The opinions expressed here are those of the authors. They do not necessarily reflect the views or positions of UK Finance or its members.

The House of Lords has published a new report reflecting on the impact of the UK’s Modern Slavery Act and calling for stronger anti-slavery measures among in-scope organisations, including in the financial sector. 

The report in context 

When it was enacted in 2015, the UK’s Modern Slavery Act (“the Act”) was regarded as “world-leading”. The report argues, however, that recent developments “have led to the UK falling behind”.

These contextual developments are hard to ignore. In 2022, the UN estimated that the number of modern slavery victims worldwide had reached 50 million, a 25 per cent increase from 2016. The private sector was thought to account for 86 per cent of the associated forced-labour cases. 

During this time, the Act has not evolved from the basic reporting requirements it imposes on private-sector entities. However, if the recommendations in this report are followed, all of this could be about to change. 

Key takeaways for financial services organisations  

1. Access to comparable data 

The first potential implication for organisations in the financial sector is that they may soon have easier access to comparable data on forced-labour management through a government-run dashboard. 

If the report’s recommendations in this area are followed, such a dashboard could provide organisations with essential data embedded within modern slavery statements – from the total number of statements submitted to sector-specific insights and examples of strong or weak reporting practices. 

For the financial sector, this could be a valuable resource in assessing potential investment opportunities and evaluating how well corporate clients are managing their risks and impacts related to forced labour. 

If developed, this dashboard should be just one part of a broader toolkit that investors and commercial banks use to conduct modern slavery due diligence more effectively. 

2. A standardised approach to due diligence 

The second area of significance is that the report recommends new legislation requiring companies to conduct modern slavery due diligence and banning imports of products tied to forced or compulsory labour. 

As human rights due diligence becomes standardised globally, it will be essential for the success of any new legislation to align with international principles, such as the United Nations Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises.

For the financial sector, this could mean more rigorous assessments of their business relationships, including supply chains, along with heightened scrutiny of investments and commercial clients, particularly in sectors and jurisdictions where forced labour is prevalent. 

By standardising these requirements, the new legislation could simplify compliance, helping the financial sector to make more informed, responsible choices while navigating increasingly complex global markets. 

3. Increased participation in evidence-gathering 

A third potential implication for the financial sector lies in evidence-gathering.

Financial records offer “the best evidence” in a modern slavery inquiry according to statements submitted by the Modern Slavery and Organised Crime Unit. However, the related prosecutions are often limited by their lack of resourcing, with the Unit indicating that financial investigators are “finite” and “difficult to retain”. 

For these reasons, the report calls on the government to provide more resources for finance-related investigations. If the government responds, financial institutions could find themselves drawn into an increasing number of modern slavery inquiries by specialist investigators in pursuit of “the best evidence”. 

Doing so will require some institutions to upskill relevant staff members on the issue of modern slavery, how it can be identified through financial transactions, and how they can best cooperate with a related inquiry.

What happens next 

All eyes will now be on Whitehall’s response to these recommendations. Although any changes in law will take time, the short-term message for financial institutions is clear. This report sets the stage for an overhaul of the UK’s modern slavery response, and the financial sector has an opportunity to play a leading role.