A recent story published by Associated Press News reported that authorities issued an order to stop fish shipments from a vessel operated by a Chinese national being landed in the US. The agency had "determined there was credible evidence that the crew was subjected to conditions defined as forced labor under international standards".
The report provided a vivid illustration of human trafficking in the supply chain and serves as a reminder to companies that the risk is real and must not be underestimated.
As discussed in a previous Clyde & Co article, supply chain risk comes in many different shapes and forms. Human trafficking and forced labour should be added to the list which already includes risks such as sanction violations, trade based money laundering and other organised criminal activities.
It is said to be the second most lucrative crime next to illicit narcotics. In 2019, the International Labour organization (ILO) estimated that over 150 million children were involved in child labour and over 25 million children and adults were victims of forced labour.
For companies who knowingly or unknowingly have suppliers that are involved in human trafficking or forced labor, the consequences are varied and may include:
- Reputational and brand damage;
- Regulatory and legal exposure;
- Where applicable, inaccurate Modern Slavery Statements;
- Business disruption caused by enforcement activity or investigations; and
- Unintended involvement in money laundering schemes and other criminal activities.
Conducting supply chain due diligence is therefore an important activity for a well managed company. However, of the companies that do conduct supply chain due diligence, many do not understand nor look for indicators of human trafficking or forced labour. Often due diligence is conducted only at the commencement of a relationship with a supplier and never revisited. Many companies conduct no due diligence at all.
Other measures that companies can take include
- Performing a supply chain risk assessment which includes assessing risk factors such as human trafficking and forced labour;
- Identifying red flag indicators and embedding them in your supply chain risk controls - these can include factors such as the maturity of the regulatory environment in the country of the supplier, adverse news and media coverage and the nature and origin of the goods or commodities being supplied;
- Having robust contractual terms which, provide a right to inspect and audit (unannounced preferably) the premises of your supplier, restricts the supplier from subcontracting production without agreement and sets out penalties for noncompliance;
- Raising awareness of employees and providing training to help them identify the warning signs; and
- Implementing a transparent and comprehensive supplier risk management process which includes a due diligence procedure that's revisited on a periodic or event-driven basis.
If you would like some help to review and test your controls in this area, identify red flag indicators that are relevant to your business or investigate an incident involving your supply chain please contact Neal Ysart, Lead Regulatory & Investigations Advisor at email@example.com / Tel: +971 55 138 9250 or your usual Clyde & Co point of contact.
....migrant workers, often from the Philippines and Indonesia, are particularly vulnerable to abusive labor conditions, with brokers often taking a cut of their wages and ship operators and companies forcing them to work extreme hours and endure brutal treatment, in one of the most dangerous occupations, with no recourse and no way to escape while at sea.