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Intensified by the global pandemic, modern slavery risks are on the rise, with banks and manufacturers being warned to remain vigilant to exploitation happening through supply chains and money laundering.

The severity and frequency of modern slavery violations has increased over the last few years, with the growth in such encroachments concentrated across Asian manufacturing hubs, finds the Modern Slavery Index, an annual report by Verisk Maplecroft, a global risk analytics and advisory company.

This will only continue to rise post-pandemic, says Phoebe Ewen, programme director at the Mekong Club, a Hong Kong-based NGO that consults the private sector on modern slavery risks. GTR speaks to Ewen about how the pandemic has changed modern slavery-related problems, how risks can be minimised, and how banks can do better in training their staff to understand the links between modern slavery and the financial landscape.

 

GTR: What risks are you seeing when it comes to modern slavery for banks and manufacturing?

Ewen: Modern slavery impacts every country in the world differently. There can be a misconception that modern slavery is a faraway issue, or it is something that we don’t need to worry about where we live. But it does impact every single country and virtually every industry that we work with.

In finance, we tend to be looking at how modern slavery relates to money laundering, ethical investments, anything finance related, as well as how Covid-19 is causing new patterns of behaviour and exploitation – people moving online, for example. Within retail and manufacturing, we are focusing on modern slavery within supply chains. There are vulnerabilities within low-skilled jobs, where there is a reliance on low-paid migrant workers.

 

GTR: How can these companies minimise their risk of exposure to modern slavery?

Ewen: One of the most fundamental things that we recommend any company do is map out where their supply chain is. A lot of companies will be producing many different goods from a wide range of suppliers and locations, most will know about the factories they source and buy from. But often, they don’t know who their suppliers are sourcing from and the further down the supply chain you go, the higher the risk of modern slavery existing undetected. Developing clear expectations of your suppliers and laying out what your modern slavery policy is, is really important because you cannot expect suppliers to guess what your standards are. Then also – during Covid this became much more difficult – going out and visiting factories and talking to workers.

On the financial services side, we recommend having clear policies and procedures in place, but also engaging with organisations like ours or other financial crime-focused organisations, to understand what the risks are and how they are evolving. Knowing what the crime landscape is like right now and what we expect it to be like in the future is important because finance providers need to be one step ahead of criminals, otherwise they’re just reacting rather than taking a proactive approach.

A lot of banks have a broad, fairly robust anti-money laundering policy. However, we’ve seen cases where fines have been issued against banks for not properly either catching issues or administering these policies effectively. Largely, it comes down to staff responsible for identifying red flags fundamentally not understanding all of the relevant crimes within the broader spectrum of money laundering. There’s room for improvement within the finance sector to train staff on modern slavery and human trafficking, and how that relates to money laundering. So, when they are looking for red flags or potential policy breaches, they are also thinking about the possibility that there could be human trafficking and modern slavery and they better understand the nature of the crimes that they are looking for.

 

GTR: Have any modern slavery issues arisen because of the pandemic?

Ewen: One of the biggest issues that we saw fairly early on in the pandemic was the massive reduction in demand for goods, such as clothes for example. Suddenly, people were not buying clothes and sales went down. A number of large retailers and manufacturers cancelled their orders with their suppliers. In some cases, these orders were cancelled by the buyer after the factories had already produced the clothing. Most of these factories work with super thin margins, they’re reliant on the business that they get from these brands, so pulling these orders caused massive, widespread unemployment, with employees not paid for work they had already done. Of course, it is challenging for them too because they suddenly saw a huge reduction in demand, and they need to protect their own staff, but the knock-on effect of these decisions on workers in supply chains was huge.

However, in some of the industries that we work with, it has been the opposite. Some factories are seeing massive spikes in demand, those making PPE for example. There have been huge scandals in Asia around the conditions within the factories making face masks, rubber gloves and other medical equipment, because they have not been able to keep up with a sudden global pandemic. The rubber gloves industry is a startling example. According to reports, in Malaysia, some rubber gloves factories are forcing overtime onto workers. Conditions are deteriorating, with more migrant workers being brought in to try and cope with demand. This continues to be an area of concern as demand for PPE continues to be incredibly high globally.

 

GTR: What solutions are out there to try and combat modern slavery?

Ewen: There are a number of tech-focused initiatives out there to help combat modern slavery, which is very hard to detect. We have an app called Apprise Audit that we give to social auditors when they check factory conditions. It allows them to interview workers in their language by selecting their country’s flag on the app on the auditor’s phone. The workers then listen to a series of questions, which overcomes the simple issue of language barriers between auditors and workers. If you go into a factory as a social auditor, chances are you’re not going to speak the languages that the worker population speaks. Most likely, you’re not fluent enough to ask them quite complex questions about modern slavery risk. This is just one example of how technology can solve relatively simple barriers to identifying modern slavery.

Some other great examples are ‘worker voice’ apps, which the worker has on their own phone. This allows them to report issues such as involuntary overtime and give regular feedback on their working conditions.

 

GTR: Going forward, how will the risk of modern slavery change for businesses?

Ewen: As a general trend, we expect there to be more modern slavery risk within manufacturing and supply chains as we emerge from the pandemic. That said, it may become easier for companies to better understand risk within their supply chains because they are collecting more data and applying new technologies in this space. Companies also seem to be more open to sharing data with each other to create a more collective understanding of where risk lies.

Political situations can impact risk as well. As the world of global politics changes, we might see greater focus being placed on different countries, even new sanctions or legal measures related to modern slavery, or we may see different countries becoming the centre of sourcing activities. Places like Vietnam seem to be becoming even more popular for companies to source from, which may push the risk up as demand for cheap labour increases.