Modern Slavery

Legislation and regulation

As well as being insidious and cruel, modern slavery is a social crime and a financial crime, and comes within the remit of environmental, social and governance (ESG) considerations, both as part of responsible business practices and as a matter of compliance.

A wave of particular modern slavery legislation has begun to focus the attention of accountants:  

• The Criminal Law (Human Trafficking) Amendment Bill 2013 redefined “labour exploitation” to “a work or service which is exacted from a person under the menace of any penalty and for which the person has not offered himself or herself voluntarily”. Under this legislation, both companies and individuals can be prosecuted for trafficking and forced labour. Irish courts can also exercise jurisdiction over offences committed outside of Ireland, where such crimes have been committed by Irish citizens or persons ordinarily resident in Ireland. Irish companies therefore can be prosecuted for trafficking and forced labour, both at home and abroad (BITCI, Mitigate the Risk of Modern Slavery, 2021)
• The UK’s Modern Slavery Act 2015 places a requirement on larger commercial organisations to annually report on the risk of modern slavery in their business and supply chain and to actively work to mitigate this risk. This includes companies operating in other countries, such as Ireland, but within the supply chains of these organisations.
• In March 2020, the UK government became the first to publish its own modern slavery statement, setting out its efforts towards eradicating modern slavery from its own £50 billion supply chains, including direct engagement with c. 400 suppliers and delivering training to over 250 government commercial staff.
• In Australia the Modern Slavery Act 2018 (Cth) requires larger companies and other entities to report on how they are preventing and addressing modern slavery risks in their operations and supply chains.
• The Corporate Sustainability Reporting Directive (CSRD), on which the European Parliament and EU Council recently secured provisional agreement, introduces landmark sustainability reporting rules for large companies. These will make businesses more accountable by requiring them to disclose their impact on people and the planet, including the environment, human rights, social standards and work ethics – disclosures which will also have to be independently audited and certified.
• Italy, France, Germany, the United States and Brazil have already enacted modern slavery legislation, and some countries, such as Canada, are working to introduce legislation which will implement measures relating to modern slavery that are of significant consequence for international business, and specifically international supply chains.

Fast-growing crime

Human trafficking is the fastest growing form of international crime and the third largest criminal industry after drugs and arms trafficking. A 2014 International Labour Organization report estimated the global profits generated by modern slavery to be $150 billion per year. 

(How to Mitigate the Risk of Modern Slavery - A Report & Guidance Tool for Companies in Ireland 2021)

On this page

1. What is modern slavery?
2. Legislation and regulation
3. Fast-growing crime
4. Accountants and slavery
5. What can accountants do?
6. Key steps for accountants to take
7. Who is most at risk?
8. What should accountants look for?
9. What should accountants do if they discover modern slavery?
10. Resources

Accountants and slavery

Everyone everywhere has a part to play in the identification of modern slavery. As Professor Jan Bebbington, Director of Pentland Centre for Sustainability in Business at Lancaster University, describes it, states have a duty to protect, companies have a responsibility to respect, and both need to provide effective remedy processes.

Therefore individuals, business, civil society and government services have a role.  

"A quick survey of attendees at the Chartered Accountants Worldwide Network USA event found that 93% of respondents felt that accountants have a role to play in combating modern slavery.

(Modern slavery and the role of accountants, Chartered Accountants Ireland 2022)

What can accountants do? 

Chartered Accountants regularly have a role in interrogating supply chains, examining or advising risk on risk management and compliance. They also have the tools and skills to be instrumental in fighting this crime.

“[A]ccountants can go beyond compliance to take more of a proactive advocacy role in tackling this crime... The key message is: silence is not an option.”

(ICEAW Insights “Modern slavery: nothing to do with me?, Dipak Vashi, Technical Manager, Financial Services at ICAEW, 2022)

On this page

1. What is modern slavery?
2. Legislation and regulation
3. Fast-growing crime
4. Accountants and slavery
5. What can accountants do?
6. Key steps for accountants to take
7. Who is most at risk?
8. What should accountants look for?
9. What should accountants do if they discover modern slavery?
10. Resources

Key steps for accountants to take

1. Understand the scope
   The first step to take is to understand that no business – even well-run businesses – can say that their supply chains are free of abuse. Keeping this in mind allows a depth of understanding of the numbers, and allowing you to understand what is behind the numbers.
2. Not just large businesses
   Modern slavery applies not just to large businesses. Legislation may require large firms to manage and disclose the actions they have undertaken to address modern slavery in direct operations and supply chains. Small and medium sized entities which supply goods and services to these larger companies may also find that they have to consider their management of modern slavery to remain compliant with this legislation and part of these supply chains. Accountants working in such companies should therefore be aware of modern slavery management accounting practices, with real-time monitoring and key performance indicators.
3. Identify useful people and tools
   Forensic accountants will be key in interrogating data, as will targeted audits and horizontal collaboration, such as between members of the same industry which are sourcing from the same array of factories working together to make sure that their audit regimes are robust and that the results are shared with others.
4. Put people at the centre of risk analysis
   Adopt a people-centric approach to risk analysis and use data to inform where you need to build capacity. Examples of this include from the seafood industry, where data established that in global fishing boats with poor practices differ from other boats in that they visit different ports and stay there for shorter times; this can give an indication of where investigators need to go for more information.
5. Understand clients' risks
   Accountants in practice will need to familiarise themselves with the implications of relevant legislation on their corporate clients. Consequences can include jail, confiscation of assets, civil prevention orders and/or civil recovery. Responsibilities on businesses, accountants and auditors can include severe reputational damage with subsequent implications for revenue and share price.

  “It really important to have the expectation that this a systemic problem – it’s not just bad apples or bad actors, but rather the construction of our economic system have left a group of human being vulnerable and wherever there is vulnerability it will be exploited by either processes or people, so being a really smart and nuanced about the numbers and worrying about if it’s there.”

(Modern slavery and the role of accountants, Chartered Accountants Ireland 2022)

On this page

1. What is modern slavery?
2. Legislation and regulation
3. Fast-growing crime
4. Accountants and slavery
5. What can accountants do?
6. Key steps for accountants to take
7. Who is most at risk?
8. What should accountants look for?
9. What should accountants do if they discover modern slavery?
10. Resources

Who is most at risk?

Categories of workers
Certain categories of workers at the greatest risk of modern slavery are:

• seasonal workers

• migrant workers

• workers recruited through labour providers, and

• workers who have been trapped by modern slavery before.

The sectors with the highest prevalence of slavery include:

• domestic and personal service
• food and agricultural
• construction companies
• maintenance companies, and
• companies involved in transport and freight.

According to the UK National Crime Agency, high cash-generative businesses are also reputed to be the businesses known to be linked to exploitation based on victim narrative and analysis. These include:

• beauty salons
• nail bars
• cleaning companies, including car washes
• spas and massage parlours, and
• restaurants.

"[O]nly 55 percent of attendees at the Chartered Accountants Worldwide Network USA event said that they would know how to spot the signs of modern slavery in a  client’s/supplier’s activities. Speakers described some key points to look for."

(Modern slavery and the role of accountants, Chartered Accountants Ireland 2022)

On this page

1. What is modern slavery?
2. Legislation and regulation
3. Fast-growing crime
4. Accountants and slavery
5. What can accountants do?
6. Key steps for accountants to take
7. Who is most at risk?
8. What should accountants look for?
9. What should accountants do if they discover modern slavery?
10. Resources

What should accountants look for?

In their position as advisors, accountants are often able to see the inner workings of a client’s business. They have sight of payroll and tax compliance, and often interact with suppliers and manage the supply chain relationship and have sign of suppliers’ capacity. This puts them in a clear position to spot potential the ‘red flags’ that could be signs of modern slavery.

‘Red flags’ include:

• suppliers committing to fulfilling orders beyond their usual capacity, suggesting the use of subcontracting or hidden workers
• multiple workers’ wages for client being paid into the same account, suggesting that their pay is being controlled by a third party
• business simultaneously engaged in unlikely combinations of activity – for example, construction, care workers and nail bars
• business employing workers who are living and working in the same location  (while also appreciating that this is necessary for some forms of work) 

Other signs can be found from investigating the following:

• how are staff recruited – are they subcontracted rather than directly recruited? Has there been a change in the use of recruitment firms? How well monitored and regulated are these recruitment firms? Has there been a sudden growth in use of this firm over others?
• are there proper checks and balances in ensuring that wages are going into the personally controlled bank account of person doing the job?
• has there been a change in the use of payroll companies?
• does the tax return reflect the face of the business?
• are there ethical and appropriate employment structures in place?
• is there good company communication?
• is there a whistle-blower policy?
• is there appropriate staff training to watch out for signs of modern slavery?
• is there too much money – does it look ‘too good to be true’? Are there sudden spikes in the amount of cash in and out? Has there been a sudden change in direction of profits – a change in how they are being generated?
• how do the employees look – are they unkempt or malnourished? Do they have appropriate safety equipment? Do they appear frightened or show signs of physical or psychological abuse? Do others speak for them when questioned?

You can find resources on ICEAW’s webpage Spotting modern slavery for more on how to spot the signs of modern slavery in a business or organisation.

For accountants

Events

Chartered Accountants Worldwide Network USA event recording

Websites

• On the ICAEW Modern Slavery page, there is information on red flags, how to meet regulatory requirements and how accountants can go beyond compliance to take more of a proactive advocacy role in tackling this crime.
• Find out more about Indicators of Modern Slavery and Human Trafficking in the Accountancy Sector from the UK National Crime Agency.

Podcasts

The ICAEW podcast on tackling domestic modern slavery, with Caroline Haughey, OBE QC, and Laura Thomas, Senior Prevention and Partnerships Officer of the Gangmasters and Labour Abuse Authority (the GLAA).

Webinars

Sign up to the a free three-part seminar series co-developed by ICAEW North West and the Pentland Centre for Sustainability in Business at Lancaster University. You can listen back to the recording from speakers Jan Bebbington, Nikesh Pandit and Dipak Vashi talking on the topic of Modern Slavery from 13 July.

Supports in Ireland

Business in the Community Ireland

Business in the Community Ireland (BITCI) has a Report & Guidance Tool, with a wealth of information, including practical actions to mitigate the risk of modern slavery. It also contains contact details for those concerned about human rights infringements, modern slavery and human trafficking.

Supports in Northern Ireland

Stronger Together

Stronger Together is a UK-based multi-stakeholder business-led initiative aiming to reduce modern slavery particularly forced labour, labour trafficking and other hidden third-party exploitation of workers.

Gangmasters & Labour Abuse Authority 

The Gangmasters & Labour Abuse Authority (GLAA) is the investigative agency for labour exploitation in the UK & Northern Ireland. www.glaa.gov.uk