Partner Ian Hargreaves explores supply chains and POCA risks for UK retailers in Law360

Following the case of R (on the application of World Uyghur Congress) v National Crime Agency, and other recent supply chain investigations, Partner Ian Hargreaves explores how investigations into forced labour imports have created Proceeds of Crime Act risks for UK retailers.

Ian’s article was published in Law360, 16 January 2025, and can be found here.

Beware – laundered tomatoes!

On 1 December 2024, a BBC investigation[1] revealed that certain tomato purees being sold by UK and German retailers which, despite having “Italian” in their name, likely contain Chinese tomatoes. BBC World Service referred to testing which it alleged revealed that a total of 17 products, most of them own-brand items, were likely to contain such Chinese tomatoes. The supermarkets selling these products have disputed the findings published by the BBC. The results of this investigation were also highlighted as part of the BBC Panorama programme entitled What’s on Your Supermarket Shelves? The Dark Side of the Tomato Trade[2]. The investigation highlighted that China grows about a third of the world’s tomatoes – most of which come from the Xinjiang region, where their production is linked, it claimed, to forced labour by Uyghur and other largely Muslim minorities. The Chinese authorities deny that people are forced to work in the tomato industry and says workers’ rights are protected by law.

This introduces a number of complications for the UK supermarkets who stock such products, and may find themselves caught in the dragnet of the Proceeds of Crime Act as a result.

Supply chain concerns and the Modern Slavery Act

In January 2021, the then UK Foreign Secretary, Dominic Raab, made a statement in Parliament that the evidence of the scale and the severity of the human rights violations being perpetrated in Xinjiang against the Uyghur Muslims was far-reaching. He referred to internment camps, arbitrary detention, political re-education, forced labour, torture and the forced sterilisation of women: “All on an industrial scale. It is truly horrific. Barbarism we had hoped lost to another era, being practised today, as we speak”[3].

Allegations relating to forced labour are not the sole preserve of the Xinjiang Uyghur Autonomous Region of China (XUAR), however. Forced labour is linked to many products, such as cotton, rubber, minerals such as cobalt and lithium used for batteries, construction materials, bricks, timber, spices, cocoa, coffee and tea. Before and during the pandemic, labour issues and alleged evidence of forced labour were reported in the Malaysian medical gloves sector. Several reports have also been produced accusing pharmaceutical companies of taking advantage of forced labour, and allegations have been made concerning a direct connection between cocoa harvested using child labour in Côte d’Ivoire and Ghana and the worldwide supply of cocoa paste, cocoa butter, and cocoa powder. There have also been extensive reports concerning serious human rights abuses tied to industrial fishing[4], with fish farms and processing plants having been exposed for the unethical treatment of workers. Moreover, forced labour-made apparel from the Uyghur Region is allegedly imported into the European Union marketplace which, it is claimed, can be traced from the region to high-street and high-end brands operating and selling to the EU.

In 2015, the UK introduced the Modern Slavery Act[5] which focused on making legislative provision for “slavery, servitude and forced or compulsory labour”. However, the Act is now seen by many as not fit for purpose.

While global attempts to strengthen modern slavery laws have already been implemented, there is likely to be a hardening of approach in the UK. 

Unlike the US, the UK does not currently have specific legislation banning imports of products from particular regions on human rights grounds. Many are now calling for more targeted legislation impacting imports in this area. In November 2024, effective 2027/2028, the EU introduced its Forced Labour Regulation (“FLR”)[6]. The FLR bans products made with forced labour in the EU market, including exports. It applies to all businesses operating in the EU, without exemptions for size or sector. The regulation defines labour broadly, covering all supply chain stages and child labour. Non-compliance will lead to bans, product withdrawals and penalties. Companies will be expected to conduct robust supply chain due diligence. The EU reform will also impact non-EU companies.

Earlier this year, certain UK MPs called for a domestic iteration of the US’s Uyghur Forced Labor Prevention Act[7] to specifically outlaw imports of products linked to forced labour and, on 16 October 2024, the House of Lords Select Committee published a report[8] referencing this proposal.

Examining R (on the application of World Uyghur Congress) v National Crime Agency

While the UK awaits new legislation, non-governmental organisations have actively engaged with the issues of modern slavery in supply chains rather than remaining silent.

Indeed, the World Uyghur Congress (‘’WUC’’) has been particularly innovative in looking at other routes to address the abhorrent practice of forced labour. Although involving cotton rather than tomato puree, the recent case of R (on the application of World Uyghur Congress) v National Crime Agency ([2024] EWCA Civ 715) will likely prove to be a crucial case when it comes to such matters.

In this case, the WUC brought judicial review proceedings against the UK National Crime Agency (NCA) for the NCA’s refusal to commence an investigation into the WUC’s evidence of forced labour in supply chains. The WUC had argued that the importation of goods that represent criminal property may constitute the offence of entering into an arrangement for the acquisition, use or possession of criminal property, contrary to section 329 of the Proceeds of Crime Act 2002 (POCA), notwithstanding that, at some point in the supply chain, the goods are obtained for adequate consideration. A defence to this offence arises under section 329(2)(c) allowing a person to acquire or have possession of criminal property if it is for “adequate consideration”. The WUC lost at first instance but succeeded on appeal in relation to aspects of POCA.

The evidence placed before the courts, not contested by the NCA, was that the cotton and textile industry in XUAR is integrally involved in repressive measures implemented against the Uyghurs. The evidence presented to the NCA included UK businesses with potential links to Chinese suppliers. The WUC began discussions with the NCA in 2020, presenting evidence which was later used in court with a view to encouraging the NCA to begin an investigation under POCA into the probable importation of goods into the UK that had likely been sourced from cotton produced in XUAR further to repressive conduct. The parties agreed that products derived from forced labour occurring anywhere in the world could amount to “criminal property” for the purposes of POCA. It was also agreed that funds or the benefit from the sale of those products, and any property into which the funds were put, could also be criminal property. Notwithstanding this, the NCA decided not to investigate the flow of criminal property into the UK.

In a similar vein, the BBC’s investigation pieced together “how most Xinjiang tomatoes are transported into Europe – by train through Kazakhstan, Azerbaijan and into Georgia, from where they are shipped onwards to Italy”[9]. With the assistance of an undercover reporter and testing carried out by Source Certain, an origin verification firm based in Australia, the BBC purported to establish the origin of the tomatoes used to create the puree. The procedures used by Source Certain included the analysis of trace elements which the tomatoes would absorb from local water and rocks.

In R (on the application of World Uyghur Congress) v National Crime Agency, the Court of Appeal noted that the NCA had accepted that, as a matter of law, it would be wrong to refuse to initiate an investigation under POCA simply because criminal property could not be identified at that point. This contradicted the position taken previously by the NCA in its original decision letter (and effectively at first instance) where it had argued that “an investigation premised on potential breaches of POCA is misconceived. In the absence of specifically identified criminal property and criminal conduct, POCA is of no application”. The Court of Appeal also disagreed with a further aspect of the NCA’s decision-making.

In the decision letter, the NCA noted that it was a defence under section 329(2)(c) for a person to acquire or have possession of criminal property for “adequate consideration”. The NCA argued that, if a product in the supply chain had been the subject of a transaction for adequate consideration, then the relevant criminal property would be the proceeds of the transaction in the hands of the criminal seller, and not the product in the hands of the buyer.

By this reasoning, an exchange for adequate consideration with respect to criminal property at any point in a supply chain would neutralise POCA from applying to the criminal property thereafter. The chain would effectively be broken. The WUC argued that, although section 329(2)(c) provided a defence for the bona bide purchaser for value on receipt of the criminal property, it did not mean that the benefit received did not constitute criminal property in their hands. The Court of Appeal agreed. Accordingly, although the benefit may still be received in reliance on the adequate consideration exemption, a difficulty potentially arises regarding what is then done with that benefit or property, including any onward transfer or use.

Arguably, this interpretation of POCA effectively renders the adequate consideration exemption significantly less valuable for the purposes of carrying on normal business as the onward movement of monies would require the submission of a defence against money laundering to the NCA on each occasion.

It should be stressed that, for the prosecutor to succeed with a charge of laundering proceeds of crime, it would need to establish that the person receiving the benefit knows or suspects the benefit or property to be, or to represent, a benefit from a criminal offence. The Court of Appeal reiterated that suspicion does not have to be clear, or firmly grounded and targeted on specific facts — rather, it only needs be “more than merely fanciful” (R v Da Silva [2006] EWCA Crim 1654). Many within the industry may be tempted to simply rely on statements from suppliers that the products do not originate from a territory or region where forced labour has historically been an issue. However, although relating to a different offence, it has been re-emphasised by the UK Government in its recently published guidance on the failure to prevent fraud offence[10], that reliance without verification, including a thorough understanding of third-party relationships and contracts, creates a significant risk.

Key takeaways for UK businesses

R (on the application of World Uyghur Congress) v National Crime Agency is also significant in that it has added a further level of complexity for businesses in the regulated sector, such as banks, law firms, accountants and real estate agents, which have broader reporting responsibilities under the Money Laundering Regulations[11] and POCA. Under POCA, businesses have additional reporting obligations, and are audited by their regulators for compliance with the money laundering laws, including the effectiveness of their reporting. As a consequence of the WUC ruling, it is highly likely that the volume of suspicious activity reports will increase to protect the entity in relation to what might otherwise be a money laundering offence under POCA.

Further, it is almost certain, as a result of what is a fairly embarrassing outcome for the NCA in this case, that the NCA and other law enforcement agencies will give far greater attention to importers and supply chains.

It is now undeniable that those UK supermarkets selling tomato puree are on notice of the issues with XUAR tomatoes – even if they do not have actual knowledge that the products being sold contain tomatoes from that region. Given that this issue extends beyond tomato puree and this particular region in China, the WUC case, potential legislative reforms and the issues raised by this BBC investigation suggest that importers and sellers of products which may contain a multitude of parts or ingredients face a significant further challenge that requires careful scrutiny.

This will not come cheaply, but for the sake of those children, slaves, and minorities who are subjected to this treatment, it is the right course to take.

[1] https://www.bbc.co.uk/news/articles/crezlw4y152o

[2] https://www.bbc.co.uk/iplayer/episode/m0025p5d/panorama-whats-on-your-supermarket-shelves-the-dark-side-of-the-tomato-trade

[3] https://www.gov.uk/government/speeches/foreign-secretary-on-the-situation-in-xinjiang-and-the-governments-response

[4] https://time.com/6962248/global-seafood-supply-chain-problems/

[5] Modern Slavery Act 2015 (https://www.legislation.gov.uk/ukpga/2015/30/contents)

[6] https://www.europarl.europa.eu/news/en/press-room/20240419IPR20551/products-made-with-forced-labour-to-be-banned-from-eu-single-market

[7] https://www.cbp.gov/trade/forced-labor/UFLPA

[8] https://publications.parliament.uk/pa/ld5901/ldselect/ldmodslav/8/802.htm

[9] https://www.bbc.co.uk/news/articles/crezlw4y152o

[10] https://www.gov.uk/government/news/new-failure-to-prevent-fraud-guidance-published

[11] The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (https://www.legislation.gov.uk/uksi/2017/692/contents)