Executive Summary

No country in the world is immune to the devastating impacts of modern slavery and human trafficking. Representing one of the world’s most profitable criminal enterprises, it generates some USD 150 billion per year.1 Addressing the financial angle of these gross human rights abuses is recognized as an essential approach in tackling the problem. The engagement of the financial sector, alongside the use of several financial-related policy instruments, play a vital role. This includes measures to counter money laundering and the financing of terrorism.2

To date, the UN has only used targeted sanctions in a limited number of cases in relation to modern slavery and human trafficking. Going a step further, a number of other actors, including the US, EU, UK, Canada, and Australia, have employed their own autonomous (or unilateral) sanctions to tackle the global challenge, or have started to develop legal frameworks to allow for their eventual employment. These are measures that either supplement multilateral – UN – sanctions, or are imposed entirely separately.

However, the use of these types of sanctions to tackle modern slavery and human trafficking is not yet widespread or particularly hard-hitting. When used, they are largely limited to asset freezes and travel bans. Some do not reference modern slavery and human trafficking outright, but instead address the problem under broader umbrella terms such as human rights or conflict resolution. Furthermore, such measures do not yet involve some of the more sophisticated financial sanctions that have been developed elsewhere in recent years. Clear policy communication is also lacking on the overarching strategies underlying the current use of some sanctions to tackle modern slavery and human trafficking. It is also not yet clear whether these sanctions are intended to seriously disrupt trafficking networks, rather than occupying less ambitious, more symbolic functions such as “naming and shaming.” There are also major gaps regarding enforcement, political will, capacity, and engagement across sectors.

This report, commissioned by the Finance Against Slavery and Trafficking (FAST) initiative at United Nations University Centre for Policy Research (UNU-CPR), is based on 18 anonymized semi-structured interviews with officials from the UN, US, EU, UK, and Canada, financial institution representatives and experts on sanctions, modern slavery and human trafficking, transnational organized crime, supply chains, and corporate governance. These interviews were conducted between 15 December 2021 and 4 March 2022. This study is also based on desk research, including on existing sanctions regimes, relevant legislation and academic/policy studies. Finally, it benefited from consultations with 12 academic, think tank and financial sector experts.

Key Findings

• UN sanctions to tackle modern slavery and human trafficking: Currently, sanctions are not used with any great frequency to address modern slavery and human trafficking by the UN. It employs a handful of listings relating to modern slavery and human trafficking under a variety of different mechanisms and listing criteria. This includes a small number of cases in sub-Saharan Africa as well as those under the UN’s counter-terrorism sanctions regime. In each case, only certain aspects of modern slavery and human trafficking are mentioned, e.g. recruitment and use of child soldiers, and only sometimes as the actual reason for designation, often under broader umbrella terms. A key challenge relates to enforcement and support from governments and law enforcement agencies in host countries. The UN’s rationale for using sanctions to tackle modern slavery and human trafficking is poorly communicated at present. The wording in many United Nations Security Council resolutions allow for greater use of modern slavery and related listings, but would likely be limited by political appetite. Furthermore, they are only likely be used under existing sanctions regimes, limiting geographical coverage to cases in some parts of Africa under country-based regimes, in some parts of the Middle East, Africa and Central Asia under the counter-terrorism sanctions regimes, and in the Democratic People’s Republic of Korea (DPRK) under the non-proliferation regime. They are also likely to only be used in contexts that can be linked to the core aims of the UN Security Council, particularly relating to peace and security. For example, in cases where modern slavery and human trafficking’s financial proceeds are fuelling a conflict or acting as a spoiler in conflict resolution or efforts to sustain peace. Prior experience suggests that autonomous sanctions adopted by the US, EU, and others could have scope to spur further UN action in this realm and/or to supplement existing measures. The International Labour Organization (ILO) has also used its own sanctions on occasion to tackle the problem, though its future use of such measures does not look likely to grow.

• US sanctions to tackle modern slavery and human trafficking: Outside the UN context, the use of sanctions to tackle modern slavery and human trafficking is most widespread in the US, sometimes used to supplement UN sanctions but more commonly imposed completely unilaterally in close collaboration with other autonomous sanctions regimes. The US is unique in that it has made long-standing use of sanctions that focus on transnational organized crime, corruption, and narcotics trafficking, particularly in Latin America. It is also able to enforce sanctions more assertively than other autonomous sanctioning actors. This is important in the context of modern slavery and human trafficking, where close engagement with law enforcement agencies is deemed vital. Like in the UN context, current listings are spread across a mixture of country-based and thematic sanctions regimes. They also include examples where targets are listed under broader umbrella terms rather than directly in relation to modern slavery and human trafficking activities. Its current coverage of targets under sanctions is far broader than that of the UN and other actors, spanning across the globe. The US also makes use of other related tools, such as import restrictions and non-humanitarian/non-trade funding conditionality, which can be considered de facto sanctions. The US cites tackling modern slavery and human trafficking as a national security priority. However, it does not yet communicate a concerted sanctions strategy to address the problem across the full range of sanctions regimes. The US’ future use of sanctions to address modern slavery and human trafficking is likely to be concentrated under the thematic human rights and transnational organized crime sanctions regimes.

• Other autonomous sanctions regimes to tackle modern slavery and human trafficking: The use of sanctions to tackle modern slavery and human trafficking in an autonomous capacity is not yet widespread but is starting to grow to varying degrees, among some of the other major sanctioning actors on the world stage, namely the EU, UK, Canada, and Australia. A small number of listings have been employed by these actors to date. This is done largely through their newly created thematic human rights sanctions regimes, with further scope for inclusion in the recently formed corruption sanctions regimes of the UK, Canada, and Australia. The EU is also exploring the introduction of mandatory human rights and environmental due diligence legislation on firms, which – if approved, in time – could lead to improved collaboration with European financial institutions in tackling modern slavery and human trafficking. Discussions are also underway regarding the use of an EU import ban on goods produced by forced labour. As is the case with sanctions practice elsewhere, these actors will likely take their cue from the US when adopting measures against new sanctions targets.

• Coordinated action: Sanctions scholarship shows that a coordinated approach across various sanctioning actors can improve their effectiveness and help close gaps that could allow for new modern slavery and human trafficking networks to spring up (diversion). Ad hoc collaboration on autonomous sanctions is the norm across many sanctions regimes, including the US, EU, UK, Canada, Australia, and Japan, yet no formal mechanisms exist to allow for more systematic joint planning, monitoring, or assessment across all sanctions regimes. A more strategic and joined-up approach – sovereignty concerns notwithstanding – could help to maximize their ability to seriously disrupt networks, while minimizing unintended consequences. This could include the use of existing sanctions regimes in many cases, including those on countries or on thematic grounds. Consideration could also be given as to whether any other regional organizations could be encouraged to employ sanctions against their own members in relation to modern slavery and human trafficking considering their use of sanctions in other contexts, for example, the Organization for Security and Co-operation in Europe (OSCE), the Africa Union or the League of Arab States. In light of the rise of autonomous sanctions around the world, a greater number of other countries might also be persuaded to join forces in implementing similar measures through recently approved legislative frameworks.

• New thematic sanctions regimes?: The creation of new thematic sanctions regimes focusing explicitly on modern slavery and human trafficking is not to be ruled out and could represent a powerful signalling tool, particularly if various sanctioning powers work in unison. However, there seems to be no appetite to do so at the UN. Instead, the most likely scenario for the time being would be to make use of existing criteria under country and thematic regimes to tackle various (but not necessarily all) aspects of modern slavery and human trafficking.

• Mitigating unintended consequences and avoiding a de-risking vicious circle: As in many sanctions regimes, consideration should be given to how to avoid some of the most commonly observed unintended consequences. This includes risks of legal challenges (requiring careful collection of evidence); risks of increasing or displacing corrupt and criminal practices; costs to domestic firms; risks of retaliation from State actors, such as counter sanctions and other countermeasures, cyberattacks, and military escalation; breakdown in diplomatic relations; impacts on global financial markets, and so on. Adding additional compliance requirements and risks of penalties to an already complex regulatory environment could also lead to overcompliance and de-risking. Perhaps the greatest risk, therefore, is that a vicious circle could ensue where financial institutions withdraw their services from certain countries in light of increased compliance requirements –“de-risking” – leading to financial exclusion, which in turn has been shown to fuel modern slavery and human trafficking. As raised by the World Bank in its 2021 report on financial institutions,4 a risk-based approach is thus needed regarding sanctions to ensure that adequate mitigation measures are in place to avoid exacerbating financial exclusion and, in turn, modern slavery and human trafficking. Many financial institutions already face resourcing strains in adhering to existing sanctions and wider anti-money laundering and countering the financing of terrorism (AML/CFT) requirements. This could be mitigated, in part, through close multi-stakeholder dialogue to help inform the planning of new sanctions, and related due diligence requirements, as well as providing guidance and support to reduce de-risking pressures. It could also be aided through the use of financial technology (FinTech) tools to assist these firms in playing a greater role in identifying targets for sanctions enforcement and implementing sanctions measures. It could also be assisted through donor support, such as financial assistance to help cover the administrative costs required for enhanced due diligence and know your customer (KYC) processes. Another area that merits consideration is the impacts of other sanctions regimes on increasing the prevalence of, or vulnerability to, modern slavery and human trafficking.

• Key gaps: Several important gaps and challenges exist in the current approach that would need to be addressed collectively in order for a more sophisticated and strategic approach in using sanctions more regularly to address modern slavery and human trafficking. A first step is to systematically assess the impacts and effectiveness of existing measures in place, something that would benefit greatly from support from the sanctioning actors involved, considering the opaque terminology and unclear listing criteria in some instances. A second key area relates to more effective enforcement, including better collaboration with host governments and engagement with law enforcement agencies (not the norm in most existing sanctions regimes). A better understanding is also required regarding optimal combination with other policy tools, for example referrals to legal tribunals, mediation, policing, border force controls, and trade agreements. Close engagement with academia, think tanks, and survivor organizations would also be beneficial in identifying modern slavery and human trafficking networks activities and financial flows, including with regards to questions of supply and demand.

Key Recommendations

To optimize the effectiveness of sanctions in tackling the financial angle of modern slavery and human trafficking and to assist in restricting illicit financial flows, and ultimately trafficking networks, some of the following steps could be considered by the international community:

• Conduct further research to inform sanctions implementation on modern slavery and human trafficking: 

• Develop a methodology and conduct research to assess the impacts and effectiveness of modern slavery and human trafficking-related sanctions used to date to capture all types of measures, including those listed under broader umbrella terms. This could include an assessment of how overlapping sanctions regimes against similar targets may be having an impact. 
• Execute a detailed mapping exercise, with the option for its inclusion in a regularly updated database available online, to capture all types of sanctions engaged in relation to modern slavery and human trafficking, including those with no mention of relevant terms but relating to known perpetrators. This could be linked to other existing sanctions databases, such as the UN Sanctions App5 and other similar platforms regarding the US, EU, UK, Canadian, and Australian measures alongside any new actors that start using sanctions to address these challenges. 
• Carry out in-depth consultations with US officials, former and serving, on the use of sanctions to address transnational organized crime in the Americas, such as in relation to drug trafficking, to generate detailed guidance and capture lessons learned. 
• Investigate challenges surrounding implementation and enforcement with regards to closer collaboration with governments and law enforcement agencies around the world and use of available tech-based innovations. 
• Identify and commission new research that should be accessible to the policy community, useful to financial institutions and serve as inspiration for further research by universities and research institutions.

• Establishment of: 

• A platform that serves as a repository on relevant publications, projects, initiatives, and other resources specifically on sanctions relating to modern slavery and human trafficking. 
• A multi-stakeholder forum/dialogue to include the UN, governments, financial institutions, survivor groups, and “tech-for-good”/financial technology specialists. This would have a focus on sectoral consultations, sharing of best practice, building of trust, awareness raising, capacity-building, and identification of action on mitigating de-risking as well as development of new tech platforms. Outputs could include a series of resources and network to aid policymakers and financial institutions developing and enforcing new sanctioning strategies to address the problem. 
• A research network, to include those already leading on important aspects relevant to modern slavery and human trafficking sanctions, such as measures to address transnational organized crime. 
• An expert working group or commission, composed of experienced former or serving practitioners and experts, able to advise on the direction of research and policy engagement.

• Design and coordination of: 

• A training course, including options for e-learning workshops, to be made available to relevant stakeholders on sanctions relating to modern slavery and human trafficking. 
• A “tech-sprint” to identify existing technology that could assist with the more effective use of modern slavery and human trafficking-related sanctions, and avoidance of unintended consequences of de-risking. This could include the creation of new products should appropriate innovations not be found that are able to meet existing needs. 
• A communications strategy to focus on awareness-raising and capacity-building.

• Production of: 

• A blueprint on effective and ethical use of sanctions to tackle modern slavery and human trafficking. 
• A modern slavery and human trafficking sanctions “checklist” to equip policymakers in the adoption of new measures. 
• A series of detailed recommendations for policymakers and the private sector to assist in the effective planning, adoption, and implementation of modern slavery and human trafficking-related sanctions.

Read full report here.