Financial crime compliance professionals need to risk assess for modern slavery.
The GRC Professional caught up with Julian Hunn who is the head of financial crime compliance at Flight Centre Travel Group. He addressed the importance of considering human trafficking as part of their financial crime compliance and is concerned that Australian business might not be ready or to meet the regulatory requirements.
Australia’s modern slavery laws will broadly affect companies that have a turnover of over $100 million. The New South Wales legislation will affect companies with a turnover of more the $50 million.
“Essentially, I see Australia, so I expect similar the UK law. The UK brought out the human trafficking law I think about 3 or 4 years ago. So, I guess similar to the Australian anti-bribery and corruption the government will probably mirror the UK to a certain extent,” he said.
The UK Modern Slavery Act was passed in 2015. However, some detractors of the law suggest that it is not doing enough to tackle human trafficking, Reuters reported earlier this year.
In the UK, this affects firms with a turnover of 36 million pounds who then have had to make a public statement outlining the action they have to take to ‘identify the risk of forced labour’.
Reuters continued that there no penalties for businesses that fail to do so.
So what would be the impact on Australian businesses criteria under the legislation?
Hunn said that the big risk for Australian businesses will be reputation risk.
The Australian Modern Slavery Bill 2018 is now in the hands of the Legal and Constitutional Affairs committee which expected to release a report on it on the 24 August and Hunn believes that the bill can be expected to take effect sometime later this year.
Like the UK law, Australian businesses will be expected to make a statement on their understanding of their risk exposure to modern slavery.
While there might be financial penalties with failure to comply and to do adequate risk assessments, Hunn said that the real threat for businesses lay with advocacy groups and non-governmental originations (NGOs) ‘naming and shaming’ companies that have failed to prevent modern slavery in the operations or in their supply chain.
“I would say being associated with adverse media in the newspapers, associated with slavery and human trafficking would be extremely damaging for the origination’s reputation,” he said
He said that the business is more likely to lose their customers with adverse media around human trafficking than around publicised reports around money laundering.
The Public Statement
The public statement that will then be required under the legislation will need to be more than just lip service to the legislation.
Hunn said that there are some key components to the supply chain risk that needs to be considered. There has to be some transparency on how the company has addressed those risks.
“The reason that I am interested and is probably twofold. Firstly because this does fall under the criminal code and secondly, the application of doing a risk assessment and the elements factors and variables involved in that are very similar to what we do as financial crime compliance practitioners.”
To get this right, companies should move beyond focussing on a customer risk assessment and then also focus on agents and suppliers.