Accountants have part to play in identifying modern slavery risks

Accountants have part to play in identifying modern slavery risks

Modern slavery referrals are on the rise as lockdown eases. Here’s a guide from The Institute of Financial Accountants on how accountants can help tackle the issue

Accountants have part to play in identifying modern slavery risks

There are at least 100,000 potential victims of modern slavery in Britain – almost 10 times the officially published government figure, according to the Centre for Social Justice. While accountants may not directly encounter modern slavery, they are well-positioned to identify its risks.

The problem is that slavery is a hidden crime where victims are exploited for criminal gain, trapped into a lifestyle with limited or no pay and little control over their day to day lives. This makes victims difficult to identify and support, and naturally there is a challenge in quantifying the issue.

According to the National Crime Agency, lockdown initially prompted a significant drop in the reporting of potential slavery cases through the National Referral Mechanism, but as restrictions have started to ease, reports are on the rise again.

Reporting is an essential part of identifying potential victims of trafficking and ensuring that they receive the appropriate protection and support. What’s more, these criminal enterprises are likely to have suffered as their income strategies have been restricted by lockdown. This may prompt an acceleration of exploitation in the coming months, and a diversification in business models as they seek to recoup lost income. These factors combined mean that accountants must be extra vigilant in the coming months as they seek to support their clients.

Accountants and accountancy practices are one of the areas identified by the National Crime Agency as businesses at risk of unwitting participation in modern slavery and human trafficking (MSHT). Largely this is due to a lack of awareness of the issue and recognition of the potential for the problem, resulting in accountants failing to report potential crime simply because they do not recognise that it might be happening.

Additionally, accountants may not be directly encountering cases of slavery and exploitation within their client businesses but are well-placed to help identify the risk of exploitation within their client’s supply chains where it might be occurring.

The Institute of Financial Accountants has been working with the National Crime Agency and its other partners to help raise awareness of the issue within the sector and encourage responsible reporting and management of the risk. As trusted advisers with positions of unique oversight and influence, accountants can work with businesses to prevent blatant or inadvertent use of exploited labour and make reports to the proper authorities. They can start by knowing the signs themselves, supporting clients with risk evaluation, delivering proper management of payroll and accounting, and supporting with identification of potential risks with third-party suppliers.

Areas of particular opportunity for spotting exploitation include during audit and bookkeeping services, insolvency, payroll and tax compliance, but other accountancy practices are not exempt. Risk also varies according to the type and style of business and you should be extra alert with clients operating in high-risk industries or using suppliers in these areas.

The National Crime Agency has created a useful publication which considers the indicators of MSHT. Businesses with a larger than average percentage of cash sales; outputs or turnover which do not match typical levels of staffing or business size for the sector; abuse of the legal conditions of client accounts; and a distinct lack of any investment or reinvestment of funds within the business, can all be signs of potentially elevated risk.

Certain sectors are also flagged as high-risk based on volumes of victim narrative, including agriculture, cleaning companies, high-cash businesses like nail bars and massage parlours, and transport and freight. We strongly recommend that accountants familiarise themselves with the report from the National Crime Agency and the risk factors it details.

In a nutshell, accountants can help to prevent modern slavery by:

  • providing advice on developing organisation structures, policies, due diligence processes, risk assessments, and management and training on modern slavery and trafficking, throughout the business and supply chain;
  • helping to ensure businesses are meeting the legally required statements and identifying and mitigating any risks;
  • encouraging small and medium-sized enterprises (SMEs) below the £36m threshold to consider MSHT risks and mitigating risks, for example, by including modern slavery clauses in supplier contracts;
  • reporting to the correct authorities. The police are doing what they can to protect victims and dismantle the organised crime groups behind this abhorrent crime. However, they need your help as accountants to disrupt exploitation in order to strive towards a society where there is zero modern slavery.

If at any point while supporting your clients you become aware of potential signs of exploitation, you can report your concerns to the Modern Slavery Helpline on 08000 121 700 or to the police on 101. If you believe your client to be in serious, immediate danger, please call 999. If there is evidence of trafficking linked to money laundering or terrorist financing, then you can also report it to the National Crime Agency.

Reports can be made anonymously if you have concerns about the impact on your business, but the agencies involved will find it useful if they can refer back to you at a later date. It is also worth coaching and encouraging your clients to make reports as transparency reflects well on those organisations seen to be helping tackle the issue. As you can imagine this is not an exhaustive list, but as an accountant in a privileged oversight position with your clients, it is essential that you are aware of, and taking responsibility for, identifying potential risks and examples of labour exploitation throughout your commercial interactions.

This article has been provided by Anne Davis of The Institute of Financial Accountants. More information about the professional accountancy body can be found at

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