Britain’s finance industry fails to recognise role in modern slavery, finds report
Almost half of senior managers in the financial services sector are not aware of forced labour and exploitation in the UK, a new report has found.
Bankers and other financial staff were found to be unaware of the nature and scale of the problem in the UK, including the role of financial services in the abuse.
Modern slavery currently affects 130,000 people in the UK, part of a global business that touches 40 million people worldwide and generates profits of USD150 billion each year.
The study was led by Dame Sara Thornton, the UK Independent Anti-Slavery Commissioner, in partnership with Themis and the TRIBE Freedom Foundation.
According to the study, 30 per cent of financial services employees do not believe modern slavery is something that happens in the UK, a figure that rises to 45 per cent when looking at senior managers.
At the online launch of the report, Thornton said the study revealed a “failure to recognise that financial institutions can be complicit in these crimes” by not making the link between traffickers and their bank accounts, or fund managers and their investments in businesses that engage in forced labour.
More than a third, 36 per cent, of financial industry employees said that they believe their organisation has no influence at all in combating the issue.
“Because we're talking about serious and organised crime, the financial institutions are in a great position to both detect and disrupt these crimes, but also in a hugely influential position in terms of the leverage that they have, through the provision of credit and the provision of capital,” said Thornton.
The Covid-19 pandemic has also increased many people’s vulnerability to modern slavery, added Thornton, stating that exploitation is “likely to increase over the next few years”.
The Modern Slavery Act came into force five years ago, but the study finds that publishing a statement on modern slavery is regarded by many in the finance industry as merely a “tick-box exercise”, rather than a potential legal, reputational, and material risk to the business.
Thornton continued: “I have written to the CEOs of major financial institutions asking them to respond to the worrying findings that this report highlights and let me know what they are going to do to address modern slavery and human trafficking within their organisations."
In 2020, the Australian Strategic Policy Institute revealed that forced labour by the Uyghur people of Xinjiang province in China was involved in the making of components that were later sold to firms including Apple, Nike and Volkswagen.
Western fund managers including Blackrock, Schroders and the Vanguard Group were among investors in O-Film Technology, a company which makes camera components for iPhones and, according to reports, employed over 1,000 Uyghur captive workers. The report found that the asset managers’ exposure to these stocks came from their China index-linked investment products.
Last week, the UK’s foreign secretary, Dominic Raab, responded to the “barbarism” being perpetrated in Xinjiang by warning that British businesses would face fines for failing to ensure their supply chains are free of slave labour.
The new study finds that many fund managers employ “copy and paste modern slavery statements”, and treat the issue as solely a responsibility of their ESG, marketing, or even communications teams.
Key recommendations from the study include regular due diligence by banks and financial services companies to check for abusive practices in the supply chains and investments, and integrating modern slavery red flags into existing money laundering control frameworks.
The study outlines the most effective approach as one in which modern slavery is treated as an “enterprise-wide framework, across the whole organisation”.
A blueprint for tackling modern slavery through the financial services sector has been published by The Liechtenstein Initiative for a Financial Sector Commission on Modern Slavery and Human Trafficking, a public-private partnership between the governments of Liechtenstein, Australia and the Netherlands, United Nations University Centre for Policy Research and private sector institutions and foundations.
Claudio Nardi, from the Office for Foreign Affairs of the Principality of Liechtenstein, spoke at the report’s launch: “Investors have a huge leverage over companies they invest in, and they should conduct regular due diligence on them, demand proof from the bosses that modern slavery does not exist in the investment chain, maintain ongoing engagement with companies and when irregularities are discovered, work with the company to remedy the situation.”