Financial Sector Commission on Modern Slavery and Human Trafficking

Outline
Team
  • Expected start date:
    2018•04•25
    Expected end date:
    2019•08•31
    Institute:
    UNU-CPR
    Project Status:
    Ongoing
    Project Type:
    Research
    Project Manager :
    Julie Oppermann

    Background

    This project, developed jointly by the Government of the Principality of Liechtenstein and United Nations University’s Centre for Policy Research, and in partnership with the Government of the Commonwealth of Australia and a consortium of Liechtenstein banks and the Liechtenstein banking association, responds to calls from the UN Security Council for states and the financial sector to tackle modern slavery and human trafficking, plus a commitment by G20 Leaders in July 2017 to do the same, including through ensuring effective corporate due diligence over global value chains. 193 States made a similar commitment in September 2015 when they pledgedto take effective measures to end modern slavery and human trafficking by 2030, as part of the 2030 Agenda for Sustainable Development. 43 states have already renewed that commitment by signing up to a Call to Action, which includes a focus on addressing risks in global supply chains. The Egmont group of Financial Intelligence Units (FIUs), the Financial Action Task Force (FATF) and several FATF-Style Regional Bodies (FSRB) have also begun to focus heavily on this issue, which can only be tackled if the major stakeholders collaborate effectively. There is also growing attention to these issues in the context of discussions on Business and Human Rights, responsible investment and corporate social responsibility.

     

    The financial sector and modern slavery

    Sustainability and InnovationEfforts to tackle modern slavery and human trafficking are at the heart of initiatives to achieve the 2030 Agenda for Sustainable Development. Notably, in Target 8.7 of the Sustainable Development Goals, states pledge to take immediate and effective measures to end modern slavery and human trafficking by 2030. In many places, modern slavery and human trafficking go hand in hand with a lack of access to formal financial services and credit, and poor supply-chain regulation. New financial sector innovations in areas such as human rights due diligence, social impact bonds and pooled public-private funding mechanisms hold powerful promise for transforming and rapidly accelerating global efforts to end modern slavery, and for placing the financial sector at the forefront of global sustainability and corporate social responsibility. And new uses of financial technology, from mobile money to distributed ledger technologies to AI-based quant investment strategies may offer new possibilities for accelerating the fight against modern slavery and human trafficking.

    Lending and Investment: Financial institutions that lend to, invest in or are otherwise linked to businesses whose supply-chains are exposed to modern slavery and human trafficking have both due diligence obligations and obligations to use their leverage over their business partners to address these concerns. These obligations are set out in the UN Guiding Principles on Business and Human Rights, and are now giving rise to a variety of national regulatory efforts, from the UK Modern Slavery Act to the French loi de vigilance, and from the Dutch Banking Sector Agreement to the Warren-Rubio bill in the US Congress. At the same time, some banks, pension funds, sovereign wealth funds and export-credit agencies are developing powerful operational innovations to promote responsible business practice across their client base. All actors in the sector will benefit from global discussions of these innovations and, as G-20 leaders declared in July 2017, from states and industry working together to establish adequate policy frameworks that ensure a level playing field. 

    Compliance: Handling the proceeds of modern slavery, human trafficking and forced and child labour can raise anti-money laundering (AML) and counter-terrorist financing (CFT) concerns. The UN Security Council recently drew attention to these concerns, and the Financial Action Task Force (FATF) will shortly publish a new typologies report on this topic. In some countries, private institutions, civil society, public regulators and law enforcement are working together to enable responsible and equitable information sharing and risk management, but there is more to be done to scale and harmonize such arrangements and ensure equitable burden sharing.

    About the project

    Together, United Nations University’s Centre for Policy Research and the Government of the Principality of Liechtenstein, building on its expertise as a financial sector, and in partnership with the Government of the Commonwealth of Australia and a consortium of Liechtenstein banks and the Liechtenstein banking association, are establishing a multi-stakeholder Financial Sector Commissionon Modern Slavery and Human Trafficking (“Liechtenstein Initiative”)

    The Commission will serve as a time-bound forum for a wide range of financial sector stakeholders to discuss the sector’s role in tackling modern slavery and human trafficking, and to develop a coordinated strategic response plan, to help achieve the Sustainable Development Goals. This will build on ideas developed in collaboration with financial sector actors and regulators in the report 25 Keys to Unlock the Financial Chains of Human Trafficking & Modern Slavery and will include discussion of:

    protecting the financial sector from risks associated with money-laundering and terrorist financing related to human trafficking, and due diligence in both compliance and investment decision-making to mitigate associated risks;
    guidance on understanding and identifying the proceeds of modern slavery and human trafficking in customer-bases and investment portfolios, contribution, linkage, responsibilities and leverage; best practice in public and private sector investment to address the drivers of modern slavery and human trafficking (including development finance, public infrastructure lending and private equity);
    best practice on remedy, including both law enforcement and bank-led initiatives; and
    lessons learned on effective regulatory policies and practices;
    innovations in responsible investment and lending practices, and use of financial institution leverage in other sectors; and
    innovative financing mechanisms to address the drivers of modern slavery and human trafficking.

     

    Outcome and deliverables

    The Commission will meet at least four times for consultations with relevant experts and to develop and release a final report detailing a roadmap for coordinated, evidence-based initiatives to strengthen the sector’s role in tackling the financing of modern slavery and human trafficking. The Commission will meet in at least four formal 1-day sessions:

    On 20-21 September 2018 in New York, to discuss ‘Financial Sector Compliance to Address Modern Slavery and Human Trafficking’ on the sidelines of the UN General Assembly (covering the size of the problem, the sector’s risk exposure, AML/CFT and compliance);
    On 20-21 January 2019 in Liechtenstein, to discuss ‘Responsible Lending and Investment to Address Modern Slavery and Human Trafficking’ on the shoulder of the World Economic Forum (covering responsible lending and investment, the sector’s role in remedy, investments in solutions through private equity, infrastructure lending and development finance); In April 2019 in Australia, to discuss ‘Financial Sector Innovation to Address Modern Slavery and Human Trafficking’ in the margins of the Bali Process Government and Business Forum (covering innovative financing models, including social impact bonds and pooled financing);
    In September 2019 in New York, to release the final report and roadmap in the margins of the UN General Assembly.

    The Commission will meet with experts drawn from the networks of UN University and Commission Members, such as Alliance 8.7, Financial Action Task Force, Freedom Fund, Global Compact, ILO, Kroll, LibertyAsia, Reporter Brasil, RUSI, Shift, Thomson Reuters, UN OHCHR, UN Principles for Responsible Investment, and UNODC. 

     

    Structure

    The Commission is convened by the H.E. Dr Aurelia Frick, the Foreign Minister of Liechtenstein; The Hon. Senator Marise Payne, the Foreign Minister of Australia; and Professor Muhammad Yunus, the Nobel Peace Laureate. The Commission is chaired by Fiona Reynolds, the CEO of the UN-supported Principles for Responsible Investment. The Commission consists of 23 Commissioners, including survivors of human trafficking and child labour, commercial and retail banks, institutional investors, hedge fund managers, international regulators, anti-slavery activists and the UN. Commission Members will:

    Receive detailed, concise research briefs prepared by global experts under the direction of the Commission Secretariat (UN University);
    Be invited to join at least four meetings (as indicated above) to be briefed by global experts on these issues. The Initiative will cover reasonable travel expenses for participation in these meetings;
    Have the option to participate in digital/telephone consultations of the Commission organized by the Chair(s) (or have an alternate do so); and
    Contribute to and be invited to endorse the final Report of the Commission.

    United Nations University’s Centre for Policy Research (New York) will serve as the Commission Secretariat.