New Corporate Reporting Requirements for Modern Slavery in Asia-Pacific

Uptick in Companies Taking Steps to Combat This Scourge

More and more companies are combating modern slavery. The scourge is a particular problem in the Asia-Pacific region, but the fight is also going strong there. Wendy Wysong and team discuss steps being taken in Asia-Pacific to curb the infringement of human rights.

with co-authors Peter Coney, Nick Turner and Amanda Murphy

Modern slavery, encompassing human trafficking and abusive labour practices such as forced labour, slavery, servitude, debt bondage, and forced marriage, is recognized as a serious human rights problem globally and increasingly in Asia-Pacific. The International Labour Organisation estimates that over half of the global victims of forced labour, approximately 11.7 million people, are in the Asia-Pacific region. Modern slavery is widespread to the extent that much of it is “hidden in plain sight.”

Increasing international efforts to combat modern slavery include legislation in Asia-Pacific, particularly in Australia, as well as proactive steps taken by Asia-Pacific companies to address potential modern slavery in their supply chains.

Mandatory Reporting Imminent in Australia

Under the pending Commonwealth Modern Slavery Bill 2018, approximately 3,000 entities based or operating in Australia and with annual revenue of more than AUD 100 million will soon have to report on the risks of modern slavery practices in their operations and supply chains and what they have done to address those risks. Enactment of the Bill is imminent, as it is moving quickly through the Australian Senate.

New South Wales has also been proactive in combating modern slavery by passing the Modern Slavery Act 2018 on June 21, 2018. The NSW Act, which is yet to come into force, requires publication of an annual slavery and human trafficking statement by any organisation with employees in NSW that supplies goods and services for profit and has a total annual turnover of AUD 50 million.

What Do Mandatory Slavery Statements Need to Cover?

The Commonwealth Bill specifies six mandatory reporting criteria:

• identification of the reporting entity;
• the reporting entity’s structure, operations and supply chains;
• the risks of modern slavery practices in the operations and supply chains;
• the actions taken to assess and address those risks;
• how the effectiveness of the actions taken to address those risks will be assessed; and
• the process of consultation with any entities that the reporting entity owns or control.

The modern slavery statements must be board approved and signed by a “responsible member” of the entity.

Enforcement

Penalties under the NSW Act for failing to prepare a modern slavery statement, failing to make it public in line with the regulations and providing information that is false or misleading can be as high as AUD 1.1 million.

By stark contrast, there are no enforcement mechanisms in the Commonwealth Bill.  Rather, the Commonwealth Bill prescribes details regarding the form and content of the reporting requirement, which is intended to “facilitate a collaborative ‘race to the top'” rather than seek to impose punitive penalties, which “may lead to a tick box compliance approach from reporting entities.”

Whilst the Commonwealth Bill does not prescribe offences or civil penalties for a failure to report, it does anticipate the creation of a “Modern Slavery Statements Register,” which is to be made available to the public on the internet free of charge. It is expected that this will facilitate scrutiny of the adequacy of statements by the public — achieving a “name and shame” impact.

Be Prepared

Under the Commonwealth Bill, the reports must be filed within six months of the financial year end. There are no transitional provisions. Accordingly, it is crucial that affected organisations put processes in place to meet their obligations. The NSW ACT reporting timeline will be provided for in the regulations.

Corporations should consider the following:

• Is your organisation likely to be subject to the supply chain reporting requirement?
• If so, can your organisation answer the criteria outlined above for reporting on its supply chain?
• What due diligence might be necessary to prepare a supply chain reporting statement?
• Does your organisation currently have modern slavery policies? If not, will the organisation establish such a policy?
• Does your organisation educate and train staff about modern slavery?
• What existing risk management procedures could be revised to address modern slavery?

Uptick in Asia-Pacific Countries Taking Steps to Combat Modern Slavery

Based on our interactions with clients, a growing number of companies within Asia-Pacific are starting to become aware of and take action against the risks posed by modern slavery. In Japan, for example, a growing number of trading houses are filing U.K. Modern Slavery Act reporting statements, similar to the Commonwealth Bill requirements. Other Japanese companies are using their review of the U.K. Modern Slavery Act to trigger risk assessments of their global supply chains.

In Hong Kong, Clifford Chance has collaborated with Liberty Asia to research anti-money laundering reporting requirements for financial institutions in various Asia-Pacific jurisdictions. Our research formed the basis of a series of client trainings to help financial institutions understand how their due diligence and transaction monitoring programs can help detect and report potential trafficking to local authorities. The firm is currently researching how funds seized from traffickers as a result of such reporting can be used to compensate their victims.