Proceeds from a crime – modern slavery and supply chains

Duncan Jepson is founder of Liberty Asia
posted by Duncan Jepson
24 March 2016

In May 2015, Malaysian police showed the world’s press a series of jungle camps and graves in the north of the country close to the border with Thailand where they had found 139 bodies. It was explained that the victims had been smuggled over the border, falsely imprisoned in camps and then probably beaten before being murdered, either maliciously or from neglect.

No doubt, most victims would have been deceived at the start, but it would still have required bribery and corruption to cross borders and have authorities turn a blind eye to their continued presence.

The destination of those who survived these camps is the subject of several rumours among the non-governmental organisation community and interested groups. A prevailing narrative is that the individuals were held hostage and ransoms offered to potential relatives and others until it was clear no one would make payment. After that, the victims were sold to recruiters, brokers and ultimately local businesses, most likely in agriculture.

Each of these people was a victim of criminal acts, many different offences. Those who survived may still be living at the bottom end of a supply chain, working to produce, harvest and assemble. The likelihood that they continue to scrape a living, having already endured what their companions could not, makes it difficult from the perspective of a fellow human to be anything other than repulsed at the idea that our business activities may profit from their labour and our sales targets are met because our pricing benefits from their zero or even negative income. If they could write to us, they would not describe their situation as a matter of corporate social responsibility, a sustainability problem or a dilemma of ethical business. They would describe their suffering as what it clearly is: criminal.

Most of the laws relating to human trafficking have yet to place the burden of a criminal charge on businesses gaining from slavery in their relationships, instead they reinforce the disclosure approach such as is set out in the California Transparency in the Supply Chain Act and the requirements of the UK’s Modern Slavery Act. One significant change introduced through the latter legislation is that if a party is found guilty of either slavery or trafficking offences, the court will assume that all assets of the defendant and those of the previous six years are the proceeds of crime. The attitude sounds very familiar to me.

For the past 15 years, I have worked as a regional head of legal and compliance in the finance industry across Asia Pacific. Before that, I worked for five years in purchasing and supply, focusing on product from China to buyers in the UK. I subsequently found purchasing to be a generally unregulated environment compared with finance, yet both have a desperate social need to know the identity of the activities of the third parties contributing to their business model.

In finance, it’s important to know the client, but also the beneficial owners of the assets one is investing or servicing, it is a money-laundering offence to transact the proceeds from a crime, no matter how many prior transactions have taken place, and there are no excuses if you fail to be suspicious. In supply chain management, it is accepted that it is expected and generally reasonable, though an uncomfortable truth, to not know one’s supply chain, even though tracing physical objects across seas is easier than tracing financial instruments through the global banking system. Both the products – fish, minerals or sweaters – and the money banked from their sale, are proceeds of the same crimes, such as those that culminated in the mass graves and the suffering discovered in northern Malaysia.

Surely then, the responsibility, obligation and penalty must carry the same burden? Yet, at present, although maybe only for a little longer, to transact the money is a crime (money laundering), but to transact the product is simply a matter of business ethics.

Duncan Jepson is the founder of Liberty Asia

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