New money laundering risk for pubs and bars

The UK’s Court of Appeal has recently provided a ruling regarding a case concerning money laundering and modern slavery that could have serious repercussions for pubs and bars. In this article, Ben Cooper, partner in TLT’s economic crime compliance team explains the ruling and what it means for pubs and bars.

The changing legal landscape

Earlier this year, the UK’s Court of Appeal issued an important ruling that may have wide reaching ramifications for pubs and bars. The judgment in the case (‘R (World Uyghur Congress) v NCA’) shone a spotlight on money laundering risks for businesses which have identified potential modern slavery and forced labour within their supply chains.

In simple terms, the court clarified that trading in goods tainted by criminality, for example through forced labour or modern slavery, can constitute a money laundering offence under the Proceeds of Crime Act (POCA) 2002, regardless of whether the business has paid adequate consideration for these goods. Previously, the widely held understanding was that if a party paid adequate consideration for goods, the goods would be “cleansed” of their criminality. The new ruling overrules this interpretation, meaning that any onward dealing with tainted goods could lead to criminal liability later in the value chain.

Essentially, the onus is now on businesses to ensure their supply chain is free of criminality at all levels as businesses will no longer be able to rely on the adequate consideration exemption to avoid criminal liability.

The implications – what do you need to know?

Bars and pubs, like any other business, are vulnerable to money laundering risks, especially when dealing with suppliers who are based in jurisdictions where there is a high risk of human rights abuses. Food production is one sector where modern slavery is particularly rife. A UK government report has stated that 13% of all potential forced labour victims came from the food sector.

To give an example, if a business purchases coffee or bananas from a supplier who has acquired them  from a plantation where forced labour is used, and the business knows or suspects the goods may be tainted by human rights abuses, the business may be exposed to criminal liability under the POCA if they deal in those goods. If businesses are found to be guilty of a money laundering offence under POCA they may be subject to a custodial sentence of up to 14 years and an unlimited fine.

The threshold for suspicion is low, as such merely suspecting that the relevant goods might be tainted by criminality can expose a business to risk of prosecution under the POCA. This may be particularly concerning for bars and pubs which often operate with multiple suppliers and who may not have the adequate resources to thoroughly vet their suppliers.

Precautionary steps – what can you do?

You should evaluate the procedures you have in place to monitor supply chains, for example, by regularly reviewing and updating the due diligence processes you have in place to monitor the legitimacy of the operations of your suppliers. You should also ensure that processes are in place to dictate what action should be taken if concerns regarding your supply chains come to light.

It is worth noting that if you suspect that goods you wish to take delivery of are tainted by criminality you should report the matter immediately to the NCA and apply for a defence against money laundering in respect of those goods to protect yourself from committing any money laundering offence. Additionally, you should review the contractual terms you have in place with your suppliers to ensure there are provisions in place to allow you to reject the delivery of tainted goods.

Q&A

Q: What are the rules for hosting fireworks/a bonfire at my venue?

A: "Fireworks can only be set off between 11pm and 7am, except for Bonfire Night, when the cut off is midnight or New Year’s Eve, Diwali and Chinese New Year, when the cut off is 1am. Bonfires and firework displays should be risk assessed for health and safety of customers and potential fire hazards to neighbouring property. Finally, double check your public liability insurance to make sure you are covered."

Q: How can I make sure that the gaming machines in my venue are not being used by underage persons?

A: "The Gambling Commission has a code of practice which sets out good practice for supervising machines in bars. It recommends putting into effect procedures intended to prevent underage gambling including checking the age of those who appear underage and refusing entry to anyone unable to produce an acceptable form of identification. Machines should be clearly visible from the bar and staff regularly reminded it is their job to check ID in the same way they do for alcohol sales. Codes of practice - Section C - Gaming machines in clubs and premises with an alcohol licence (gamblingcommission.gov.uk)"

This article was first published in Pub & Bar.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at October 2024. Specific advice should be sought for specific cases. For more information see our terms & conditions.