The prohibition of slavery is one of the strongest norms in international law. It has been translated into a wide range of international and domestic legal regimes. Laundering the proceeds of modern slavery and human trafficking is also a crime in most jurisdictions. But enforcement of that norm is weak. Identification of victims is difficult, leading to low numbers of victim identifications (a high of just over 25,000 in 2016). Global prosecution and conviction rates are also low (highs of 11,096 and 7,841 in 2018, respectively). Financial sector actors can help enforce the ban by strengthening compliance with existing laws, in five different areas.
First, financial sector stakeholders (both public and private) can work to strengthen compliance with anti-money laundering (AML) and counter financing of terrorism (CFT) laws. These already extend in most jurisdictions to handling funds generated from modern slavery or human trafficking, though that is not always made explicit by regulators. Where this has been made explicit, for example through specific guidance on these risks or asking questions in Suspicious Activity Reporting forms, up to a 1,000 per cent increase in reporting has ensued.
Stronger compliance with AML/CFT rules will also come about through devoting more resources to financial investigations. Transaction analysis tools need to be developed to deal not just with forms of modern slavery in the developed world, such as cross-border sex trafficking, but also those that take place in the developing world, such as localized debt bondage and domestic servitude. The FAST Financial Investigations Tool, developed by the OSCE working with the Commission, compiles good practice from around the world and synthesizes it, helping financial sector actors get started.
Other steps that financial sector actors can take to strengthen compliance with AML/CFT rules to end modern slavery and trafficking include:
Second, financial sector actors have a key role to play in enforcing international sanctions targeting slavers and traffickers. This includes sanctions imposed in 2018 by the United Nations Security Council on six suspected human traffickers in Libya. Financial sector actors can help by identifying, freezing and facilitating the confiscation of assets. More cooperation and information sharing between governments and financial institutions is needed to strengthen sanctions implementation. One option may be to develop a network of sanctions enforcement actors, modelled on the Egmont Group of Financial Intelligence Units, that plays a global networking, information-sharing and enforcement cooperation role in the AML/CFT space.
Third, the insurance sector’s willingness to cover – or not – slavery risks has shaped business conduct and systemic risk since at least the 18th Century. Today, insurers can mobilize to develop exclusion language for specific policy lines – such as marine cargo insurance for goods produced with forced labour, or employers’ and directors’ liability insurance. The industry’s role in determining systemic levels of modern slavery risk should be considered in forums such as the International Association of Insurance Supervisors and the UN Principles for Sustainable Insurance initiative.
Fourth, public financial actors also have a powerful role to play in enforcing anti-slavery and anti-trafficking norms, in particular by using the power of the public purse. Public procurement requirements, investment and lending choices can all nudge demand towards businesses that actively work to prevent modern slavery and human trafficking, and away from those generating risks. This has implications for sovereign investors, public pension funds, development finance institutions, export credit agencies and other public financial actors. Examples from Australia, Canada, New Zealand, the UK and the US show what is possible.
State fiscal policy and tax regulation also have a powerful role to play. By withholding subsidies or tax collection authority from companies that rely on forced labour, as has occurred in Brazil, government entities can influence business practice, rewarding companies that work to prevent and mitigate modern slavery and human trafficking risks.
Fifth, regulators also have a key role to play in preventing unfair market competition, by excluding from the marketplace those firms that rely on forced labour. Stock and commodity exchanges can do this through listing rules, and also use environmental, social and governance (ESG) guidance and indices to encourage compliance with laws against modern slavery and human trafficking. Competition regulators also have a role to play, especially through carving out space for pre-competitive collaboration to strengthen knowledge on modern slavery and human trafficking risks and to develop relevant prevention standards.
Increase public- and private-sector resources for financial investigation of modern slavery and human trafficking, commensurate with the scale and gravity of the problem. Regulators, financial intelligence units (FIUs) and private-sector actors should work together to develop better indicators of AML/CFT risks associated with current and emerging forms of modern slavery and human trafficking.
Actively integrate survivors into processes of regulation, investigation, enforcement and organizational change in order to benefit from their expertise and assist with their own recovery.
This could include:
Develop transaction analysis tools to help identify proceeds of modern slavery and human trafficking in all areas of financial sector activity – banking, remittances, insurance, investment, commodities trading and beyond. This should include extending these tools to cover labour trafficking, debt bondage and other forms of modern slavery and human trafficking occurring in the developing world, not just commercial sexual exploitation and human trafficking taking place in the developed world.
Mobilize the insurance sector to exclude modern slavery and human trafficking risks, including through development of exclusion clause language for specific policy lines such as employers’ and directors’ liability insurance, cargo insurance or workplace insurance.
