Finance Professionals Play Important Role in Guarding Against Pillage, Says ACCA

Finance professionals have an important role to play in designing and implementing assurance systems to guard against pillaged goods and materials in a company’s supply chain, says the Association of Chartered Certified Accountants.

Business supply chains have become so complex that companies could be at risk of prosecution by paying for goods and materials that have been pillaged by criminals and terrorists without even realizing it, warns the ACCA.

ACCA says pillage - the crime of theft in armed conflict – is widespread beyond the conflict in the Middle East.

The ACCA report, "Pillage: A New Threat to Global Supply Chains," says that the rise of cross-border supply chains, and the fact they have become longer and more complex makes it easier for raw materials that have been pillaged to enter the supply chain.

Simply handling pillaged goods can count as money laundering, vastly expanding the scope for prosecutions.

"Pillage as a prosecuted offence seemed to disappear after the Second World War, but globalisation and the related supply chains have seen it re-emerge in the 21st century," says Jason Piper, ACCA’s Technical Manager, Tax and Business Law.

The fact Isis fighters have sold raw materials that were pillaged from Syria means those materials have entered the machinery of global trade.

It could mean consumers in the UK, US and around the world will be buying products that have pillaged components in them and that multinational businesses are indirectly financing those fighters.

Prosecution is an option not just in respect of the original theft, but also for handling the pillaged goods or the proceeds from them.

The consumer electronics industry is just one sector that could be at risk with its reliance on tantalum, tungsten and tin, which have links with the various conflicts afflicting the DRC. The risks for businesses go far beyond mineral extraction.

"You can order your mobile phone in the colour of your choice, buy cheap clothes at the out-of-town mall full of chains stores you choose, and buy customised birthday cards one at a time off the Internet," says Piper.

"And behind that incredible array of choices lies a global web of trade and manufacture which almost defies comprehension.

Piper notes that companies exposed to pillaged goods and materials through their supply chains will take a hit to their reputations.

"Who wants to buy a company’s products made with the fruits of war, when a competitor’s business is squeaky clean?"

Due Diligence

The ACCA says that the administrative burden of maintaining, for example, a consistent paper trail of accountability at every stage in the production process in respect of every individual shipment of materials is unlikely to be an attractive prospect for businesses.

The levels of due diligence required at each stage of the production cycle will vary according to the perceived risk, and the resources available to the business.

However, the global accountancy body warns that a lack of resource to confirm the status of goods will not in itself constitute a defence in criminal proceedings.

Piper notes that businesses may need to look at other ways of ensuring as best they can a pillage free supply chain.

"If the costs of effective supply chain assurance become too great then competition from less scrupulous competitors may well render the best efforts of a responsible business counterproductive as its goods are priced out of the market," said Piper.

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