Disrupting Slavery Finance

Outline
Team
  • Expected start date:
    2017•01•04
    Expected end date:
    2017•12•31
    Institute:
    UNU Office at the United Nations
    Project Status:
    Ongoing
    Project Type:
    Research
    Project Manager :
    Julia Blocher

    Slavery is both illegal – and big business. The ILO estimates that forced labour generates $150 billion a year in revenues. The funds generated by illegal forced labour, human trafficking and slavery are, however, proceeds of crime. Handling those funds can constitute money-laundering or, in certain cases where designated terrorist organizations are involved, terrorist financing. In other cases, slavery may involve underlying crimes such as kidnapping, enforced disappearances, assault, sexual assault – and often also bribery or corruption.

    Financial institutions that handle funds generated by slavery, human trafficking and forced labour – or that finance businesses that rely on such illegal practices – thus risk violating a range of existing laws and norms, especially in the area of anti-money laundering (AML) and countering the financing of terrorism (CFT). Some anti-slavery organizations, financial regulators and financial institutions have begun to realize the risks involved, as the result of work undertaken by pioneers such as Liberty Asia, Stop the Traffik and Finance Against Trafficking. In 2014, the US Financial Crimes Enforcement Network (FINCEN) issued an Advisory on identifying activity that could be indicative of human trafficking and human smuggling.

    [1]

    Reporting of relevant suspicious activity subsequently increased by 900 per cent. The Financial Action Task Force (FATF) and FATF-Style Regional Bodies (FSRBs) have also moved to issue “typologies”, helping relevant actors to identify suspicious activities and transactions.

    [2]

    These have helped to identify the important role that cash couriers, straw men and cash-intensive businesses typically play in human trafficking networks – and helped banks and other financial intermediaries to spot indicators of such activity.

    [3]

    These efforts are likely to take on an increased urgency in 2017, if, as anticipated, the UN Security Council calls in December 2016 on financial institutions and networks to take steps to apply existing AML/CFT systems to the flow of funds from human trafficking in conflict. This language, if adopted, will be the direct result of work led by United Nations University in close collaboration with the Permanent Missions of the UK and Liechtenstein to the United Nations, and with Grace Farms Foundation in New Canaan, Connecticut. This work produced a report, Fighting Human Trafficking in Conflict: 10 Ideas for Action by the Security Council, which has informed the drafting of the UNSC Resolution, and Member State preparations for the accompanying debate.

    Challenges to using AML/CFT systems

    UNU’s consultations over the past year suggest that efforts to scale-up and accelerate the enforcement of AML/CFT norms and standards, and related financial regulation, to slavery finances may face several obstacles:

    ·

    Financial institutions have a limited understanding of slavery finances. This suggests a need to engage leading financial institutions, especially their compliance officers, to understand how and when they may be handling funds generated by slavery, forced labour and human trafficking – and the associated risks.

    ·

    Financial institutions have limited access to reliable data on which to assess potentially suspicious transactions. An effort may be needed to connect financial institutions to reliable sources of data, including data reliably developed and managed by anti-slavery organizations, and other leaders in the compliance industry, such as Thomson Reuters, as well as leading voices on forced labour in supply-chains, such as the ILO, Shift and the Business and Human Rights Resource Centre.

    ·

    Financial institutions have limited incentives to apply AML/CFT norms to slavery finances. Because financial regulators have not focused attention on this issue, and because prosecutors do not often investigate and prosecute these crimes, financial institutions that may be unwittingly handling funds generated by forced labour, slavery and human trafficking may not care to find out if they are doing so. Increased investigation and prosecution could quickly transform these incentives. Organizations such as the International Corporate Accountability Roundtable (ICAR) have begun to work with networks of prosecutors to increase attention to these issues.

    ·

    Organizations that have reliable data may face obstacles to sharing it. In some countries, defamation, libel, privacy, confidentiality and other laws may prevent those organizations that have data about slavery from sharing it with financial institutions or regulators. Equally, financial regulators may be prevented from sharing such data with each, or with regulated financial institutions. Some jurisdictions have created provisions allowing for such sharing – such as ss 314a and 314b of the Patriot Act. There may be a need for other jurisdictions to learn from these approaches.

    ·

    Financial regulators, investigators and prosecutors may not focus on slavery finances. This may be for entirely valid reasons, relating to prioritization of scarce resources. Exposure to learning, typologies, techniques and information from other regulators that are focusing on these issues may encourage others to do so. FATF and the FRSBs have made important strides on these issues in relation to ‘human trafficking’, but there may be a need to consider how these norms apply to human trafficking in business supply-chains, and in the process, to slavery and forced labour.

    Project proposition

    To address these challenges, on 30/31 March 2017, UN University will convene an international group of roughly 40 financial regulators, investigators and prosecutors, financial institutions, anti-slavery organizations and key practitioners (such as the UK Independent Anti-Slavery Commissioner), at Grace Farms in New Canaan, CT. This two-day ‘Disrupting Slavery Finance’ workshop will aim to:

    ·

    identify good practice in the areas of AML/CFT, anti-bribery, anti-corruption and investment and trade finance decision-making, to reduce financial institutions’ risk of exposure to slavery finance;

    ·

    create a community of leaders who will work together and within their organizations to prevent unwitting involvement in handling slavery funds, or funding slavery;

    ·

    identify measures to improve access to reliable data about slavery, forced labour and human trafficking finances, including potential public-private partnerships.

     

    The project will be lead by UN University, specifically Dr James Cockayne, Head of Office at the UN for UN University. UNU will work in close collaboration with:

    ·

    Daniel Thelesklaf, Director, Financial Intelligence Unity, Principality of Liechtenstein

    ·

    René Brülhart, Director, Financial Intelligence Authority, Vatican City

    ·

    Grace Farms Foundation

    ·

    International Corporate Accountability Roundtable.

    UNU will also consult other key stakeholders, such as Liberty Asia, Stop the Traffik, Thomson Reuters, Shift and key FIUs and their international networks.

    [1]

    FinCEN, “Guidance on Recognizing Activity that May be Associated with Human Smuggling and Human Trafficking – Financial Red Flags”, FIN-2014-A008, July 2014.

    [2]

    Eastern and Southern Africa Anti-Money Laundering Group, Typologies Project Report on the Vulnerabilities of Money Laundering Related to Trafficking in Persons in the ESAAMLG Region, Doc No. ESAAMLG/TFM/XXII, 22 ESAAMLG Task Force of Senior Officials Meeting And 11th Council of Ministers 1-7, September 2011; Asia/Pacific Group On Money Laundering (APG), APG Yearly Typologies Report: Methods and Trends of Money Laundering and Terrorism, 14th Annual Meeting, India, 22 July 2011; APG, APG Yearly Typologies Report: Methods and Trends of Money Laundering and Terrorism, (Sydney, Australia: APG Secretariat, 17 July 2014); Financial Action Task Force (FATF), Money Laundering Risks Arising from Trafficking of Human Beings and Smuggling of Migrants, (Paris: FATF/OECD, July 2011); Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures, “Proceeds from Trafficking in Human Beings and Illegal Migration/Human Smuggling, European Committee on Crime Problems, MONEYVAL 16th Plenary Meeting, Strasbourg, 17-21 January 2005; Australian Transaction Reports and Analysis Centre (AUSTRAC), Typologies and Case Studies Report 2014 (Commonwealth of Australia, 2014).

    [3]

    FATF , Money Laundering Risks Arising from Trafficking, pp. 32-33.