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On your doorstep? Modern slavery, human trafficking and the insurance industry

Slavery may sound archaic but that’s far from the case; an estimated 40 million people worldwide are living in modern slavery today and this isn’t just in far-flung factories, mines or plantations. In the UK alone, there are thought to be around 136,000 people living and working in conditions of modern slavery, including in nail bars, construction sites, restaurants, cannabis farms and across county lines. These figures are concerning enough on their own; more so when taking into account the fact that, according to a survey conducted by Themis last year, 30% of financial services professionals - and 45% of senior managers - do not think modern slavery exists in the UK. In truth, it's on the increase, with the number of potential victims of modern slavery in the UK up by 20% from 2020 to 2021.

The term modern slavery is used to encompass any form of human trafficking, slavery, servitude or forced labour, and is a lucrative practice; it is the world’s third most profitable crime, behind drugs and arms trafficking, generating an estimated USD 150 billion in profits every year. Economic damage wrought by the pandemic and global conflict, like in the Ukraine (especially when that results in mass displacement) vastly increase vulnerability to exploitation and the number of potential trafficking victims.  

There’s a rising awareness of ESG issues in supply chains (and increasing recognition of the importance of social as well as environmental factors within this matrix), in terms of ensuring physical goods aren’t produced in poor factory conditions, or contract cleaners or catering staff aren’t working in servitude, for example, but how might traffickers be using less tangible products like financial or insurance services?

Like other financial crimes, the impetus of human trafficking is ultimately economic in nature; perpetrators seek to turn a profit. Human traffickers must first launder the spoils of their criminal endeavours through legitimate services if they are to spend money in the wider global market. It’s vital that businesses consider these unwitting links to modern slavery.

Parts of the insurance sector, like life insurance, are inherently attractive to those wishing to launder the proceeds of crime, with criminals overfunding policies with illicit funds and moving money in and out via remittances. Life insurance companies have notoriously been used to launder the proceeds of drug trafficking and cartel activities, which are increasingly diversifying into human trafficking as a profitable side venture. Dirty money may also be used to purchase general insurance policies to insure high-value goods, which have, in turn, been purchased with the proceeds of illicit activity - with fraudulent claims subsequently made against these policies, effectively laundering criminal proceeds several times over.

Cooling-off periods, top-ups, annuity policies and other high-premium savings vehicles, and single-premium contracts all provide leeway for criminal activity and can make it difficult to identify suspicious activity. The diversity of the industry, where numerous types of policies are handled, and the fact that large sums of money and sudden financial transactions are normal can also make it difficult to detect abnormal activity.

Further than this, however, the insurance sector has historic links to slavery, recently apologising for providing cover for the carriage of enslaved individuals from West Africa to the Americas from the 17th to the 19th centuries and, via litigation resulting from British insurers’ refusal to pay an insurance claim for 132 slaves who died whilst on board a ship in the Caribbean, playing a significant role in the rise of abolitionism.  

Today, insurance companies may provide cover for businesses involved in high-risk modern slavery sectors like construction in the Arabian Gulf or mining in Africa. Marine cargo is another risk area; depleted fishing stocks and labour shortages associated with unregulated fishing have, for example, fuelled slavery across the Thai fishing industry, which often exploits debt-bonded migrants from Cambodia and Myanmar as a means of reducing labour costs in the face of economic pressure.

A number of industry initiatives are working to address these risks; the Joint Cargo Committee (JCC), for example, advocates for claims payment being made conditional on policyholders having undertaken due diligence relating to prohibited labour. In the UK, the Gangmasters and Labour Abuse Authority has worked with major insurers to create a standardised “Forced, Child and Slave Labour” exclusion clause for the marine market, requiring the insured to demonstrate compliance with their existing legal duties. Furthermore, the UN-backed Principles for Sustainable Insurance (PSI), an initiative involving insurers representing over a quarter of the world’s premium volume, has also developed detailed, sectoral specific guidance for fishing vessel insurance, which it recognises as a high-risk area for forced labour.

However, there is more to do. In November 2021, the Independent Anti-Slavery Commissioner, Dame Sara Thornton, as part of her work with Themis on modern slavery and human trafficking, stated that the insurance market had the potential to become “a significant influencer” in combatting modern slavery. Although she praised efforts in the insurance market to promote anti-slavery clauses in marine cargo business, she noted that the sector could do “so much more” to tackle the issue, saying: “We could design insurance products so that they encourage positive behaviour, rather than hedge against the negative. It’s better to have a carrot than a stick.”

The national Anti-Slavery Digital Learning, launched at the end of March, is intended to help with this, and is freely available to everyone working in the financial services industry and beyond. It features interactive guidance for ten industry sub-sectors, including insurance, crypto, retail banking, corporate banking, investment and accountancy, using diverse multimedia supports and taking a sector-specific approach that reflects the range of challenges faced by different financial institutions. The training includes insights and video clips from Karen Bradley MP, Caroline Haughey QC, and experts at HSBC, Nationwide, Fidelis, Anti-Slavery International, and Transparency International. It was developed by the UK Government’s National Modern Slavery Training Delivery Group, the UK Independent Anti-Slavery Commissioner, and Themis, with support from Unseen, RedCompass Labs and AllianceBernstein, and is accredited by the London Institute of Banking and Finance.

We encourage all ABI members to roll out the digital learning across their organisations. The module can be accessed either directly via Themis’ website or via a SCORM package that firms can take onto their own Learning Management System if they have one. Get in touch with Hope Sherwin, Head of Social Impact and Modern Slavery Lead at Themis (hope.sherwin@themisservices.co.uk), to find out more.

Last updated 18/05/2022