From the Financial Sector Commission on Modern Slavery and Human Trafficking / the Liechtenstein Initiative by Barry Koch
The staggering estimates that 40 million people are trapped in modern slavery and that forced labor generates $150 billion dollars a year in illicit funds have raised global alarm. It comes as no surprise to those combatting financial crime that thefinancial community intersects with these forms of exploitation in a variety of ways, from unwittingly laundering funds generated by these practices to investment in businesses that have labor trafficking embedded in their supply chains.
The Financial Sector Commission on Modern Slavery and Human Trafficking, known as the Liechtenstein Initiative, is working to put the financial sector at the heart of efforts to identify, target and disrupt these crimes and their root causes. The Commission is a public-private partnership between the Governments of Liechtenstein, Australia and the Netherlands as co-sponsors, and a consortium of Liechtenstein banks, philanthropic foundations and associations. The United Nations University Centre for Policy Research serves as the Secretariat. To view an Awareness Video from the Liechtenstein Initiative see here.
The Commission consists of 25 Commissioners, comprised leaders from hedge funds, commercial and retail banks; institutional investors and development financing organizations; global regulators and financial industry experts; UN mandate-holders; and NGOs. It includes the Chairpersons of the Egmont Group of Financial Intelligence Units and of Moneyval; the Executive Director of the Caribbean Financial Action Task Force; former senior officials of the U.S. Treasury Department; and a Nobel Laureate. It also includes two survivors of trafficking and slavery, one of them himself a former bank manager.
The Commission's work
The Commission’s first meeting was in New York last September, focusing on financial sector compliance issues with an emphasis on AML/CFT norms and barriers to effective compliance, supply chain due diligence, and reporting. Increased regulatory attention on modern slavery issues can be seen in the UK, where a Modern Slavery Act has been in place for several years and has just undergone an independent review, and similar legislation passed in Australia at the federal level and in New South Wales. Several other countries are considering similar legislation and other countries have adopted human rights due diligence requirements that cover the financial industry.
The Commission also considered how some countries are pioneering collaborative efforts – between financial service institutions, civil society, public regulators and law enforcement – that can enable responsible and equitable information sharing and risk management.
In January 2019, the Commission met in Liechtenstein to turn its attention to responsible lending and investment. The Commission was briefed by experts on how financial institutions can use and build leverage and also on how the financial sector can provide remedy to survivors. For its third consultation in Sydney in April, the Commission heard more about Australia’s recent and ongoing regulatory processes and innovation across the Asia-Pacific region from a representative of AUSTRAC.
Importantly, the Commission also explored innovative financing instruments to empower communities and decrease their vulnerability to these types of exploitation. A lack of access to credit is a major factor in triggering modern slavery, and indeed of cycles of slavery and re-exploitation. Vulnerable individuals may have no alternative during financial shocks but to turn tocorrupt middlemen or traffickers to access credit or work. Traffickers might then hijack the identity and bank accounts of victims for money-laundering or engage in other fraudulent activities using their stolen identities. This has knock-onimplications for survivors’ creditworthiness and their ability to access financial products and services after they escape exploitation.
Call to Financial Institutions for support
In developed countries, where survivors are more likely to have previously had access to financial services, financial access is often a question of re-integration. As part of its work, the Commission is therefore assembling a group of interested financial institutions, survivor support organizations and other relevant entities to promote financial access to reduce modern slavery and human trafficking. The Commission has recently briefed leading banks on tools to promote financial access for survivors. Briefings were attended by the American Bankers Association and were discussed at a recent meeting of the Wolfsberg Group. Other interested banks are welcome to get in touch with the Commissions Secretariat to learn more at: firstname.lastname@example.org.
The Commission’s final consultation will take place in the Netherlands at the end of June. The Commission will consider that country’s pioneering international responsible business conduct agreements, as well as the use of sanctions regimes aimed at addressing human trafficking. In addition to our consultations, we have connected with hundreds of stakeholders, been briefed by dozens of experts and ourselves briefed a wide array of important forums.
These efforts will culminate in the launch of our final output during High-Level Week of the UN General Assembly at the end of September. These outputs will provide a roadmap identifying opportunities for every corner of the financial sector to engage with these issues and contribute towards a reduction of modern slavery risks. The AML/CFT community is a key constituent for this work and, by collaborating with others across the sector and outside of it, we can make a real difference in addressing modern slavery and human trafficking and ensuring that survivors have access to the financial products and services they need to rebuild their lives.