New report highlights lack of awareness on modern slavery in Fintechs
The Independent Anti-Slavery Commissioner has published a joint report highlighting the lack of awareness in the financial services sector in relation to issues of forced labour and exploitation of workers. Non-banking areas of the financial industry, such as crypto currencies, accountancy firms, insurance and brokering are noted as having particularly poor knowledge of this issue in the UK.
Low levels of awareness are attributed to a potential underlying assumption that because financial organisations are not involved in manufacturing or heavy industry they are not implicated in modern slavery and human trafficking. However, the report states that finance is at the heart of labour exploitation, whether due to issues of money laundering, international transfers of money or investment choices. The report emphasises that organisations in the financial services sector have a major role to play in tackling forced labour and modern slavery:
‘Financial institutions that lend to invest in or are otherwise linked to businesses whose supply chains are exposed to modern slavery and human trafficking have both due diligence obligations and obligations to use their leverage over their business partners to address these concerns.’
The report identifies several ways that financial organisations can take a stand against issues of modern slavery and human trafficking. A key factor is increased involvement by senior leaders to set the tone and to engage and collaborate with relevant external stakeholders. The research behind the report found that 45% of board level employees indicated that they view modern slavery as something which doesn’t occur in the UK (which belies the 10,000 people identified as victims of modern slavery who were referred to the authorities in 2019) and 68% of financial services employees said that they did not believe the issue had been raised more than a few times by senior management. By contrast 87% of financial services employees rated modern slavery and human trafficking as an important social/ environmental issue.
The report also called for improved internal communications of policies, reporting procedures and ongoing monitoring activities to help identify and prevent modern slavery as employees needed to know how to report any concerns. Training was identified as an area of need; to help employees recognise issues of modern slavery and human trafficking. 71% of financial industry employees said they had never participated in any form of training on modern slavery issues.
Financial institutions are also encouraged to carry out more detailed assessments and due diligence in relation to their exposure to issues of modern slavery and human trafficking, not only within their own business but through clients, suppliers, and business partners. Financial institutions, if they meet the criteria, are required to publish a modern slavery statement on an annual basis in line with the requirements under the UK’s Modern Slavery Act 2015. Under section 54, an organisation is required to publish the steps that it has taken to ensure that modern slavery and human trafficking is not taking place in its business and supply chain. At present, many organisations see this obligation as a tick box exercise, but there will be increasing pressure for organisations to pay more than lip service to this requirement. The government has recently announced its intention to tighten these reporting requirements, with mandatory content for statements and potential new penalties and sanctions for non-compliance. Organisations are at increased risks of reputational damage and negative impact on customer and business relationships if they fail to take these issues seriously.
Financial institutions already have strategies and financial reporting protocols available to them to tackle the risk of modern slavery and human trafficking. For example, as money laundering often arises from issues of modern slavery; financial institutions should consider combining compliance requirements in relation to modern slavery with measures intended to implement money laundering legislation. Suspicious activity which needs to be reported may also be indicative of such problems, and financial institutions can use the measures available to them to cut off financial networks from perpetrators.
Investment choices by financial institutions are likely to play a key part in addressing issues of modern slavery and human trafficking. The increasing importance of ESG (Environmental, Social and Governance), which measure the sustainability and societal impact of an investment, means that they are likely to become criteria that financial institutions cannot afford to ignore. Financial institutions, together with other financial bodies and lobby groups, can use their business relationships, including divestment, to require better transparency and exclude organisations and industries that demonstrate poor behaviours.
The overall message of the report is that there is much that financial institutions can and should do internally and externally to address issues of modern slavery and human trafficking. The final words on the report seem to perfectly summarise the urgency: ‘Take a Stand, Spread the Word, Act Now’.
Source: (City AM)