Read the transcript
Welcome and discussion with Caroline Haughey OBE QC
Philippa Kelly
“Welcome to ICAEW Insights in Focus, the podcast from the Institute of Chartered Accountants in England and Wales, which looks at issues facing business and finance. I’m Philippa Kelly, Director of Financial Services at ICAEW, and this episode focuses on modern slavery. As inflation endures and the supply chain crunch continues, businesses are feeling considerable pressure. Many may be struggling to find the workers they need, and that can either be empowering or extremely disempowering for workers. At the same time, we’ve seen several recent revelations around fraud, including in government-backed loan schemes and furlough. In challenging times, some people are willing to push and breach the limits in order to succeed or simply to survive.
“Such conditions can also heighten the risk of modern slavery, and Chartered Accountants need to be aware of the risks and what to look out for. 2022 also presents a broader ESG context for business. While much has been made of more robust environmental reporting, the social side is just as important and more needs to be done. Awareness of the signs of modern slavery and how to respond to those signs are an important part of this.
“To explore this further, I’m joined by Caroline Haughey OBE QC, barrister at Furnival Chambers, who prosecuted the very first case brought under the Modern Slavery Act; Laura Thomas, Senior Prevention and Partnerships Officer of the Gangmasters and Labour Abuse Authority (the GLAA); and Dipak Vashi, Sustainability Manager at ICAEW, to talk about building cases against modern slavery offences, the part Chartered Accountants can play in tackling the issues, and how to spot the red flags.
“We’re starting with Caroline. What can you tell us about prosecuting that first case under the Modern Slavery Act? And what were the challenges of building that first case?”
Caroline Haughey
“This case was against a background of earlier cases, in the sense that the Modern Slavery Act filled a gap that had been left, really, since Wilberforce’s time, which seems somewhat ironic. To put it in context, we had anti-slavery legislation pre-dating the Coroners and Justice Act. But we didn’t have legislation that meant you could prosecute those who were holding people as slaves in domestic servitude. You could only prosecute the movement of people being held for exploitation. We then had the Coroners and Justice Act, which was almost like a holding piece of legislation before we bought in the Modern Slavery Act.
“I was very lucky, I was involved with the drafting of the Modern Slavery Act. What it did was clarify and solidify the legislation, which was a bit disparate, into one place. More importantly, it extended the sentencing powers and gave us greater reach in our prosecutions. For example, prior to the Modern Slavery Act, you could get more time in jail for trafficking – moving – three kilos of cocaine, than you could get for trafficking 300 people. This is pretty shocking, when you put a higher price on cocaine than you do on the destruction and demolition of people’s lives.
“Building the first case was very challenging, because we were explaining new law not only to a jury, but to the judge who has to ensure that it’s properly applied. Really, the biggest thing is selling the concept of what exploitation is to a jury, getting them to understand it. Slavery isn’t what we expect from cotton-picking in America in the 1700s. It’s a different, contemporised format. It’s people who are working for next to no wages, in unsafe conditions, with limitations on their freedom of movement and their access to basic rights that we take for granted. It’s removal of their identity papers, total misinformation on their rights, prevention of contact with their families, or maybe the creation of debt bondage in their source countries. But I want to make it clear that victims of modern slavery and exploitation could as easily be British citizens as they could be from Vietnam or Poland or any other jurisdiction. So it was challenging on two fronts: communicating the new law; and finding a way of explaining contemporary servitude and slavery to modern society – the jury.”
Philippa Kelly
“We’re keen to emphasise that this isn’t simply a problem in other parts of the world. This is a very real issue in the UK. You talked about some of the different elements of building that case, both in terms of the legal concepts that the Modern Slavery Act brought together, and the different types of evidence that you might be looking at and assessing. What do you tend to look for in building a case?”
Caroline Haughey
“I think Laura and I come from pretty much the same background, but slightly different angles. First of all, normally, we would start with an account from a complainant. We would look to find out what had happened to them, how they had been exploited, even if it may be that we never actually rely on that account in court. The second case I did under the Modern Slavery Act was child labour exploitation of Vietnamese nationals. The three young ladies concerned were so badly damaged by what had happened to them that it wasn’t right, morally, to call them [as witnesses] because it was going to be so detrimental to their mental health. But that is a starting point for the investigation: who is doing what and how are they doing it.
“Although we start with a complainant, we then would corroborate their account by looking at, for example, phone evidence, and financial documents. We often take an ‘Al Capone approach’: if we can’t get them for the criminal acts, we can show where the greed and the money is going. Because let’s be honest, modern slavery and trafficking is motivated by fiscal gain and greed, and when you have unseemly profits, you need to hide them somewhere.
“We also do a ‘compare and contrast’: compare the lifestyle of the victims – what they have and what they have access to – to the lifestyle of the defendants and what they have, their social media footprints. Often the complainants in our case will simply not exist in normal ways – they won’t be recognised by the NHS or education or local authority or social services.
“We will often see – and I’m sure Laura will agree with me on this – surrounding criminal offending: exploitation could also involve fraud by the creation of false bank accounts. So the financial aspect is definitely a very significant driver, as is supporting our victim. It’s always better to be able to show the jury how damaged someone is and what their story is, and it can be very helpful for the victim to be able to give their account and be examined on it. In Operation Fort, we had over 300 victims. Every victim I called, with the exception of two, had said that by providing their account, and being believed, they felt that they had reclaimed some of their dignity that was stolen from them.”
Discussion with Laura Thomas
Philippa Kelly
“Laura, is that consistent with what you have found at the GLAA when you are working with victims, bringing a case and telling their story?”
Laura Thomas
“Yes, we find the victims feel empowered and for them that’s the first step in being able to move on and start a life again.”
Philippa Kelly
“What role can Chartered Accountants can play here? Caroline, you mentioned financial data and the ‘Al Capone approach’? How important can that be?”
Caroline Haughey
“It’s absolutely vital. I can tell you from having been prosecuting these cases for nearly 11 years that every single one of those cases – and I’ve had over 1,000 victims and over 150 defendants – has included financial evidence. I have summoned accountants who haven’t provided appropriate documents to me, because the view I take is that if this is motivated by greed, dirty money has to go somewhere.
“I’d also make this observation: if there is human exploitation in your supply chain, if you are seeing this activity and sanctioning it by absence of intervention, bear in mind that money laundering is normally associated with it, as well as a risk of other criminal and potentially terrorist activity. This exposes you to really very significant criminal penalties. So as accountants, you must ensure that when you’re doing your audit, when you’re returning your accounts, you challenge your client. We don’t just sign them off for the sake of doing it.
“I’m self-employed, and my accountants are rigorous. I welcome it because I need to know, even though I am self-employed and don’t employ anyone else, that my supply chain is clean.
“Look at other organisations. We’ve recently seen in the press that Tony’s Chocolonely did its own inventory of the cleanliness of its supply chain and discovered that its cocoa beans were being harvested in one of the African nations by child labour. So those uncomfortable and difficult questions have to be asked, because if you have one aspect of criminality – exploitation – invariably, money laundering is running hand in hand with it.”
Philippa Kelly
“I think that is the key point for our members, that whatever role you are in, whether that’s on a board, whether as a non-executive, an auditor, or in a finance team, this is something that you may have the capacity to see and do something about.”
Caroline Haughey
“Absolutely, and sub-contracting out and delegation is not a defence. You are the company responsible. One of the things that we’ve noticed through the pandemic is a change in ethical consumerism. The bottom line is no longer financial. The bottom line is far more holistic. I think financial experts are vital in this.
“In Operation Fort, in July, we convicted the first ever British national running a commercial organisation for his involvement in labour exploitation. He was effectively running a wholly illegal operation, paying Polish workers absolutely de minimis wages, paying their slavers – because that’s what I would call them – directly, and liaising with them directly, knowing full well what was going on.
“He never lodged any proper accounts. When we unpicked his accounts, we discovered that we could also charge him and convict him of tax evasion. Not only company tax evasion, but personal tax evasion, theft from the public purse, cheating the British taxpayer. It goes back to the ‘Al Capone approach’: pick apart the finances, look at the bank accounts, look at where the money is moving. If there is not a reasonable, acceptable answer, then people like me will just keep hacking away at it until we get the answers that we’re expecting.”
Philippa Kelly
“It’s that web of offences that often happen to sit together. Laura, could you talk about some other examples or case studies of successful interventions that you’ve made, that are particularly relevant for Chartered Accountants?”
Laura Thomas
“During a recent compliance inspection, conducted with an agency, the investigator found that the workers weren’t being paid the holiday pay they were entitled to. Measures for COVID-19 were brought in in March 2020 and 516 workers, who were all owed some holiday, were furloughed. The company stated that it was following the guidelines published and that once the furlough was finished, it would work out the pay. In total these workers were owed £36,971. In going through the compliance inspection, the investigator was able to find this anomaly and ensure that the workers were paid what they were owed. This is not on the same scale as Caroline’s prosecution but more of an intervention to make sure that people get what they are entitled to.”
Philippa Kelly
“For those who may not be as familiar with it, can you tell us a little bit about what the GLAA exists to do and who you license?”
Laura Thomas
“We are a non-departmental public body. We’re sponsored by the Home Office, and we have three key functions: regulation; enforcement; and prevention. Within our regulation work, we operate a licensing scheme to regulate businesses that provide workers for the fresh produce supply chain and the horticulture industry. That’s from workers picking in the fields through to workers in warehouses, breaking down pallets for goods to be moved to the next place. Anybody who supplies workers into those places has to be licensed by the Gangmasters and Labour Abuse Authority.
“Alongside that, we have our enforcement teams who investigate reports of worker exploitation, illegal activities such as human trafficking and forced labour and illegal labour provision. We work with partners – law enforcement, the National Crime Agency and non-government organisations – to make sure that the offences are investigated properly, and that victims are given the support they need to move forward.
“Then we have our prevention work, which is made possible by working with lots of other people in industry, education, governments, charities and faith groups. Through our prevention work, we aim to raise awareness of basic employment rights provided under the UK law for workers: whether they’re UK citizens or European nationals, whoever is working in the UK has rights.”
Philippa Kelly
“Caroline mentioned the change in ethical consumerism over the pandemic. I suppose this is in part driven by things like climate change as well, but how have you seen the landscape for workers change over the pandemic? And how do you expect it to change in the next months and years as businesses face increased cost pressure due to inflation, supply chain issues that are still very prevalent, and labour shortages? Have you seen a change in the treatment of essential workers?”
Laura Thomas
“There are labour shortages in a lot of sectors and this can lead to unscrupulous employers cutting corners. These practices existed before COVID-19, but have been exaggerated by the pandemic, by travel restrictions – and exploiters, as you know, target those with perceived weaknesses. They use these perceived weaknesses, such as a lack of education, or not being able to speak the language of their co-workers, to control them. They’ll tell them, for instance, that they’re here illegally, and not to trust the authorities. Because of that, they’re able to take their money from them.
“We work in lots of different areas and have different protocols in place, such as the Construction Protocol; we support UK visas and immigration with the Seasonal Workers Pilot. We’ve also looked at the development of the Workers Rights Award, which is available across the UK; it very simply educates workers about what their rights are. It teaches people things that we may take for granted, like how to read a pay slip, how to make sure that they’re being paid the national minimum wage, how to make sure that they’re getting the annual leave and sick pay that they’re entitled to. When you give people tools to see and understand what they are entitled to, it empowers them. It also means that potential exploiters don’t have as much opportunity to exploit these vulnerable people.”
Philippa Kelly
“Caroline, have you seen this increase in exploitation or unscrupulous behaviour filtering up to the level of prosecution yet? Or if you haven’t yet seen it, is it something you’re expecting?”
Caroline Haughey
“That’s a very astute question. It’s a combination of both. We saw a number of problems. First of all, victim retention. What COVID-19 created was many people fleeing back to their origin countries, starting afresh and so not engaging with our ongoing prosecutions and investigations. During the pandemic we saw exploitation, particularly sexual exploitation, taking place behind closed doors. Organised crime groups, because that’s predominantly who’s doing it, were adapting to what needed to be done in order to feed the criminal market and gain profit. Now we are seeing the legacy of that.
“All of the indicators that Laura pointed out, are exactly what we see: lack of education, lack of understanding, fear and intimidation are used as the tools of control by the perpetrators. We only have to look at what happened in Leicester, for example, in the garment sector.
“In my personal opinion, anyone doing due diligence should be first spot-checking manufacturing plants and ensuring that they have safe working conditions. Second, they should be asking who’s doing the employment? Are they subcontracted through an employment agency? Who’s regulating that employment agency? How are they being paid? One of the things that we see over and over again, is that employees’ wages are paid into one or two bank accounts, instead of into an individual’s checked bank account. All it takes is someone being paid to show their bank card in their own name with money going to them, and you remove one of the elements of control for perpetrators.
“It’s tough keeping complainants engaged. In the cases that I’m seeing come through now, exploitation is being pushed further and further underground and that’s a real problem.
“Also, companies are fiscally more desperate. The economy is changing, inflation is on the increase, things cost more, and I can see that there will be an increase in the levels of exploitation. It’s not just big manufacturing or recycling. It’s things like your high street nail bar: you pay £30 pounds or less – maybe just £15 – for a manicure and it takes an hour. Break that down. You’re paying for the materials, the rent, the rates, tax – how can that really be justified at £15 an hour? You have to ask the question: where’s the profit being made? Those who are returning the books, particularly in cash-heavy businesses, need to be mindful of that. Ask those searching, challenging, uncomfortable questions. Otherwise, they could end up with me prosecuting them – and to be honest, I’m not very nice.
Philippa Kelly
“I don’t think any of us would want that! What would you say to a Chartered Accountant who might be sceptical about a business? And can you help our members be more sceptical now than perhaps they have been in the past?”
Laura Thomas
“The most important thing is to remember to seek advice, seek help. If something doesn’t look right, if something doesn’t feel right, trust your instincts. Look for those signs, look for where somebody hasn’t been paid the national minimum wage, look for where there might be a deduction for personal protective equipment. If it’s there, then it’s possible that these people are being exploited in some way or another. We’re not saying that all of these indicators will be present all of the time. And we’re not saying that, even if one or two of them are there, that people are being exploited. But we are here to investigate these suspicions. We are here to look for the evidence and present the case.
Philippa Kelly
“Caroline, when that case gets presented to you, what happens next?”
Caroline Haughey
“Laura provides me with the evidence and then I might suggest a couple of further lines of inquiry. But as Laura says, better to ask for help and cover your back than find yourself having committed a criminal act, being professionally negligent and ending up in a criminal court because you have turned a blind eye. Turning a blind eye is not only criminally irresponsible, it’s morally irresponsible and the ramifications are so far-reaching, because you will have done an act in furtherance of the criminal end game.
“You have to be sceptical, as Laura said. Why are these expenses being deducted? Is national insurance being properly paid? One of the things we discovered in Operation Fort was the use of zero hours contracts. Unpicking them is actually what led us to some accounting material which demonstrated that the defendant in question had been exploiting the workers; he had zero hours contracts which were wholly irregular and, in fact, he was in liaison with HMRC when we swooped in to intervene. The accountants in that case did the right thing. They were lucky because if they hadn’t, I would have had no hesitation in considering whether to join them on as a linked party.
Philippa Kelly
“So if Chartered Accountants are being professionally sceptical, what next? What about actually raising that red flag? How can we do that?”
Laura Thomas
“There are a number of ways in which you can raise potential issues. If it’s within the regulated sector, make contact with the Gangmasters and Labour Abuse Authority. You can make contact with the police – Crimestoppers – and also the Modern Slavery Helpline; the latter of the two is completely anonymous, although I would suggest that in a professional capacity, you provide your details in order tocover yourself, as Caroline said. But all of these pieces of information are vital. An investigation is like a jigsaw puzzle. It’s when you bring all of the little bits together, that you actually build the case and see the whole picture”
Discussion with Dipak Vashi
Philippa Kelly
“Dipak, we’ve heard about the responsibility that Chartered Accountants in particular have. You and I both know this is something ICAEW is increasingly conscious of and needs to support members with. What guidance can we offer accountants on the risk factors to look out for in their clients?”
Dipak Vashi
“I think the key thing here is knowing where to spot it in your clients and knowing where it’s likely to occur, including risk countries and industries. Examples of these include hand car washes and nail bars. Further information can be found at the National Crime Agency and the Global Slavery Index. It’s knowing what activities and red flags to look out for. These are numerous, including cash-based business and output which is not proportionate to staffing or size, unexplained business activities, complex business structures, and unusual payment structures. Again, all this is information that the accountant will be privy to within the organisation. We’re in a very fortunate position – we see the nuts and bolts of the company and everything that’s confidential within it. Of course, there are many other factors. But these are probably the key ones that have been identified.”
Philippa Kelly
“We’ve talked about raising concerns externally. But for someone within a business, or an auditor or other consultant, what would be their first step? And has this become more challenging in a remote or hybrid working world?”
Dipak Vashi
“Yes, it’s become more challenging in a remote and hybrid world where access to your senior managers, your junior managers, your partners, may not be so prevalent. But I think if suspicions are there, they should be raised with seniors. The main thing, as Caroline and Laura have said, is that being silent is certainly not an option. Nor is approaching anyone who you suspect may be held in slavery for the reasons that have been outlined already. Likewise, you can’t really tip off the suspected perpetrator, as this may place a victim in danger, and this may compromise the entire investigation. But again, I’d just like to reiterate the main point, which is that silence is certainly not an option – and trust your instincts.’
Philippa Kelly
“That tipping-off concept is something that members will be familiar with. But regarding its application to modern slavery, rather than economic crime, Caroline, what advice would you have?”
Caroline Haughey
“I think, when dealing with economic crime, it’s got to be treated like money-laundering. We have a Suspicious Activity Reports process. So be alert, think about who you’re dealing with. If you have a genuine concern, ask the company to account for their activities and actions. And if it doesn’t meet due diligence requirements on your part – if, as Laura said, it doesn’t look right, it doesn’t smell right – it probably isn’t right. Then I’m afraid to say the biggest issue is reporting it and not being fearful of that. Isn’t it better to report it, even if it’s simply bad account-keeping practices on their part rather than criminal activity, instead of looking the other way and by ignoring it being part of the agreement to make it happen?”
Laura Thomas
“I think one of the biggest things is to remember that there is a person at the end of this. The victim is a real person who potentially is living in squalor, potentially has nothing, potentially is scrabbling around in bins to eat. When you remember this and you report it, you’re ensuring that we or the other authorities can safeguard that potential victim. It’s important to remember, as well, that not all victims will identify themselves as a victim, and they’re reliant on somebody else raising that flag for them, to help them.”
Caroline Haughey
“I’d absolutely endorse what Laura says. Not every case is going to end up in a criminal prosecution. Our responsibility is safeguarding the vulnerable and modern slavery offending is colour-blind, economically blind, nationality-blind, it could be anyone; it could be one of us, if something went wrong in our life. We have a moral responsibility to ensure that, as I’ve seen, victims aren’t walking along the street picking up cigarette butts to smoke because they have nothing else in their life, that they’re not washing in a canal because there is no water where they’re living, that they are not being dragged into woods and threatened to be hung by parts of their anatomy, if they don’t toe the party line. Simply taking on your decent moral duty and asking how someone is, is the most important thing. Ignoring someone and allowing their life to be stolen from them isn’t something I’m particularly comfortable with.”
Philippa Kelly
“I think that’s an excellent point to end on. Not only is this a professional responsibility, it is also a moral responsibility. As all of our guests have illustrated, Chartered Accountants are in a unique position in many instances to spot those signs of modern slavery. The action that you take or don’t take can have very profound consequences for real people.
“My thanks to all our guests. More guidance is available at icaew.com/modernslavery”