Human trafficking represents the recruitment, transport, receipt and harbouring of people for the purpose of exploiting their labour.
Globally, it is estimated that there are today about 21 million men, women and children entrapped in this form of modern-day slavery, with about half in Asia alone, according to International Labour Organisation.
The United Nations has indicated that there are more slaves in the world today than at any other time in history.
Victims can be found in factories, fisheries, construction sites, and sex venues and are forced to work for little or no pay, deprived of their freedom, and often subjected to unimaginable suffering. The ILO estimates that the profits generated from this illicit trade exceed US$32 billion annually.
The international human trafficking community - comprising an array of state lawmakers, law enforcement, judiciary, NGOs, auditors and repatriation specialists - has not come close to meeting its full potential in addressing the problem.
Despite a few individual, success stories, the vast majority of victims are never identified. The 2012 Trafficking in Persons Report by the US Department of State was only able to account for 50,000 victims receiving assistance globally. This number has remained unchanged for several years.
Human trafficking, by its nature, represents a range of different crimes. Because of the immense amount of money associated with these illicit businesses, nearly all banks are vulnerable to having some direct or indirect association with this problem.
The anti-slavery community has mostly focused on those private sector industries such as apparel manufacturers, mining, fishing industries and entertainment where forced labour is most prevalent and has not fully considered the choke points where these industries connect with the more heavily regulated banking world.
But that has begun to change recently as non-governmental organisations (NGOs) cast a wider net in their quest to put an end to the scourge of human trafficking.
The problem in Asia
The problem is especially grim in Asia since it accounts for more than 50% of the 21 million people trafficked globally. The bulk of global manufacturing is done in Asia, usually with legitimate workers but sometimes with forced labour, and the goods sold are transacted from Asia into the global marketplace and funded via the global financial system.
Human trafficking also accompanies drug and animal trafficking, which is very prevalent in Asia, and the sums laundered through banks from these activities are substantial.
The buyers of these goods might well conduct some due diligence but as we have already seen in the cocoa, palm oil, electronic consumer goods and apparel industries, that work doesn’t always identify the illegal exploitation of workers.
In these cases, the supplier sells into the market using a letter of credit, receiving money by remittances or some other form of financing, not knowing that the goods were produced by people in a forced labour situation, requiring the commission of crimes from human trafficking, false imprisonment, bribery and various forms of physical violence, and likely money-laundering.
As a former regional head of compliance, I can’t say human trafficking was singled out very often in my job, if at all, as a key legal risk worth tracking. Our focus was very much on the various anti-terrorism and anti-drug trafficking laws that we needed to comply with. We also looked out for potential money laundering by organized crime, but rarely from the specific perspective of human trafficking.
However, there are growing reasons why bank compliance officers should start pushing these issues further up the agenda.
Unlike other criminal activities, such as terrorism, drug smuggling and weapons trafficking, which are mainly for law enforcement or law enforcement-derived organisations, there are a large number of NGOs focused on fighting human and animal trafficking in some way.
Two years ago we identified 700 across Southeast Asia performing a wide variety of work, from investigating criminal activity, psycho-social work, counselling and re-integrating victims, legal reform, data research and monitoring and surveying victim and criminal activities; all of which provide opportunities to understand the financial activities of the criminals.
Until recently, NGOs in the field have not focused on the money trail. To fight trafficking and slavery these dedicated activists have worked with the victims and, at great risk, tracked the activities of criminals and gathered information on them. But identifying the banking channels and services used by manufacturers and ‘entertainment’ establishments presents less of a risky endeavour than tackling the criminals directly.
Realising this, NGO investigations into potential bank involvement in human trafficking are now ongoing and we can expect names to be identified within the coming months. For example, there are credit card and cash transactions to buy drinks and food from bars and clubs where trafficked girls provide entertainment, credit card and cash transactions to buy drinks, food and accommodation from hotels which allow their facilities to be used by the illicit sex trade and letters of credit and remittances to sell goods manufactured by forced labour to legitimate buyers.
Of course, this has traditionally been the field of investigative journalists interested in publishing ‘name and shame’ (or ‘publish and be damned’) stories. It is these journalists who will be contacted by NGO activists once enough evidence has been gathered concerning a particular bank’s involvement unless compliance officers are fully prepared to co-operate. I understand that the NGO community is still very willing to resort to ‘naming and shaming’ if it presents the only alternative.
It should be remembered that NGO activists are primarily interested in fighting slavery and human trafficking and will first seek to work with banks to raise their concerns and share their findings to that end. So there is scope for co-operation to fight slavery and trafficking and reduce legal, compliance and reputational risk exposure.
Duncan Jepson was previously regional head of legal and compliance at ING Investment Management Asia-Pacific, and is now head of legal at BNY Mellon Investment Management Asia-Pacific. He is the founder of Liberty Asia.
Matthew Friedman is a counter human trafficking expert with more than 24 years’ experience working with the United Nations, the World Bank and a range of corporations.
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