The issue of supply chain due diligence is at the forefront of the corporate agenda as more and more companies suffer financial and reputational damage as a result of their failure to conduct such due diligence effectively. These risks were highlighted in July 2021 when it was reported that Inditex, the parent company of Zara, and Sketchers were profiting from forced labour by sourcing clothing from factories in China where Uyghurs were interned (see Figure 1). Recognising the financial and reputational damage that these reports could cause, both Inditex and Sketchers released statements reiterating their zero-tolerance policy on forced labour.
Figure 1: A Themis Search investigation detailing adverse media surrounding Inditex SA following reports that they sourced clothing from factories where forced labour was used.
In February 2022, the European Commission announced that it had adopted a proposal for a Corporate Sustainability Due Diligence Directive (CSDDD). The CSDDD, which is expected to pass into law by the end of this year, is underpinned by a growing desire to foster responsible and sustainable corporate behaviour among companies. While a number of the EU’s Member States have already introduced similar legislation domestically, as seen in France with the Loi sur le Devoir de Vigilance, the EU has adopted the CSDDD to reduce reliance on unstandardised voluntary action. The CSDDD focuses on the following companies:
and requires them to:
The CSDDD’s emphasis on appropriate measures and due diligence should therefore lead to more comprehensive efforts from companies to mitigate and prevent adverse human rights and environmental impacts across their supply chain. This should also reduce the incidence of associated financial crimes, namely environmental and wildlife crime and modern slavery and human trafficking (MSHT), as more rigorous checks by companies leave criminals with far less room than they currently have to profit from such crimes.
Companies may suffer financial loss if they fail to adhere to the directive as national administrative bodies can penalise them with financial penalties; those who fall victim to damage that could have been avoided with proper due diligence will also be able to launch civil claims against companies. Significantly, such cases invariably lead to reputational damage. The CSDDD has a broad scope by virtue of the fact that it applies to an eligible company’s subsidiaries and value chains in addition to their own operations. As a result, the CSDDD has been heralded for ensuring that governance frameworks give adequate attention to environmental and social risks in their decision-making as well as the externalities of these decisions.
While the CSDDD appears to be a momentous development at first sight, it has been reported that the Council of the European Union has currently agreed to exclude banks and investment funds from the directive. This would be a significant omission given that financial institutions lie at the heart of combating the likes of MSHT, enabling the flow of associated illicit funds. In addition, the effectiveness of the CSDDD is hindered further by its narrow scope; while small and medium-sized businesses (SMEs) may be affected indirectly by virtue of their involvement in a larger company’s supply chain, it does not apply to SMEs despite this group accounting for 99% of the companies in the EU.
If the imminent passage of the CSDDD into law has you concerned about the risks that your business may be exposed to, the Themis Supplier Risk Assessment can put you at ease. This newly released tool helps you identify and assess the specific financial crime threats your business is exposed to through your suppliers and third parties. Having your suppliers and other third party stakeholders complete the diagnostic will enable you to understand which of them represents the greatest financial crime risk to your business and in which area, be it in their governance framework and/or controls to mitigate specific financial crime risks, including modern slavery.
Themis’ Anti-Slavery Hub also provides complimentary guidance to financial institutions on the ways they can identify and tackle modern slavery and human trafficking by providing an array of resources, including digital learning and red flags. The Illegal Wildlife Trade Toolkit, meanwhile, mirrors this by providing financial institutions with free guidance on the ways they can identify illicit funds linked to the trade among other things.
If you would like to read further about the issue of supply chain due diligence, we’ve recently released a briefing note, No Firm is an Island: The Importance of Supply Chain Due Diligence, which you can read here.
Stay on top of the ever-changing financial crime landscape by accessing the latest information on emerging criminal techniques and the risks associated with carrying out business with particular industries or in particular jurisdictions.
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We’ve handpicked a selection of standout books our team discovered over the summer—perfect picks to kick off the “back-to-school" season. These compelling reads offer deep insight into financial crimes, the systemic vulnerabilities they exploit, and their far-reaching consequences.
AI is fast becoming a high-ROI tool in financial crime and compliance. From cutting costs and boosting efficiency to enhancing resilience, strategic AI investments are helping CFOs do more with less - transforming risk management and unlocking new value across the financial sector.
The UK’s latest National Risk Assessment (NRA) reveals how money laundering and terrorist financing are evolving—and how the UK is fighting back. A vital guide for AML policy, it arms businesses with intelligence to spot risks and stay protected.
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Many clients have heard of the OFAC 50 Percent Rule but aren’t sure how it affects them. It’s far-reaching, with hidden sanctions risks. This post explains the rule, why it demands deeper due diligence, and steps to identify and mitigate those risks.
In June, the EU removed the UAE from its list of high-risk jurisdictions from an AML perspective, signaling growing international confidence in the country’s financial crime oversight.
New updates to the Land Conversion and Financial Crime Risk Assessment link environmental harm to financial crime. Cattle rustling in Nigeria and Cameroon is now red-rated, with added risks on carbon credit fraud, child labour, mining corruption, and gold smuggling.
An overview of modern slavery, distinguishing between human trafficking, smuggling, and forced labor. It highlights the global prevalence of exploitation and the importance of understanding these definitions to combat such crimes.
Dubai’s $160B foreign-owned real estate market faces money laundering risks. The UAE now requires reporting of property deals over AED 55K via REAR. Criminals like Daniel Kinahan have exploited property to hide illicit funds, underscoring the need for strict compliance.
Examines how digital platforms and cryptocurrencies facilitate human trafficking, allowing traffickers to operate anonymously and at scale, posing challenges for law enforcement.
Investigates how sanctions intersect with trade-based financial crimes in Hong Kong, highlighting the complexities businesses face in navigating regulatory compliance.
Financial crimes cause more than economic harm—they hit mental health too. UK data shows 60% of fraud victims face distress; Ghana research links corruption to anxiety and depression. This blog calls for tackling both psychological and financial impacts.
Environmental crime worsens gender inequality, driving violence, trafficking, and hardship for women—especially in regions like the DRC and Peru. Women defenders face abuse, and climate change deepens risks like water scarcity, child marriage, and health threats. Tackling these crimes is key to protecting women’s rights and safety.
AI is transforming financial crime prevention—improving detection, reducing costs, and streamlining compliance. Generative AI and graph networks boost due diligence, while ethical, human-guided use counters criminal misuse. Themis champions tech-human collaboration.
Explores the application of fuzzy logic in Anti-Money Laundering (AML) systems, emphasising its role in improving name-matching accuracy and reducing false positives, thereby enhancing compliance efficiency.
This book focusses on the challenges faced by law enforcement in North West USA and in British Columbia to combat illegal logging, as well as those of the timber-industry communities established since the late 19th century to maintain meaningful and financially viable lives.
The FATF has highlighted the UAE’s progress in fighting financial crime. Its third enhanced follow-up report upgraded three recommendation ratings for the country, marking a step forward in meeting international standards.
Lebanon’s economic collapse, fuelled by debt, corruption, and instability, has led to hyperinflation and greater financial crime risk. In Oct 2024, the FATF grey-listed Lebanon. The country pledges a two-year reform plan to boost transparency and restore investor confidence.
The UK treats profits from legal overseas cannabis businesses as criminal property under the Proceeds of Crime Act. Few cases qualify for exceptions, creating a legal grey area—so anyone handling such funds should proceed cautiously and seek legal advice.
The UK’s 2023–2026 Economic Crime Plan commits £400M to tackle money laundering, kleptocracy, and fraud, with reforms to Companies House, crypto, and sanctions. Progress is clear, but critics urge more urgency and funding. Success depends on public-private collaboration.
Suspicious Activity Reports (SARs) are key to fighting financial crime, with 42% of fraud found via tip-offs. Rising UK SARs and account freezes show their impact. Themis urges strong reporting systems and whistleblower protections to foster transparency.
Corrupt elites still exploit the UK property market via offshore structures and relatives to hide assets. Over 18,000 firms remain non-compliant. With cases of children holding luxury homes, Themis calls for tougher enforcement as new UK and FATF guidance target transparency gaps.
Corruption undermines sustainable development, financial integrity, and DEI. A Themis–Denominator study links lower corruption to higher DEI scores. Marginalised groups, especially women, suffer most. Promoting diversity and transparency is key to fairer societies.
Hindenburg Research accuses India’s Adani Group of fraud, alleging stock manipulation, shell firms, and nepotism—halving Gautam Adani’s net worth and shaking investor confidence. The case highlights how financial crime can roil markets and the need for strong due diligence.
Supply chain failures have linked firms like Inditex and Skechers to forced labour and reputational risk. The EU’s CSDDD will require large companies to address human rights and environmental harms. Themis offers tools to assess suppliers and fight modern slavery.
On World Wildlife Day and CITES’ 50th year, Themis reflects on tackling illegal wildlife trade—the 4th largest financial crime. Laws, AI, forensics, and global cooperation drive change, but shifting demand, like ivory to hippo teeth, shows challenges remain.
Puppy smuggling in the UK has surged post-pandemic, with organised crime exploiting demand and loopholes to import sick or underage dogs. Despite new laws, enforcement gaps remain. Themis urges buyer vigilance—tools like Themis Search can help spot breeder risks
Romance scams rose 30% in 2022, with victims losing £8,234 on average—especially men and those aged 65–74. Scammers use fake profiles and emotional manipulation. Themis urges due diligence in dating; tools like Themis Search can flag risks and help platforms protect users.
Crypto plays roles in both social good and crime—over $50M has aided Ukraine, but bad actors use it to evade sanctions and launder funds, notably via the UAE and Central African Republic. Themis calls for stronger due diligence and compliance to curb misuse.
The Russian invasion of Ukraine has heightened trafficking risks for women and children. Over 2.5M flee, with traffickers exploiting chaos, especially in Moldova, Poland, and Italy. The OSCE urges swift action to warn refugees of false offers and protect them.
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