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WHITE PAPER: Can financial institutions fight modern slavery?

WHITE PAPER: Can financial institutions fight modern slavery?

3 Sep 2020

The financial services industry is in a unique position to set in motion a chain of actions that can truly disrupt modern slavery and human trafficking (MSHT). Why is it, then, that less than 1% of global financial crime is caught, particularly when it comes to MSHT?

In their joint white paper, entitled, “Spot the Funds, Stop the trafficking”, Nadja van der Veer, a prominent payments lawyer and co-founder of EWPN (European Women in Payments Network) and Tom Hewson, RedCompass Senior Partner, examine the obligations and challenges as well as the practical steps that financial institutions can take to tackle modern slavery and human trafficking. Here are some of the highlights.


The financial regulatory framework to tackle modern slavery

In an attempt to bring clarity over the regulatory framework in this space, the white paper takes stock of the latest legislation around the world and asks a provocative question: are financial crime regulations helping the fight against MSHT? While regulations are largely necessary in the fight against financial crime, the report indicates that the resulting additional burden s for Financial Institutions (FIs) and Money Service Businesses (MSBs) drive these institutions to focus on the technical compliance rather than on addressing the root causes and make a real difference.

In this sense, Nadja points out that to achieve a real breakthrough, commitment from the industry should come from the combination of the following three paths:

1) From within the organisation

2) By the introduction of trafficking-related sanctions programmes (where non-compliance will result in massive fines)

3) From a renewed approach to authorities assessing the effectiveness of financial institutions’ programmes.

A key point made in the white paper, however, is that “taking the fight to the criminals should not be a singular effort, or one that we build from scratch”. Both authors observe that the starting point is already in FIs and MSBs systems and in our power to use data.

The power of (data) technology to target human traffickers

In the second part of the white paper, the authors identify some practical actions that FIs can take to tackle the challenges they are facing when it comes to fighting modern slavery and human trafficking. The data sitting in our payments systems is invaluable to track down traffickers. However, often financial institutions do not have the time, resources, or budget to look for hidden pattens and criminal networks, on top of meeting their regulatory requirements.

To help with this problem, organisations, NGOs, governments, and academics worldwide have started to collaborate with FIs to develop tools that make the detection more efficient. In this, the latest technology in data science is our best ally. Two examples are the project developed by the sociologist and lawyer Jill Coster van Voorhout and the RedFlagAccelerator – of which Tom gives a practical example.

Last but not least, the authors stress the importance of cross-industry collaboration and provide some examples and initiatives in the UK where FIs can get involved, including the Traffik Analysis Hub.

Call to Arms for Financial Institutions to fight modern slavery

A fragmented regulatory landscape is not an excuse. Low margins and budgets are not a good excuse either. “This is not the 1800s where slavery in the UK territories, the US and much of the world was accepted as an unfortunate fact of life. This is 2020. We have the flags, the data scientists and the tools to find and stop this stain on our banks and our society”, conclude the authors.

Their call to arms is adamant: our industry has the means to take a stand but also the moral obligation to go beyond compliance, to collaborate and to invest in the fight against modern slavery.

So, what’s next – you may wonder?

To help, EWPN and RedCompass have created a portal through which individuals and organisations can get involved. Some of these initiatives include free training, access to resources, get help to get in contact with law enforcement, peer companies and much more!

The time to act is now.

You can read the full white paper here or visit the EWPN & RedCompass portal to become part of the solution!