Modern Slavery: The important role financial institutions can play in combatting it - Banking blog

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Modern slavery is the third largest source of criminal profits globally with the majority of these profits passing through the global financial system undetected. Financial institutions have an important role to play to combat modern slavery in their own operations and with the clients and companies they provide services to. Expanding, updating and developing the necessary frameworks to identify actions and associated risks are vital to combat modern slavery.

The Issue

Modern slavery is an umbrella term that covers a set of specific legal concepts including forced labour, debt bondage, other slavery-like practices and human trafficking. In 2016, it was estimated that over 40 million people were victims of modern slavery globally. Closer to home, approximately 14,000 people are considered modern slaves in Switzerland. It is the third largest source of criminal profits globally, after the trafficking of narcotics and weapons, generating an estimated USD 150 billion each year of illegal profits. The majority of these profits are passing undetected through the global financial system.

Current regulatory approach

From a regulatory perspective, the EU Directive 2014/95/EU, also known as the non-financial reporting directive (NFRD) requires large companies to publish reports on policies related to respect for human rights, anti-corruption and bribery, and treatment of employees. In Switzerland, either by implementation of the Responsible Business Initiative or through the parliamentary counter proposal, increased diligence obligations will be introduced to Swiss companies.

For the financial services industry, the existing duties of due diligence against money laundering already provide a substantial layer of protection against proceeds from modern slavery. However, in light of the above, one must question if these measures are sufficient.

The FAST Initiative

In September 2018 a public-private partnership emerged between the governments of Liechtenstein, Australia and the Netherlands, the United Nations University Centre for Policy Research, and private sector institutions and foundations in Liechtenstein. They established a blueprint of five strategic goals to combat the laundering of proceeds from modern slavery in the financial sector. A toolkit was developed giving market participants the ability to increase awareness and strengthen the framework against modern slavery. It comprises six key focus points:

  1. The Financial Investigations Tool, describing good practice in conducting financial investigations into modern slavery and human trafficking.
  2. The Connection Diagnostic Tool, offering support for businesses to understand the link between their own business and potential modern slavery and human trafficking.
  3. The Leverage Practice Matrix, inviting the financial sector to use its advantage to prevent or mitigate harm from such practices.
  4. The Survivor Inclusion Initiative, which brings together a dedicated coalition of financial institutions and survivor support organisations to facilitate survivor access to basic banking services.
  5. The Vulnerable Populations Initiative, addressing the high coincidence between lack of access to financial products and vulnerability to modern slavery and human trafficking.

Deloitte’s view

Financial institutions have an important role to play to combat modern slavery in their own operations and with those clients and companies that they provide services to. Expanding, updating and developing the necessary frameworks to identify actions and risks associated with modern slavery are vital to do so. Embedding the FAST goals and toolkit in the existing corporate strategy and operations can be an important step in this direction. Deloitte has experience supporting companies to develop the necessary frameworks and tools to report on human rights and modern slavery. Please reach out to the contacts below in case you would like further insights on the topic.

Ralph wyss

Dr Ralph Wyss - Partner, Financial Services

Ralph is a Swiss attorney at law and PhD (law) with more than 25 years of professional experience in the Swiss financial services industry and other industries. He is a well-known AML and compliance expert in the Swiss marketplace.
At Deloitte, he leads our Risk and Regulatory Assurance services. In addition he supports our Restructuring Services in the area of restructuring and liquidation of banks.

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Marcel

Marcel Meyer - Partner, Financial Services

Marcel leads Deloitte Switzerland’s Sustainability services, Investment Management practice and is a member of the Board of Directors. He has 20 years of experience auditing and advising domestic and international clients primarily in the financial services industry, but also in real estate, trading and technology. As head of Sustainability services, he helps clients integrate sustainability in their strategy and operations focusing in particular on climate change and sustainable finance. He also provides independent assurance on sustainability reports and compliance with necessary regulatory requirements.

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Nadine Esposito

Nadine Esposito - Assistant Manager, Risk Advisory

Nadine is an Assistant Manager in our Sustainability team based in Zurich with a focus on sustainable finance and the role the financial industry plays in achieving sustainability objectives. She is also a climate risk advisor with a background in assurance and quality risk management.
Nadine holds certifications in sustainable finance, modern slavery and soon in sustainability and climate risk.

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