Landmark UK ruling on money laundering risks in supply chains involving modern slavery

The NCA has been asked to reconsider its decision not to investigate in this case. The ruling was confined to interpreting the explanations given in a letter from the NCA to the NGO which had justified its decision in this case.  This judgment may lead to the NCA opening an investigation in this matter, or it may seek to justify its decision not to do so on other grounds.  The NGO accepted that the NCA is entitled to take the view that there was insufficient evidence from which to develop an investigation which had any realistic prospect of bearing fruit.  If the NCA were to open an investigation, it may not share the decision publicly pending the outcome.   

Other claims

At first instance the NGO had also challenged (unsuccessfully) decisions by HMRC and the UK Border Force not to investigate under the Foreign Prison-Made Good Act 1897 and s139 Customs and Excise Management Act 1979.  These points were not appealed. 

Impact on supply chains

POCA was amended in 2018 to make it easier to seek recovery from those who deal with  the proceeds of overseas ‘gross human rights abuses’. 

Money laundering challenges are being used by those seeking to exert pressure on businesses involved in supply chains with allegations of human rights abuses.  In addition to this case, in March it was reported that two human rights groups have launched judicial review proceedings against the London Metal Exchange for failing to consider its UK money laundering obligations when deciding which brands of metals to allow on its exchange.

This ruling will put more pressure on the NCA to take action as it substantially limits the scope of the adequate consideration exemption in supply chains. Where P buys goods while knowing or suspecting that they may be the proceeds of crime, P could commit a money laundering offence or be subject to civil recovery.  The adequate consideration exemption is very narrow in application and certainly does not ‘break the chain’: 

• P will need to consider how to protect itself when doing anything with the property – eg selling, transferring, moving, through for example, seeking a Defence Against Money Laundering (DAML).  It cannot rely on the adequate consideration exemption to cover these steps. 
  
  
• Any onward purchaser (TP) will need to consider whether it has its own defences – it can not rely on the goods having been cleansed by P paying adequate consideration.
  
  
• The exemption does not protect P or TP from civil recovery.