Time To Cotton On: Managing Supply Chain Risks

• Published date: 15 March 2023
• Subject Matter: Government, Public Sector, Criminal Law, Money Laundering, Human Rights, Crime
• Law Firm: Cooley LLP
• Author: Mr James Maton and Benjamin Sharrock

Introduction

Potential criminal activity in international supply chains can create reputational, civil, and criminal risks. This can be particularly difficult to manage when there are many links in a chain from the source of raw materials to the final product.

One regular question is whether revenue and profit generated from tainted supply chains can be regarded as the proceeds of crime; if so, anti-money laundering legislation may be engaged. This has been considered in a recent High Court case, arising in the context of a special interest group challenging a law enforcement decision not to launch an investigation into alleged supply chain criminality¹.

Background

The World Uyghur Congress ('Congress') is a non-governmental organisation that seeks to promote the collective interests of the Uyghur people. Congress alleges that it has provided compelling evidence to UK law enforcement agencies that UK companies importing cotton from the Xinjiang Uyghur Autonomous Region ('XUAR') are benefitting from criminal activity and human rights abuses in their supply chains, that the cotton is sourced from facilities that qualify as 'foreign prisons', and that as a result the revenue and profits generated by the import and use of the cotton are the proceeds of crime. Congress argued that the UK authorities should investigate whether money laundering offences had been committed, and whether they should exercise their powers to bring POCA civil recovery proceedings.

The UK authorities declined to do so. Congress challenged that decision through judicial review proceedings, asserting that the UK authorities had misinterpreted the Foreign Prison-Made Goods Act 1897 and the Proceeds of Crime Act 2002 ('POCA'). In both cases, a key question was whether criminal activity had to be shown in relation to specific consignments of the cotton.

When can a claimant challenge a decision not to launch a prosecution?

The Court recognised that it would only rarely intervene to set aside a decision not to investigate alleged criminality, reiterating that 'There is much authority to the effect that the jurisdiction to conduct a judicial review of a public authority's decision to launch or not to launch a prosecution, though it undoubtedly exists, is to be exercised sparingly'².

The Foreign Prison-Made Goods Act 1897 (the '1897 Act')

The UK authorities argued that the 1897 Act required proof on the balance of probabilities that a specific consignment of goods must be linked to a specific...