Modern Slavery and Forced Labour: Due Diligence for Financial Services

Modern slavery isn't a distant, developing-world problem for financial services firms to observe from a safe distance. It shows up in cleaning contracts, in the supply chains behind office fit-outs, in the labour used by portfolio companies, and increasingly in the due diligence questions clients and regulators expect firms to have credible answers to. For finance and accounting professionals, forced labour and modern slavery compliance has moved from a niche CSR topic to a mainstream part of risk, audit and advisory work.

What "Modern Slavery" Covers

The term is broader than most people expect. It covers forced labour (work performed under threat of penalty, involuntarily), debt bondage (working to pay off a debt under exploitative terms), human trafficking for labour or sexual exploitation, and other forms of severe labour exploitation. In the UK, the Modern Slavery Act 2015 requires large commercial organisations (turnover above £36 million) to publish an annual statement setting out the steps taken to ensure slavery and trafficking aren't taking place in their own business or supply chains. Ireland doesn't have an equivalent standalone statute but addresses the same conduct through the Criminal Law (Human Trafficking) Acts and related employment law. The EU's Corporate Sustainability Due Diligence Directive (CSDDD) goes further, requiring in-scope companies to conduct active human rights and environmental due diligence across their value chains, not just publish a statement.

Where the Risk Sits for Finance and Accounting Teams

• Audit and assurance. Auditors are increasingly expected to consider modern slavery risk as part of broader ESG and non-financial reporting assurance work, particularly for clients in higher-risk sectors like construction, agriculture, textiles and hospitality.
• Supply chain and procurement. Finance teams that oversee supplier onboarding and payment increasingly need to understand red flags in supplier documentation — unusually low labour costs, third-party wage payments, confiscated identity documents reported by workers.
• Corporate finance and M&A. Modern slavery due diligence is becoming a standard part of ESG due diligence in transactions, particularly where target companies operate in higher-risk geographies or sectors.
• Client onboarding and AML overlap. Some of the financial red flags used in anti-money laundering work — unusual cash patterns, third-party payments, inconsistent invoicing — also appear in labour exploitation and trafficking cases, giving compliance teams a genuine overlap opportunity.

A Practical Due Diligence Framework

1. Map supply chain risk by sector and geography, not just by spend. A small, low-value supplier in a high-risk sector can carry more exposure than a large, low-risk one.
2. Build specific red flags into supplier and client onboarding. Recruitment fees charged to workers, confiscated documents, inconsistent or implausible labour costs, and reluctance to allow worker interviews are all recognised indicators.
3. Don't treat the statement as the deliverable. A published modern slavery statement that isn't backed by an actual due diligence process is itself a compliance and reputational risk if challenged — regulators and investors increasingly look past the document to the substance behind it.
4. Train the people who actually see the red flags. Procurement, audit and client-facing finance staff are usually better placed to notice anomalies than a compliance team working from a spreadsheet alone.

Worked Example: A Supplier Onboarding Review

A finance shared-services team processing supplier invoices for a facilities-management contract notices that a cleaning subcontractor's invoiced labour costs are implausibly low relative to the number of staff hours claimed. Rather than simply flagging it as a pricing anomaly for procurement to query commercially, the team escalates it through the firm's modern slavery risk process, which triggers a wider review including whether workers are being paid directly and whether recruitment fees were charged. The anomaly that started as a finance observation — a number that didn't add up — turned into the entry point for a genuine human rights due diligence review, which is exactly the kind of cross-functional catch a well-trained finance team can provide.

Common Pitfalls

The most common mistake is treating modern slavery compliance as a once-a-year statement-drafting exercise owned entirely by legal or CSR, disconnected from the finance and procurement teams who actually see supplier and payment data day to day. The second is assuming the risk is confined to overseas suppliers — labour exploitation cases have been identified in domestic supply chains across the UK and Ireland, including in sectors like car washes, nail bars and agriculture.

Building This Into Team Practice

Firms that manage this well give finance, procurement and audit staff a specific, short list of red flags relevant to their own role, rather than relying on a single generic annual training session disconnected from what they actually see in their daily work.

Why This Belongs in a Structured CPD Programme

Modern slavery and human rights due diligence expectations are expanding quickly, particularly with the EU's CSDDD, and structured CPD gives finance professionals a documented, current understanding rather than a one-off briefing that ages quickly as the regulatory landscape shifts.

How This Fits Into a Broader Compliance Programme

Modern slavery due diligence sits naturally alongside AML, ESG reporting and supplier due diligence as part of a firm's broader financial crime and sustainability compliance architecture — the red flags, escalation routes and cross-functional coordination required overlap significantly with existing AML and ESG programmes, making this a genuine extension rather than a standalone new function.

FAQ

Does the UK Modern Slavery Act apply to smaller firms?
The statutory reporting duty applies to organisations with turnover above £36 million, but smaller firms in a large company's supply chain are often required to provide due diligence information as a condition of doing business with them.

Is this the same as ESG reporting?
It overlaps significantly with the "social" pillar of ESG but has its own specific legal basis and due diligence requirements distinct from general ESG disclosure.

What's the difference between the UK approach and the EU's CSDDD?
The UK's Modern Slavery Act requires a statement about steps taken; the EU's CSDDD requires active, ongoing due diligence with legal liability for failures — a materially higher bar for in-scope companies.

For related reading, see our guides to AML training and reporting standards and ESG and sustainability. Build your team's compliance awareness with Learnsignal's CPD courses.