Slavery - Never Abolished

Slavery in Britain “is all around us. It is walking our streets, supplying shops and supermarkets, working in fields, factories or nail bars, trapped in brothels or cowering behind the curtains in an ordinary street.” Theresa May, The Guardian, 24 November 2013. UK legislation means that AML professionals must now be seized even more strongly of the risk, both in their own and customers’ businesses, says Kevin Braine of Kroll.

Modern Slavery is a very real and all too frequent occurrence. The abhorrent exploitation of both adults and children in the workplace continues to occur both in the UK and abroad.

• In 2012, the UN’s International Labour Organization estimated that 21 million people were victims of forced labour around the world.
• In 2013, working conditions in garment factories in South Asia were brought into sharp focus by the Rana Plaza tragedy when 1,135 people are reported to have died when a substandard and decaying building housing a number of Bangladeshi companies manufacturing garments for some of the world’s best known clothing brands collapsed. Following this disaster, numerous reports of inhumane working conditions and the use of child labour in the garment industry in South Asia emerged.
• In 2014, stories of fishing fleets’ extensive use of trafficked, bonded and forced labourers in the Andaman Sea started to make the headlines. Some fishing vessels were reported to have kept enslaved crews in cages during the infrequent stretches when they were allowed off the boats.
• In 2015, Kevin Hyland, the UK’s first Independent Anti-Slavery Commissioner, reported that up to 13,000 people in Britain were forced to work as slaves.
• In a presentation in May this year, the Anti-Slavery Commissioner reported a 70% year on year increase in police investigations into suspected Modern Slavery offences in the UK.

In response to these tragedies, the Modern Slavery Act 2015 (the Act), sponsored by Theresa May and Lord Bates, was passed into UK law in March last year. As well as consolidating existing legislation, the Act increased the maximum sentences available for offences, strengthened law enforcement powers and implemented new measure to protect and support victims. The Act’s Transparency in Supply Chains (TiSC) provision (Part 6, section 54), which came into force on 29 October 2015, introduced a new disclosure requirement for large businesses. The TiSC provision applies to any “commercial organisation”, in any part of a group structure which is “carrying on a business or part of a business in the UK” and has an annual turnover of £36 million or more after tax. While no strict definition of “carrying on a business in the UK” has been issued to date, the latest UK Ministry of Justice guidance indicates that a common sense approach will be taken, so if an organisation employs staff, conducts business or issues invoices from the UK and has a turnover of over £36m it is likely to be subject to the TiSC provision.

Under the TiSC provision, organisations now need to make public the steps they are taking to ensure that modern slavery offences are not taking place in either their business, or their supply chain. This includes publishing a yearly anti-slavery statement disclosing how much, or how little, they are doing to prevent abuse of basic human rights from taking place in their organisation.

It is hard to gauge how effective the TiSC provision will be in encouraging companies to investigate forced labour in their supply chains. Whilst the Act has introduced tougher sentences for slavery and trafficking offences, for which companies risk facing corporate criminal liability, there are currently no financial penalties for companies that fail to publish an anti-slavery statement. At worst, companies that fail to publish an anti-slavery statement could be issued with a High Court injunction requiring them to comply. Most observers do not regard this as a significant deterrent. Instead, the Act, much like the similar 2010 California Transparency in Supply Chains Act in the US, relies principally on companies choosing to do the right thing or face consumer pressure and reputational damage. Several NGOs regularly update and disseminate lists of companies that are failing to comply or fully embrace the principles of the California Transparency in Supply Chains Act. UK companies failing to demonstrate their commitment to fighting modern slavery are likely to be similarly ‘named and shamed’ should they fail to comply with the UK Act.

There is also growing political will to enforce the Act. Within her first month as Prime Minister, Theresa May reiterated her commitment that her government will lead the way in defeating modern slavery. She has announced the creation of a new cabinet taskforce and committed £33m of the UK aid budget to overseas initiatives targeting modern slavery.

Meanwhile, the Modern Slavery (Transparency in Supply Chains) Bill (the Bill) had its second reading in the House of Lord on July 8 this year. The Bill proposes to amend the TiSC provision so that it explicitly applies to “public bodies” too and requires slavery and human trafficking statements to be included in an organisation’s annual report and accounts, rather than just published on its website. The Bill also seeks to amend Regulation 57 of the Public Contracts Regulations 2015, by including a mechanism to exclude companies which have failed to produce a slavery and human trafficking statement from participating in public tenders. This proposed amendment would go some way to incentivise companies to comply with the Act or risk losing access to UK government tenders.

It is foolish to presume that modern slavery only occurs in certain industries, countries or type of activities. Abusive domestic servitude can happen anywhere. In 2014, the OSCE saw fit to publish guidelines entitled “how to prevent human trafficking for domestic servitude in diplomatic households and protect private domestic workers”. In 2015, the press reported allegations of trafficking in the world of football, with allegations of children being illegally lured to come to the UK and other European countries to trial for professional clubs.

Any commercial activity involved in the production of low margin, low skill, labour intensive goods or services is potentially at risk of modern slavery offences. For professional services firms, exposure to modern slavery can come through the use of third party cleaning contractors or suppliers of staff uniforms.

• Specific risk factors that put a particular commercial activity at a higher risk of modern slavery include:
• Reliance on seasonal, casual or migrant workers;
• Use of labour brokers, recruitment agencies or other agents;
• Work conducted in jurisdictions with lower levels of labour protection; and
• Goods or services sourced through convoluted or opaque supply chains.

While no industry is immune, some sectors can be considered to have an elevated risk of modern slavery offences. 

These include:

• Construction: the use of forced labor in the construction of infrastructure for major sporting events has recently attracted media attention and provoked public outrage. The routine use of displaced and sometime unskilled labour hired through a myriad of subcontractors often puts the construction sector at risk.
• Hospitality: the high turnover of staff, low wage, seasonal nature of work and extensive use of agency and migrant workers make this sector vulnerable in all markets, developed and emerging.
• Food production and processing: there are plenty of high profile reports of the abuse of seasonal migrant workers by gangmasters, placement agencies and employers across Europe and elsewhere. The UK’s Morecambe Bay tragedy where 23 men and women died is a particularly tragic example of the exploitation of illegal workers in the agricultural sector.
• Garment and footwear: Uzbekistan is the world leading exporter of cotton and antislavery.org reports that it is “one of the few countries in the world where the use of forced labour in the cotton industry is systematically organised by the state”. Working conditions in the footwear and garment industry in South and South East Asia have also been the subject of numerous critical reports by a plethora of NGOs. Obtaining comfort that staff uniforms are sourced through appropriate suppliers is a growing concern for a number of UK businesses.
• Timber & minerals: The US Department of Justice lists diamonds from six African nations and granite from three, alongside numerous other mined products originating in Africa, in its ‘list of goods and their source countries which it has reason to believe are produced by child labor or forced labor in violation of international standards’. In Russia’s Far East, the US Department of State reports that around 40,000 North Koreans are the victims of forced labour in the local logging industry.

Modern slavery is one of the many regulatory and reputational risks facing organisations. Tried and tested risk management processes enable companies to go well beyond the basic requirements of the Act with little additional cost and minimal disruption. For companies with strong AML and anti-bribery and anti-corruption measures already in place, compliance with the Act and putting in place effective measures to detect and prevent modern slavery should be very straight forward. Following the UK Bribery Act (“UKBA”) guidelines and extending third party risk assessments and screening measures to capture, not just bribery risk in a supply chain but modern slavery as well, typically only requires minor adjustment to UKBA controls which may already be in place. This could include:

• Adding specific modern slavery references to company codes of conduct and third party contracts;
• Adding modern slavery references to a group whistleblowing or compliance line programme;
• Including modern slavery risk triggers to standard AML and UKBA third party risk assessments;
• Adapting third party compliance questionnaires and disclosure forms to include modern slavery where relevant;
• Adding modern slavery to regular risk reviews and to the company risk register; or
• Including research into third parties’ labour practices as part of standard due diligence research on potential commercial counterparties.

In conclusion, most companies consciously seek to avoid exposure to modern slavery. Compliance with the TiSC provision is not burdensome and the risk of being exposed as willing to tolerate or ignore human rights abuses in a supply chain ought to be a powerful motivator for companies to put the necessary controls in place. Companies with strong anti-bribery and anti-corruption processes should find presenting a comprehensive anti-slavery statement a fairly straight forward process.

This article first appeared on www.moneylaunderingbulletin.com