MODERN SLAVERY AND HUMAN TRAFFICKING STATEMENT

Lloyds Banking Group 2019 Modern Slavery and Human Trafficking Statement 2019 02

About Lloyds Banking Group

We are a UK financial services provider with around 26 million customers and a presence in nearly every Modern Slavery and Human community. Lloyds Banking Group plc has a number Trafficking Statement 2019 03 of subsidiaries, a full list of which can be found in Our Policies 04 our Annual Report. Our main business activities are retail and commercial banking, general insurance Our Suppliers – assessing and managing risk 06 and long-term savings, provided through well recognised brands including , , Combatting human trafficking , MBNA and . as a financial crime 08 Working with survivors 09 We employ approximately 63,000 employees (on a full-time equivalent basis), of whom 99 per cent work in the UK. Our Training 10 active supply base comprises approximately 3,100 suppliers, the majority of which are in professional services sectors such Governance 10 as management consultancy, legal, HR, IT, marketing and communication and located in the UK, other European countries, Looking ahead 11 North America and Asia (see ‘Our Suppliers – assessing and managing risk’ for more detail). Our shares are quoted on the London and New York stock exchanges and we are one of the largest companies in the FTSE 100 index.

26m 99% 3,100 Find out more 26 million customers and 99 per cent of our 63,000 Our active supply base About our Group in 2019, a presence in nearly every employees work in the UK comprises approximately Annual Report and Accounts community 3,100 suppliers Lloyds Banking Group Modern Slavery and Human Trafficking Statement 2019 03

Modern Slavery and Human Trafficking Statement 2019

This Statement outlines This is our fourth Modern Slavery and As outlined in our 2018 Statement, last We do not tolerate slavery, trafficking or Human Trafficking Statement. It is made year we focused our efforts on: forced labour in any part of our business the steps we have taken in in accordance with section 54(1) of the or supply chains. This is reflected in how the last twelve months to UK’s Modern Slavery Act 2015 and we are embedding these considerations We do not tolerate slavery, combat the risk of modern applies to Lloyds Banking Group plc, Raising awareness of across our business. By way of example, trafficking or forced labour slavery and human trafficking its subsidiaries, employees and officers modern slavery and in the UK (where 99 per cent of our in any part of our business taking place in either our of the Group for the financial year ending human trafficking employees work) we have aligned our or supply chains. 2019. This Statement was approved in 1. amongst our colleagues activities and policies with international business or our supply chains, February 2020 by the Board of Lloyds best practice and recognised standards. and our focus areas for the Banking Group plc on behalf of all the We are either a signatory to, or abide year ahead. In 2019 we had Group’s subsidiaries, and by the Boards Progressing our efforts by, the principles of a number of of its principal subsidiaries Lloyds Bank to tackle modern slavery international and national codes and no reported incidents. plc, Bank of Scotland plc and HBOS and human trafficking as standards relating to responsible plc on behalf of the Ring Fenced Bank 2. a financial crime business practice. These include: sub-group. The Boards of Lloyds Bank The Equator Principles, the UN Principles Corporate Markets plc and Scottish for Responsible Investment, the UN Widows Group Limited approved the Global Compact, the UN Universal Statement on behalf of the Non Ring Collaborating with Declaration of Human Rights, the Fenced Bank sub-group and the Insurance external stakeholders International Labour Organisation’s sub-group respectively. 3. Core Labour Standards and the UN Environment Programme Finance Initiative (UNEP FI) Principles for Regularly reviewing our Responsible Banking. supplier risk assessment 4. processes

Find out more About our Group in 2019, Annual Report and Accounts Lloyds Banking Group Modern Slavery and Human Trafficking Statement 2019 04

Our Policies

We have a number of Group Alongside this statement, this year we Our Code of Responsibility (the Code) We have recognition agreements with two have made significant updates to our provides clear guidelines for doing trade unions that collectively negotiate on policies and procedures Human Rights Policy Statement. We business fairly and responsibly, in line behalf of our UK workforce (around 99 per in place that reflect our 99% have used the United Nations Guiding with our Group Values: putting customers cent of colleagues worldwide). The UK’s commitment to operating Principles on Business and Human Rights first; making a difference together; and Living Wage Foundation has accredited We have recognition agreements responsibly and ethically as to guide the development of the Policy keeping it simple. The Code encourages the Group as a Living Wage Employer. with two trade unions that collectively Statement and the Group’s broader colleagues to report, through our We review our pay rates annually to ensure negotiate on behalf of our UK a business and as individual approach to human rights. whistleblowing service, Speak Up, or minimum rates are above the statutory workforce (around 99 per cent of employees. These help us to the Group’s Colleague Conduct minimum and living wage requirements colleagues worldwide) to embed modern slavery Our policies include; Colleague, Sourcing, Management team, any actions that are that are applicable in the countries we Speak Up (whistleblowing) and Anti- considerations into our unsafe, unethical, unlawful, or not in line operate in. We have worked, and continue Bribery. Each business area is required with Group Policies. to work, with third-party contractors operations. to set its strategy in line with our risk to ensure that they operate in line with appetite and our policy requirements. In our internal operations, our Pre- our commitments and expect them to These Group policies, associated employment Vetting Policy and Group ensure that the wages they pay meet procedures and mandatory training Wide Vetting Standards, apply to legally mandated minimums without are reviewed annually as part of the all permanent and non-permanent unauthorised deductions. governance of the Group’s Policy and Risk employees that we recruit, including Management Frameworks. This annual temporary staff and contractors. The Group uses a number of recruitment review reflects our efforts to continually The Pre-employment Vetting process agencies to fill roles. UK agencies are improve our responsible business upholds our respect for labour rights bound by contracts which require governance approach, and to further and, for our UK employees, includes the compliance with our Pre-employment embed human rights into our business. review of individuals’ proof of identity, Vetting Policy and Vetting Standards and address, and right to work in the UK. the Code of Supplier Responsibility, and which include specific Modern Slavery and Anti-Bribery clauses. UK agencies also attest compliance annually via the Financial Services Supplier Qualification System (FSQS).

Our Code of Responsibility provides clear guidelines for doing business fairly and responsibly, in line with our Group Values.

Find out more Code of Responsibility Anti-Bribery Policy Statement Human Rights Policy Statement Lloyds Banking Group Modern Slavery and Human Trafficking Statement 2019 05

Our Policies continued

Our Suppliers We expect all of our suppliers to: Our suppliers have a contractual obligation to ensure compliance with all We expect all UK suppliers to conform to Respect the human rights of their applicable laws that apply to their supply our Code of Supplier Responsibility which employees and comply with all relevant of goods and services to us, regardless of we share through the supplier contract legislation, regulations and directives, the jurisdiction in which they operate. as governed by our Business Sourcing including the Modern Slavery Act and Process. It defines our expectation in its reporting obligations in the countries We include compliance with the Code terms of responsible business behaviour, and communities where they operate of Supplier Responsibility and modern including human rights and labour issues. Prohibit forced labour (slavery) and slavery clauses in our UK supplier We require those UK suppliers going human trafficking in their supply chain contracts and purchase order standard through the FSQS to confirm they have and give their employees the right terms and conditions. These clauses read, understood and complied with and ability to leave employment if seek to manage modern slavery risks the Code of Supplier Responsibility and they choose and ensure that we receive appropriate provide us with evidence to demonstrate information on suppliers’ supply chains their approach. Prohibit child labour and organisations, including copies of Ensure that wages meet legally their modern slavery statements if they Speak Up mandated minimums without are required to report under the UK We offer our UK suppliers access to our confidential unauthorised deductions Modern Slavery Act. We go through Speak Up Line where they and their workers can report Allow their employees to exercise an escalation and sign off process with any incidents. An independent supplier, Expolink, the legal right to organise and join the business to consider the risks of any manages the line and we have worked with them to associations (such as labour unions) supply contract, particularly where there ensure that, if instances of modern slavery or other is deviation from our standard clauses. human rights abuses are reported, they are identified Provide clear and uniformly applied and effectively investigated. This formal process disciplinary and grievance procedures is intended to be both sensitive and robust. including prohibiting mental, physical There were no reported modern slavery incidents or verbal abuse through Speak Up in 2019. Ensure working hours are in accordance with local regulation and industry The Speak Up Third-Party Policy has been designed to practice and voluntary overtime is at a assist in managing any risk that Third-Party Suppliers’ manageable level employees are prevented from reporting any concerns about risk, malpractice or suspected wrongdoing. Our suppliers are also asked to comply with specific Third-Party Supplier Policies, where applicable to the services they provide to the Group. Third party policies such as Anti-Bribery, Data Privacy and Fraud, are documents which: Articulate Lloyds Banking Group’s expectations in regards to behaviours and decision making Address the primary areas of risk which Lloyds Banking Group faces Translate Lloyds Banking Group’s risk Find out more appetite into mandatory requirements Code of Supplier Responsibility Third Party Supplier Polices and controls Lloyds Banking Group Modern Slavery and Human Trafficking Statement 2019 06

Our Suppliers – assessing and managing risk

Lloyds Banking Group We take a risk-based approach and The Group regularly reviews the FSQS risk contractually require our c.1,100 managed framework. In 2019 we have introduced subscribes to the FSQS, UK suppliers to self-attest their compliance additional questions that trigger a ‘red a third-party managed to the Group’s policy expectations on an flag’, prompting further investigative Responsible Sourcing supplier qualification annual basis. As part of the FSQS, these action and remediation. system for the financial suppliers are asked to provide evidence of Recognising that sectors such as cleaning, catering, processes and procedures for assessing The Group Sourcing Supplier Assurance property and security are potentially higher risk, sector that is currently used and complying with relevant human team conducts an annual programme especially where separately outsourced, we have by 22 major banks, building rights legislation and labour standards, of assurance reviews for suppliers which consolidated these under one managed service societies and insurance including the UK Modern Slavery Act. represent the highest risk exposure to the agreement. This enables us to better monitor and Group. Suppliers that trigger agreed risk companies. This ensures We require these suppliers to complete manage this risk. The supplier is based in the UK, the FSQS questions on an annual basis, criteria are selected for an onsite supplier and a dedicated Supplier Manager supports we adopt a standardised and employees who manage the supplier assurance visit to test the supplier’s this relationship. approach to compliance and adherence to relevant Group policies, relationship (Supplier Managers) must In addition to our standard risk controls, we are confirm that this is satisfactorily completed which includes an assessment of modern assurance, which forms an slavery risks as appropriate. In 2019, there Living Wage Foundation accredited and key to this integral part of our supply throughout the duration of the supplier’s relationship is the bottom-up transparent review of contract with the Group. were no high priority findings and no chain management. relationships exited as a result of issues costs, with particular focus on those employed under If a supplier provides a non-compliant with Modern Slavery. cleaning and guarding. The supplier directly employs answer to any responsible business FSQS 68 per cent of their workforce and the remaining question such as the occurrence of an 32 per cent is through key sub-contractors who employment tribunal in the last three attest to those working on the account and in line years, or non-compliance with the UK with Living Wage. The Supplier Manager also has Modern Slavery Act, Supplier Managers Suppliers that trigger agreed sight of all supplier processes and procedures in are required to investigate and manage risk criteria are selected for relation to Modern Slavery for employee induction through to resolution. If the issue is an onsite supplier assurance and training, supplier evaluation procedure and guidance, plus associated policies including the deemed sufficiently serious or cannot visit to test the supplier’s be resolved in a reasonable timeframe, supplier’s Modern Slavery Statement. the Group may undertake a review of the adherence to relevant Group terms of the contract, which could include policies, which includes triggering the right to terminate where an assessment of modern Modern Slavery issues have arisen. slavery risks as appropriate. 68% The supplier directly employs 68 per cent of their workforce and the remaining 32 per cent is through key sub-contractors

Find out more Working with suppliers Lloyds Banking Group Modern Slavery and Human Trafficking Statement 2019 07

Our Suppliers – assessing and managing risk continued

We have analysed our suppliers based Our supplier geography Our supplier spend on geography, service sectors and spend. The majority of our direct suppliers represent a traditionally low risk of modern slavery. According to the 2019 Global Slavery Index, 99.5 per cent of our supplier spend is incorporated in geographies that are considered low risk for modern slavery; 95.5 per cent of our supplier spend is incorporated in the UK, 2.5 per cent in 90% other European countries, 1.5 per cent in of our external supplier North America and the remaining 0.5 per spend is in service sectors cent in other countries, including India, considered low risk the Philippines, Israel and Hong Kong. Additionally, 90 per cent of our external supplier spend is in service sectors 0.5% considered low risk, and analysis of the 1.5% 95.5% Other: India, remaining 10 per cent potential high risk North America of our supplier Philippines, Israel and spend is incorporated Hong Kong service sectors shows that 100 per cent of in the UK spend has a supplier manager assigned, 2.5% plus 99 per cent of spend is covered by Other European the FSQS. We will continue to monitor, countries and seek to continuously improve our 10% process of identifying risks. potential high risk service sectors Our suppliers in India and the Philippines, including IT providers, are large global firms which have undergone rigorous due diligence and are managed by dedicated Supplier Managers. 100% of spend has a supplier manager assigned, plus 99 per cent of spend is covered by the FSQS Lloyds Banking Group Modern Slavery and Human Trafficking Statement 2019 08

Combatting human trafficking as a financial crime

The financial sector has an The Group takes a proactive role in In 2020, we will be looking to deliver an Collaborating with others We have continued to collaborate identifying potential Modern Slavery and internal communication programme with others on the Traffik Analysis We work with other financial service important role to play in Human Trafficking (MSHT) perpetrators. based on the Hiding in Plain Sight Hub (TAHub), designed to share vital providers, NGOs, taskforces, law tackling modern slavery and Our Group Financial Intelligence Unit campaign being run by HM Government trafficking information across all sectors. enforcement agencies and key human trafficking, as there (GFIU) seeks to better understand the to raise awareness of Modern Slavery, The aim is to be able to predict future organisations to help identify and MSHT threat to the Group to make and encourage front line colleagues to incidents of human trafficking before may be exposure through prevent incidences of modern slavery accurate and insightful assessments report concerns. they occur through identifying financial and human trafficking. the receipt and movement that inform our risk-based approach and patterns, trafficking routes, hotspots We are aware that the financial system of the proceeds of crime. response. GFIU continuously seeks to We are a founding member and of community trafficking activity and can fund companies with poor labour The Group is aware of the obtain intelligence on MSHT to create remain an active participant of the vulnerability across complex supply standards, which is why we have a baseline understanding of the threat Joint Money Laundering Intelligence chains. Conceived and led by STOP risks and the influence it developed policies for lending to sectors and its scale, and track changes over Taskforce (JMLIT). The taskforce THE TRAFFIK, we continue to provide can have in combatting with known prominent risks. These sector time. Whilst intelligence available on was established to tackle financial support to the testing process at each statements detail our expectations for modern slavery through its MSHT is limited, GFIU regularly engages crime in partnership with the financial development stage. corporate customers and require them with intelligence providers such as sector and Government and has five financial crime approach to comply with applicable international The Halifax Foundation for Northern law enforcement, charities and other operational priorities, one of which is and we have implemented conventions, sanctions and embargoes, Ireland, is also currently funding a organisations working to counter MSHT. human trafficking and modern slavery. legislation, and licensing requirements charity called Invisible Traffick, an and continue to strengthen The Group Fraud and Financial Crime In 2018 GFIU developed specific whilst showing a clear commitment organisation that provides primary monitoring controls to help Prevention’s Financial Intelligence typologies to target financial indicators to robust Environmental, Social and school children in the region the Unit has made human trafficking and identify activity which may linked to sexual and labour exploitation. Governance (ESG) risk management. education and support needed to modern slavery a primary area of focus. be indicative of proceeds In 2019 GFIU have continued to review help them understand the signs and relating to modern slavery and improve these indicators in response dangers of modern slavery. Human trafficking and modern slavery offences and human trafficking. to developing intelligence to allow the Group to more accurately monitor are on the rise in Northern Ireland suspicious transactions. and vulnerable children are often the target of gangs. The charity’s work is This year, we have deepened our focus vital in protecting these children from on the UK’s County Lines, where drug becoming victims. gangs expand their operations into smaller towns or rural areas. This often involves the intimidation, financial exploitation and endangerment of young and vulnerable people at a higher risk of modern slavery and people trafficking. This year, we have deepened GFIU has collaborated with the National our focus on County Lines, County Lines Co-ordination Centre where drug gangs expand (NCLCC) portfolio to provide training and awareness raising to support Group their operations into smaller colleagues in spotting behavioural and towns or rural areas. transactional indicators. More than 500 colleagues joined an awareness webinar on this issue specifically. Find out more Sector Statements Lloyds Banking Group Modern Slavery and Human Trafficking Statement 2019 09

Working with survivors

This year, the Group has The Group recognises the challenges Survivors’ bank accounts are often used that not having the standard forms by gangmasters for fraudulent activity. focused on helping survivors of identification can present and Normally, this would prevent the survivor of modern slavery and Support is provided on a 11 47 has modified its UK Acceptable from using our banking services in future. human trafficking. As a Documentation procedures to allow Taking modern slavery referrals from case by case basis to ensure Survivors have Total survivors result of the West Midlands for alternative forms of documentation recognised charities and the police, we our customers are treated been assisted have been assisted when opening accounts, as survivors ensure that fraud records created as a sensitively and flexibly. in 2019 since 2016 Police modern slavery ring of trafficking may not have these in result of the activity of the abusers do investigation in 2016, which conventional forms. not cause the survivors to become a culminated in 2019, we have victim twice over. Working with charities Alongside Hope for Justice, the Group worked on mitigating against to improve our referral process so that works with a number of charities to customers’ accounts can be considered two key banking challenges; support those impacted by modern appropriately, our Retail Application Fraud identification and fraud. slavery. An initiative has been in place Team is able to cross-check records and at our Lloyds Bank Manchester Flagship documents in advance to allow an account branch since the end of 2017 supporting to be opened. the opening of accounts for customers with limited documentation. We have since expanded this initiative to additional branch locations in London, Cardiff, Glasgow, Newcastle, Birmingham and Liverpool. Ensuring strong links between local charities and the branch, we can confirm what documents and information are available before the customer visits the branch, ensuring the account opening process is smoother and less stressful. Support is provided on a case by case basis to ensure our customers are treated sensitively and flexibly. Lloyds Banking Group Modern Slavery and Human Trafficking Statement 2019 10

Training Governance

In 2018, we worked to raise A new Group-wide Fraud and Financial Community Bank colleagues: The Group’s approach to The Group’s day to day management Crime mandatory training module Induction training includes Identifying of and engagement on modern slavery awareness of modern slavery has been rolled out in Q4 2019 for all and Supporting Customers in human rights is governed and human rights is guided by a throughout the business. colleagues. This training includes a Vulnerable Circumstances and by the Responsible Business Cross-Divisional Working Group, led by This has been built on in specific modern slavery case study and annual mandatory training Committee, a committee of Responsible Business. This Group meets 2019, through continued the ‘red flags’ that will assist colleagues includes Customers in Vulnerable the Board of Lloyds Banking regularly to assess the embedding of training and engagement. in detecting and reporting this activity. Circumstances. Group plc. The Committee’s modern slavery and human rights within This is further supported by training for GFIU colleagues: Specific training the Group’s operations. colleagues in specific roles; on financial crime themes, such as a role is to support the Board in overseeing the Group’s Other relevant committees include; the Group Sourcing and Supplier County Lines awareness session, has Group People Committee, responsible Managers: Updated training and been rolled out and in 2019, more policies and performance for governance of the Group’s people guidance delivered in October 2019 than 500 LBG colleagues dialled into a as a responsible business. and colleague policies, covering conduct, covering the requirements of the UK webinar led by a subject matter expert values and behaviours that can relate to Modern Slavery Act and the risks of on the criminal exploitation of children. human rights concerns, as well as related slavery and human trafficking. It is areas including remuneration and reports available for colleagues to replay directly to the Chief Executive, by way and download for future reference. of the Group Executive Committee; and the Supplier Management Governance Committee responsible for overseeing supplier management capability and delivery and is made up of representatives from across the Group to embed strategy and best practice. Lloyds Banking Group Modern Slavery and Human Trafficking Statement 2019 11

Looking ahead

We will continue to monitor, Looking forward, we will seek to; This statement is made pursuant to the Modern Slavery Act 2015 and constitutes embed and evolve the way Continue to regularly review our Lloyds Banking Group’s Modern Slavery we identify and mitigate supplier risk assessment processes 97% and Human Trafficking Statement. modern slavery and human Raise colleague awareness of modern In 2019, 97 per cent of slavery and human trafficking colleagues completed trafficking risks in our training in relation to Strengthen external partnerships Signed by business and supply chain. slavery and trafficking This will be guided by our and collaborations Integrate modern slavery and human updated Human Rights Policy trafficking considerations into our Statement, which outlines relationships with clients the Group’s position on, We will continue to review and report and commitment to embed 0 on the following indicators to assess the Lord Blackwell human rights considerations. effectiveness of our actions: incidents of modern Chairman slavery reported through Number of colleagues trained in our Speak Up line relation to slavery and trafficking: This is measured by colleague engagement with our annual Group-wide mandatory Anti Money Laundering training module. In 2019, around 97% per cent of colleagues completed this training. This was António Horta-Osório updated in Q4 and is now part of the Group Chief Executive Fraud and Financial Crime Annual Refresher training and includes a modern slavery case study. Number of reports of modern slavery through our Speak Up line: In 2019 we had no reported incidents of human rights breaches, slavery or trafficking.

Queries or comments can be shared at any time by writing to: Group Chief Executive’s Office Lloyds Banking Group 25 Gresham Street London EC2V 7HN @LBGNews