery links. Companies can also face legal and regulatory repercussions if they fail to comply with modern slavery laws or are found to be holding the proceeds of MSHT. In this case, poor risk management can result in being liable for money laundering offences. Finally, there is a growing tendency of customers willingness to hold financial institutions accountable for actively protecting the most vulnerable in society. Organizations that fail to demonstrate their commitment to take robust action against modern slavery can experience their clients turning against them.
5 steps financial institutions can take to tackle modern slavery.
In order to make the insights more actionable, the report includes some best practices that the financial industry should holistically embrace to ensure the effective detection of the signs of modern slavery:
1. Maintain strategic and cultural alignment. It is crucial to put MSHT fighting measures on Boards’ or Senior Management’s agendas and to incorporate its elements into existing risk assessments and due diligence processes across the business. A transparent corporate culture is likely to raise employees’ awareness and their engagement with the issue.
2. Monitor and report on direct risks of modern slavery in your daily activities. Start performing risk assessment of staff, suppliers, and business partners. Review the recruitment processes of manpower suppliers and of your partner organisations.
3. Engage with the companies you invest in. Demand proof that modern slavery is not present in their supply chains as a pre-condition of any investment or lending terms. Define a risk tolerance map, outlining your risk appetite and developing a set of action protocols. When you regularly engage with your clients and business partners, you can influence their behaviour
4. Detect and Disrupt. Integrate MSHT into your mandatory company training. Make sure that modern slavery and human trafficking due diligence is incorporated into existing financial crime controls and screening processes that identify other types of risk. If you need help in this space, RedCompass RedFlag Accelerator team can support you by providing training as well as our MSHT Typologies, a compendium of all the flags that your financial crime team needs to identify suspicious patterns in your payments data.
5. Work collaboratively with business partners, NGOs, and government to progressively address the issue. Consider supporting and empowering charities and organizations that work on MSHT initiatives. Collaborative projects are much more effective than individually taken actions.
Fighting Modern Slavery in the Financial Sector: What’s next?
The report “Preventing Modern Slavery & Human Trafficking in the Financial Sector” is undoubtedly a valuable step in the fight against these crimes. However, it is just the first chapter of a much broader campaign. In fact, the UK Independent Anti-Slavery Commissioner has already started an outreach project that aims to encourage the CEOs of the top UK financial institutions to commit to disrupting modern slavery. Their concerns and insights will be gathered and published as an addendum to this report. The Commissioner will also continue to organise private round tables to keep the agenda moving forward.
The time to act is running out. Join us on this journey. Take action.
If you need support training your staff and identifying the red flags, sign up to RedCompass the RedFlag Accelerator website and let our team help you address the MSHT risks of and understand how your data can help in the fight against it.