Member Article

Lauren Bowkett is a principal associate in the financial crime team at Shoosmiths. She has experience in providing financial crime compliance advice, including advice in relation to the Modern Slavery Act (“MSA 2015”). In this article Lauren takes us through the key features of the Modern Slavery Bill and gives her comment on the potential amendments.

The new Modern Slavery Bill will seek to strengthen the Modern Slavery Act 2015. Recently announced by Prince Charles as part of the Queen’s Speech, the aim of the Bill is to give protection and support to victims of slavery and human trafficking and to increase the accountability of organisations which fail to demonstrate the minimum standard of disclosure and transparency in their supply chains.

The bill was originally introduced on 15 June 2021. At the time, it made no further progress than first reading. It is expected that the new bill will follow the same key features of the Modern Slavery (Amendment) Bill outlined last year:

Strengthening Section 54 of MSA 2015 with mandatory reporting requirements.

Currently s54 of the MSA 2015 requires organisations which supply goods or services and has a global turnover of over £36 million to publish an annual modern slavery statement. The duties under this section are imposed on commercial organisations. Section 54(12) of the MSA 2015 defines a commercial organisation as a body corporate, which carries on a business, or part of a business in any part of the UK or a partnership which carries on a business, or part of a business in any part of the UK. A modern slavery statement sets out the steps an organisation has taken to ensure that human trafficking and slavery is not taking place in any of its supply chains or within its own organisation.

The Modern Slavery (Amendment) Bill strengthened this duty through the creation of two criminal offences.

The two criminal offences are:

1. Knowingly or recklessly publishing a modern slavery statement that is false or incomplete.
2. Continuing to source items from suppliers or sub-suppliers that fail to show the minimum standards of transparency following a formal warning from the Independent Anti-Slavery Commissioner (“IASC”).

A person who is responsible for a slavery and human trafficking statement and is found guilty of committing an offence could be sentenced to up to 2 years in prison and/or a fine amounting to 4% of the global turnover of their commercial organisation up to a maximum of £20 million. For the purposes of this act a person is a human. A person is responsible if they are a director or equivalent if it is a body corporate other than a limited liability company. A member of the organisation if it is a limited liability company or a partner of the organisation, if it is any other kind of partnership.

A person is not guilty if they have taken all reasonable steps to ensure that the slavery and human trafficking statement is corrected and informs the IASC as soon as practicable after becoming aware that it contains information which is false or incomplete.

Previously there were no criminal penalties for non-compliance with the legislation. Now if the bill is enacted, a person is found guilty in the crown court they could be sentenced to up to two years in prison and/or they could receive a fine amounting to 4% of the global turnover of their commercial organisation up to a maximum of £20 million.

Further criteria to be added to what information must be available within an organisation’s modern slavery statement.

Currently s54(5) MSA 2015 sets out the minimum standards of disclosure and transparency for commercial organisations when drafting their modern slavery statement. The statement must include details of:

• The organisations’ structure, business and supply chains.
• Its policies in relation to slavery and human trafficking.
• Its due diligence procedures in relation to slavery and human trafficking in its organisation and supply chains.
• Highlight where there is a risk of slavery and human trafficking taking place within the organisation and steps the organisation is taking to assess and manage this.
• Its effectiveness in ensuring slavery and human trafficking is not taking place within the organisation or its supply chains.
• Details of the training the organisation gives to its staff about slavery and human trafficking.

As well, as the information currently contained within s54(5) the Modern Slavery (Amendment) Bill set out that a commercial organisation would also need to:

• Publish and verify information about the country of origin of sources within its supply chain.
• Arrange for external inspections, audits and unannounced external spot checks.
• Report the use of employment agents acting on behalf of an overseas government.

The criteria is mandatory. Under the bill if an organisation fails to meet the requirements of disclosure and transparency they will be issued with a formal warning. If they continue to fall below the minimum standards then those responsible, which we have outlined above will be criminally liable and at risk of receiving a sentence of up to two years and/or a fine amounting to 4% of the global turnover of their commercial organisation up to a maximum of £20 million. Similar to a commercial organisation’s reporting requirements, there are currently no criminal penalties for an organisation that does not set out this information in a modern slavery statement.

The introduction of financial penalties for an organisation which does not comply with the new requirements.

The financial penalties have bite. If a person who is responsible within a commercial organisation is found guilty of either of the two proposed criminal offences their organisation could face a fine amounting to 4% of the global turnover of the organisation up to a maximum of £20 million. In respect of the first proposed offence of knowingly or recklessly publishing a modern slavery statement that is false or incomplete. This could be instead of or as well as a custodial sentence.

The implications for commercial organisations who previously did not comply with MSA 2015 were only at risk of proceedings by the secretary of state for specific performance. Specific performance is when a court issues an order requiring a party to perform a specific act. In the case of a breach of the MSA 2015 that could be to draft and publish a modern slavery statement, if they did not have one. The new bill brings into play both financial and custodial implications to those at the very top of commercial organisations, placing the responsibility firmly at their door.

Conclusion

Lauren says “The new bill, if enacted, will have significant impact on corporate liability for breaches of the MSA 2015. Described as “toothless” the legislation as it stands has been criticised by many as paying lip service to one of the most abhorrent human rights issues of our time.

The changes have been welcomed by many groups working to end modern slavery and human trafficking, including Hope for Justice. It is hard to see how the bill could be challenged. Commercial organisations need to look at their supply chains now, consider the training they offer, carry out risk assessments and place it high on their agendas. If they fail to do this, they will be at risk of criminal prosecution and large fines.

Shoosmiths have a dedicated financial crime team, who can help you implement a robust financial crime compliance programme. By strengthening your compliance programme this will help in mitigating any wrongdoing if it is found your organisation has breached the legislation. We can assist through the design and delivery of a human trafficking and modern slavery policy, putting in place and reviewing procedures if they already exist, advising on risk assessments, monitoring and carry out training. You can find further information on how we can help here. Organisations need to adopt a robust approach to compliance, or they will face both criminal and financial implications in the future.

In March 2021 the government’s online modern slavery registry was launched. The registry encourages organisations to publish their annual modern slavery statement to their register and to see what other organisations are doing to assists in eliminating modern slavery from their supply chains. The register is not mandatory but Shoosmiths hope you can join us in combatting human trafficking and slavery and publish your modern slavery statement to the register.

 

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