A recent surge of new modern slavery regulations has pushed financial institutions to update their compliance structure with an eye toward both legal obligations and risk management. Modern slavery screening is now about more than reputational risk.
As this timeline shows, modern slavery received very little international attention before 2011. Since then, the number of international standards and national regulations has grown, and these now include transparency requirements and human-rights related sanctions.
This increase in regulation has resulted in many more prosecutions of modern slavery crimes, with Moody’s Analytics capturing more related adverse media coverage and the creation of specialized lists in Grid.
The increased attention to modern slavery was visible when the biggest corporate fine in Australian history was handed down in 2020. The regulator agreed that the organization “failed to identify activity potentially indicative of child exploitation risks by failing to implement appropriate transaction monitoring detection scenarios”.
To identify human trafficking and areas of weakness in a supply chain, capacity in monitoring agencies is essential, but so is legislation. Landmark changes at the national level show the importance of legislation.
In 2018, Pakistan passed the Prevention of Trafficking in Persons Act, which enabled the first prosecution for human trafficking in 10 years. Enhanced monitoring allowed the authorities to recognize frequent bride trafficking, where Pakistani women were sold to Chinese men through marriage brokers.
Australia implemented its modern slavery act in 2018. The country is ahead of others in recognizing the role companies can play in identifying, tracking and combating human trafficking as part of their KYC/KYS due diligence.
As more legislation is passed, more acts of modern slavery are correctly reported as such. However, many crimes that could be classed as modern slavery are still reported and prosecuted under other labels such as professional misconduct in regions that lack a specific modern slavery law. Organizations should therefore screen not only for modern slavery, but also for the types of crime most often related to modern slavery.
As risks become more intertwined and regulation around modern slavery continues to evolve, Moody’s Analytics is helping organizations detect, assess, and monitor risks associated with modern slavery and human trafficking in their networks and throughout their supply chains. Our modern slavery risk assessment tools, available in Compliance Catalyst, bring together data and software to help organizations identify and verify entities in their networks that they can screen for risks related to modern slavery and human trafficking.
Find out how legislation is transforming the data that helps to fight modern slavery by reading our white paper.