Home Office minister, Victoria Atkins MP, spoke at the National Crime Agency's recent ‘Invisible People’ exhibition asking for ''increased support from financial institutions [to] identify and disrupt illicit financial flows which are used to fund and launder the proceeds of modern slavery.''
This point was also made last March by the Royal United Services Institute for Defence and Security Studies whose report, 'Disrupting Human Trafficking: the Role of Financial Institutions', emphasised the need for financial institutions to make better use of client data and technology to combat modern slavery. A year on, many financial institutions have put in place a number of innovative responses to tackle the issue, including:
- investing in artificial intelligence which uses algorithms to detect suspicious transactions within a modern slavery context;
- co-operating more extensively with external modern slavery experts, such as the Joint Money Laundering Intelligence Taskforce and Europol. These organisations have helped provide financial institutions with the necessary expertise to be able to focus resources on particular geographical areas and markets where modern slavery is most prevalent, making the use of artificial intelligence discussed above more effective; and
- providing greater staff training on detecting and reporting suspicious transactions.
There remain, however, significant challenges ahead; figures published by the NCA reveal a 35% rise in reported incidents of modern slavery and human trafficking in the UK in 2017. In addition, the techniques used to launder the proceeds from modern slavery are evolving, placing increasing pressure on financial institutions to keep up.
According to Matt Horne, Deputy Director General of the NCA, money launderers are turning to the internet to launder, often targeting the online payment services of well-known companies. In addition, tighter governance within mainstream financial institutions is pushing launderers towards various cryptocurrencies, which are not currently subject to the same levels of regulatory scrutiny as traditional banks (although this may soon change). According to a recent article published by Thomson Reuters, ''[…] digital currency is now the easiest, quickest, and most private way to launder money globally.''
Moving forward, as financial institutions become increasingly exposed to these new markets and technologies, it will be important to reconsider whether their modern slavery policies and wider governance structures are keeping up.
More information
For more information on the Modern Slavery Act, please see our previous client briefing "Updated guidance on modern slavery" or speak to one of our modern slavery experts.
