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Breaking chains: 3 ways FIs can fight modern slavery

How can financial institutions identify and report indicators of modern slavery? Insights from EY’s interactive modern slavery hackathon.

Mariya Pattara
May 19, 2023

Last week’s interactive modern slavery hackathon, co-hosted by EY and Banking & Payments Federation Ireland (BPFI) and attended by Napier’s chief revenue officer Kevin O’Neill and global head of professional services Cian Harrington, looked at how financial institutions could improve on identifying and reporting on modern slavery risk by taking a collaborative, data-driven approach. The theme of the session was ‘following the money’, which brought together diverse stakeholders sharing a common mission to crack down on modern slavery by contributing their expert intelligence from the worlds of technology providers, non- governmental organisations (NGOs), and law enforcement (including Garda National Economic Crime Bureau.)

Modern slavery affects around 50 million people globally and involves the use of force, fraud, or coercion to exploit people for financial gain. It exists in many forms, including forced labour, human trafficking, debt bondage and child labour, and can occur in a variety of settings, from factories to homes to farms.

Shackled and invisible: the devastating effects of modern slavery

It can be difficult to identify victims and perpetrators, and many people who are survivors of modern slavery are afraid to come forward for fear of retribution. One of the reasons this appalling crime is so prevalent is that it is often hidden in plain sight. As a result, it is severely underreported, and the true scale of the problem is likely much larger than official statistics suggest.  

Modern slavery can hide in seemingly legitimate businesses, often through the use of subcontracting, when an organisation can lose oversight of the supply chain, making it difficult to identify labour abuses and exploitation. This is particularly prevalent in industries with complex, opaque, global supply chains, such as electronics and fashion.

The impact of modern slavery on individuals and communities is devastating. Victims are often forced to work long hours in dangerous conditions for little or no pay. They may be subject to physical and emotional abuse and have no control over their own lives. Victims are often vulnerable to financial crime due to their lack of legal status and precarious situation. Their stolen personal and financial information can be used by traffickers or other criminals to help them evade detection or gain access to financial services, including taking out loans or credit cards using the stolen identity of the victims.  

Joining the conversation at EY’s Wavespace lab, Neil Geis, director intelligence- STOP THE TRAFFIK and president of Traffik Analysis Hub commented that a big piece to add to the jigsaw of fighting against modern slavery is adding the victim narrative, since victims have a better insight into how the business works. Drawing from their lived experiences in ways that are “sensitive enough to work for them, and detailed enough to work for us” is invaluable.

Breaking chains: Tackling modern slavery

“While the hackathon demonstrated that there are certainly widespread good intentions in addressing this issue, it also showed that there is still a considerable way to go. The complexities of modern slavery typologies require both a more technically oriented solution than is commonly applied to detect thematic risks, and a regulatory and legal framework for government and industry to operate within,” says Cian Harrington.  

And Kevin O’Neill notes that having the latest technology alone is not enough to solve the problem. “Modern slavery is a complex issue that requires a coordinated response from governments, civil society, and the private sector. Financial crime such as money laundering feeds modern slavery,” he says. “Different stakeholders may detect different symptoms of such activity; the key is to interconnect these puzzle pieces to crack down on indicators of a crime that is still all-too current."

Using modern technology and sharing intelligence between the bodies that set standards, law enforcement, and regulated institutions can help pinpoint the typologies traffickers use to disguise their funds, and lead to higher rates of apprehension and prosecution. While powerful legislation, such as individual jurisdictions’ Modern Slavery Acts, provide a good framework to combat this crime, financial institutions can also play a critical role in identifying indicators of modern slavery. Here are three ways in which they can help:

1. Conduct risk assessments and due diligence

Risk assessments and due diligence can be used to identify sectors, screen customers, and highlight suppliers at high risk of modern slavery. This can help FIs target their efforts and resources more effectively.  

Red flags to look out for include suspicious recruitment practices that involve high recruitment fees, excessive debt bondage, lack of employee documentation, or confiscation of identity documents.

2. Following the money: Transaction monitoring

Financial institutions can monitor transactions for patterns that may indicate modern slavery, such as large cash withdrawals, suspicious transaction patterns or collections of network accounts, or transfers to countries known to have high rates of human trafficking. Other red flags include payments from unassociated third parties, or payments to unregistered or offshore accounts.

3. Information sharing:

Financial institutions must share information with law enforcement, industry vendors and other organisations to help identify and track perpetrators of modern slavery. By exchanging information about suspicious activities, such as patterns of exploitation or the movement of vulnerable individuals, law enforcement agencies, NGOs, and other stakeholders can better collaborate to define modern slavery typologies. Financial institutions should educate their employees on the signs of modern slavery and how to report suspected cases. This can help create a culture of awareness and vigilance within the organisation.  

The engagement and commitment made by participants in the hackathon brought a sense of commitment and a step change in the prevention of flow of value and funds to criminal organisations, as rightly remarked by Colin Ryan, country leader, EY Financial Services Ireland. It’s a promising step in the right direction towards eradicating some of the evils propagated by financial criminals.

Unfortunately, modern slavery represents just one facet of a larger spectrum of financial crimes.

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Photo by Safal Karki on Unsplash