Modern slavery is big business so how can you help reduce the risk?

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The International Labour Organisation has identified modern slavery as a US$150 billion industry. Forms of modern slavery include:

  • human trafficking
  • slavery
  • servitude
  • forced labour
  • debt bondage
  • forced marriage, and
  • the worst forms of child labour.

With modern slavery being such big business, Australia enacted the Modern Day Slavery Act 2018 (Cth) (the Act) in an attempt to curb instances of modern slavery caused by, contributed to by or directly linked to Australian entities or foreign entities carrying on a business in Australia. The Act requires Reporting Entities (as defined in the Act; refer below) to submit a Modern Slavery Statement (Statement) to the Minister for Home Affairs.

With a high threshold to satisfy the definition of a Reporting Entity, most entities will fall outside the scope of a Reporting Entity for the purposes of the Act. However, non-Reporting Entities should still turn their mind to the ways in which they can play their part in eliminating instances of modern slavery. Even though non-Reporting Entities do not have an obligation to submit a Statement, non-Reporting Entities should consider conducting a risk analysis as to how they may cause, contribute to or be directly linked to modern slavery:

  • Cause – is there a direct link between a non-Reporting Entity and instances of modern slavery e.g. does the non-Reporting Entity operate a call centre that employs staff but does not meet the minimum standards for employment?
  • Contribute – how does the non-Reporting Entity engage with its suppliers?
  • Direct Link – can the non-Reporting Entity be linked to modern slavery through its third party suppliers (via supply chains)?

After this analysis, a non-Reporting Entity may consider developing a response plan to remediate any instances of modern slavery risk identified. Financial services entities should consider their modern slavery risks on the whole, but also from a money laundering perspective. Money laundering is the process used to disguise the origin of the proceeds of illegal activities, such as modern slavery. It is the process by which illegally obtained funds are given the appearance of having been legitimately obtained, or “laundered”. Financial services entities should ensure they have adequate processes and procedures in place to review client behaviour and any transactions undertaken, to ensure anything which is out of the ordinary is flagged for further consideration. Financial services entities should also ensure they are complying with their Anti-Money Laundering and Counter-Terrorism Financing obligations.

Who is a Reporting Entity and What are they Required to do?

A Reporting Entity is defined by the Act as any entity with a consolidated revenue of at least $100 million for the reporting period, and:

  • is an Australian entity; or
  • carried on a business in Australia;

at any time in the Reporting Period.

The Reporting Period refers to the financial year of the entity or any other accounting period applicable to the entity.

When must a Statement be Submitted?

A Statement must be submitted to the Minister for Home Affairs within six months of the end of the Reporting Period. For example, if the Reporting Period ends on 30 June, the due date to submit a Statement to the Minister for Home Affairs is 31 December.

What must be Included on a Statement?

A Statement must:

  • identify the Reporting Entity;
  • describe the structure, operations and supply chains of the Reporting Entity;
  • describe the risks of modern slavery practices in the operations and supply chains of the Reporting Entity, and any entities that the Reporting Entity owns or controls;
  • describe the actions taken by the Reporting Entity and any entity that the Reporting Entity owns or controls, to assess and address those risks, including due diligence and remediation processes;
  • describe how the Reporting Entity assesses the effectiveness of such actions;
  • describe the process of consultation with:
    • any entities that the Reporting Entity owns or controls; and
    • in the case of a Reporting Entity giving a joint Statement — the entity giving the statement; and
  • include any other information that the Reporting Entity, or the entity giving the statement, considers relevant.

A Statement must also be signed by the Board of the Reporting Entity prior to submitting the Statement to the Minister for Home Affairs. The Statements can be viewed in an Online Register.

Other Information

Some individual states and territories have also passed legislation to demonstrate their commitment to modern slavery. At the date of this article, no individual state or territory legislation has commenced. For example, in NSW the state government passed the Modern Slavery Act 2018 (NSW) (“NSW Act”) which reduced the threshold of a Reporting Entity’s consolidated revenue to a minimum of $50 million for the Reporting Period. There is currently no current indication as to when the NSW Act will commence.

Further Reading

 

About The Author

Sarah

Sarah Murray

As the Head of Licensing, Sarah has oversight and responsibility for all AFS and credit licence applications ensuring they fulfil the legal and regulatory guidelines set by ASIC. Sarah also assists clients maintain their licences through ongoing compliance processes and procedures and the development of compliance programs. She also has oversight of all AUSTRAC registrations and development of Anti-Money Laundering / Counter Terrorism Financing programs on behalf of clients.


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