NSW Anti-Slavery Commissioner Proposes a Financial Services Code of Practice to Combat Modern Slavery

By: Jim Bulling and Emre Cakmakcioglu

In May 2024, the NSW Anti-slavery Commissioner (Commissioner) published a Discussion Paper introducing a draft Code of Practice (Code) to reduce modern slavery in the financial services sector. The Commissioner sought feedback on both the Discussion Paper and Code by 15 July 2024.

In this post, we set out an outline of the Code and some potential issues market participants in this space should be aware of.

Code outline

Following consultations with NSW financial services stakeholders, the Commissioner identified two key requirements:

• clear identification of best practices in combating modern slavery; and
• harnessing specific opportunities for collaborative learning and practical leadership.

To achieve these, the Commissioner published the Code which we have summarised below:

Clause 1 outlines the role of stakeholders in tackling modern slavery including identifying people at risk, conducting due diligence, providing remedy, combating financial exclusion and supporting survivor recovery.

Clause 2 reinforces collaboration along the value-chain and between parties on a pre-competitive basis within the boundaries of competition law and general commercial obligations.

Clause 3 outlines eight specific commitments to achieve the above commitment:

1. align with Australian anti-slavery protocols;
2. engage with and focus on people with lived experience;
3. rely on best available data to identify risks and incidences;
4. train retail-facing and commercial-facing personnel to recognise modern slavery indicators;
5. ensure that lived experience is not a barrier to accessing financial services;
6. develop and use leverage to address modern slavery harms including active client engagement, initiative participation and manager endorsement;
7. extend strategies beyond derisking to active incentives; and
8. provide or enable effective remedy for modern slavery harms.

Clause 4 provides that signatories are financial services stakeholders who operate in NSW and sign up to the Code through application to the Commissioner.

The clause also highlights key signatory requirements including adherence with clauses 2 and 3, contribution to at least 2 Commissioner sessions, industry collaboration and reporting compliance efforts to the Commissioner by 31 August each year.

Finally, the clause notes the Commissioner’s right to suspend or terminate a signatory from the Code.

Clause 5 outlines how the Code is published, implemented, amended or terminated.

Where to from here?

There will no doubt be challenges for asset managers and lenders in addressing obligations under the Code, such as a portfolio manager which invests in a cotton shirt company through shares or through derivatives over shares or through a private equity fund. The question arises whether the portfolio manager is required to investigate upstream suppliers, such as the fabric mill or cotton farm regardless of the capacity in which they invest.

We also note that this proposed Code takes place in the context of emerging federal initiatives including the 2020-25 National Action Plan and the creation of the Commonwealth Anti-Slavery Commissioner in May 2024. It is to be hoped that there will be alignment and collaboration between NSW and Commonwealth Commissioners and consistency between jurisdictions.