Failure to prevent modern slavery in supply chains: Australia's proposed criminal offence

Australia is proposing to introduce a world first corporate criminal offence for failing to prevent modern slavery in supply chains. Organisations need to understand how they can mitigate risk of future criminal liability under the proposed offence.

Consultation on the design of Australia’s proposed corporate criminal offence for failing to prevent modern slavery in supply chains is underway. Once legislated, it will expand corporate accountability for modern slavery harms from transparency reporting to potential criminal liability. Boards will need greater oversight of modern slavery risks to ensure their organisation has adopted adequate procedures to identify and mitigate these risks. Management teams will require legal, compliance and human rights input to develop a common understanding of the risks for the organisation and the legal and human rights frameworks that will underpin the defence to the proposed offence.

Elements of the proposed criminal offence

The rationale for the proposed offence is to promote a preventative approach to managing modern slavery risks by incentivising companies to strengthen compliance systems and governance frameworks. It forms part of the federal government’s broader objective of significantly reducing the likelihood that goods and services linked to modern slavery enter Australia and become part of Australian supply chains. 

The offence would arise where a corporation fails to prevent modern slavery or forced labour in its supply chain. It is proposed to apply to companies with annual consolidated revenue over $100m. 

The consultation paper proposes the following elements for the offence:

1. Underlying modern slavery and forced labour offence – an offence of slavery, servitude, forced labour or debt bondage under Divisions 270–271 of the Commonwealth Criminal Code has been committed by a person. A conviction for the underlying offence is not required.
    
2. Nexus – a connection between the underlying offence and the corporation’s products or services (i.e. supply chain), and the corporation’s conduct.
    
3. Fault – either strict or absolute liability (no requirement to prove fault or a state of mind on the part of the corporation) or recklessness could apply to the physical elements of the offence, such as the conduct, circumstances or results of the elements in (1) and (2).
    
4. ‘Reasonable steps’ defence – a defence would apply where the corporation can prove on the balance of probabilities that it had taken reasonable steps to prevent modern slavery in its supply chain.

Penalties would align with comparable offences such as the failure to prevent foreign bribery offence, which carries a maximum penalty of the greater of: 

• 100,000 penalty units (currently $36,400,000); 
   
• three times the value of the benefit obtained from the offending conduct; or 
   
• if the value of the benefit cannot be determined, 10% of the corporation’s annual turnover during the relevant turnover period. 

Nexus between modern slavery and the corporation

The proposed nexus would require two connections to be established between the underlying criminal conduct and the corporation: a supply chain link and a conduct link. 

Supply chain link

The consultation paper offers two alternative formulations. In the first, the prosecution would need to prove that specific goods or services sourced by the corporation were produced using modern slavery. The second, broader formulation would require only that modern slavery occurred within the goods, services, labour, materials or other inputs forming part of the corporation's sourcing arrangements, regardless of whether they can be traced to a particular product. The broader formulation would capture inputs made by modern slavery, which are then blended, processed or co-mingled so that traceability to specific products may be impossible. For example, if raw cocoa beans harvested using forced labour are blended with beans from other origins to produce a processed cocoa blend, the broader formulation would capture that exploitation even though it is impossible to trace the tainted inputs to any specific batch of blend or finished chocolate product. By contrast, the narrower formulation would require the prosecution to establish that precise link between the exploited inputs and the cocoa actually acquired by the corporation.

Conduct link

The consultation paper identifies a continuum of possible nexus formulations, from ‘caused or significantly contributed to’ and ‘materially contributed to, facilitated or enabled’. If the broader formulations of ‘facilitated’ or ‘enabled’ are adopted, then conduct such as failing to act on known risks, continuing to source from a supplier despite credible allegations of modern slavery, or maintaining commercial arrangements that sustain modern slavery practices could expose corporations to criminal liability unless they can prove that they took ‘reasonable steps’ to prevent modern slavery in their supply chain. 

Human rights due diligence and the ‘reasonable steps’ defence to corporate criminal liability 

The proposed offence will enable a corporate defendant to avoid liability for failing to prevent modern slavery in its supply chain if it satisfies the court that it took ‘reasonable steps’ to prevent the modern slavery from occurring. The consultation paper suggests that evidence of compliance with guidance issued by the responsible Minister on ‘reasonable steps’, drawing from the United Nations Guiding Principles on Business and Human Rights (UNGPs) and the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct, could constitute evidence of ‘reasonable steps’.

In principle, linking the reasonable steps defence to existing ‘soft law’ standards for human rights due diligence (HRDD) should incentivise companies to implement HRDD or uplift existing HRDD processes as a critical legal compliance function. 

However, a key question for the design of the reasonable steps defence is whether it is sufficient for corporate defendants to have in place adequate governance frameworks and compliance systems that respond to inherent modern slavery supply chain risks. If the approach follows the Ministerial guidance for the adequate procedures defence to the failure to prevent foreign bribery, appropriate expertise and resourcing will be factors a court will consider when determining whether an entity has taken reasonable steps. A further question is whether a reasonable steps defence will fail if an entity did not act on known indicators of modern slavery risks. 

Evidentiary challenges in proving modern slavery in overseas supply chains 

The proposed offence would require the prosecution to prove beyond reasonable doubt that modern slavery occurred in the corporation's supply chain. Where modern slavery occurs overseas, the evidentiary challenges for the prosecution will be significant. For example, securing testimony from vulnerable overseas workers or gathering documentary evidence in foreign jurisdictions without compulsory powers will be challenging for enforcement agencies. 

Interaction with proceeds of crime offences

Once an offence of modern slavery in a company’s supply chain is proven, goods derived wholly or partly from that exploitation are, by definition, ‘proceeds of crime’ under Part 10.2 of the Criminal Code. This would expose Australian incorporated entities and/or their employees to liability under Commonwealth proceeds of crime offences where it was reasonable to suspect the product or money derived from the modern slavery, or they otherwise believed, were reckless or negligent as to whether they were dealing with the proceeds of crime. Maximum pecuniary penalties will depend on the value of the proceeds of crime involved, and organisations could also be subject to asset confiscation orders requiring forfeiture of any benefits obtained from the unlawful conduct. The term of imprisonment for individuals will also depend on the quantum of the proceeds of crime involved, but this could be up to life imprisonment. In World Uyghur Congress, R. (on the application of) v National Crime Agency [2024] the UK Court of Appeal held that the National Crime Agency’s decision not to investigate whether cotton goods manufactured in China were the product of forced labour or other human rights abuses was unlawful. In doing so, it confirmed that modern slavery in a company’s supply chain can attract liability for proceeds of crime offences under the UK Proceeds of Crime Act 2002. 

The role of Deferred Prosecution Agreements 

A Deferred Prosecution Agreement (DPA) scheme is being considered as an alternative to contested prosecution. A DPA is a statutory mechanism that enables criminal matters to be resolved through a negotiated agreement between the prosecution and corporate defendant. Criminal proceedings are deferred subject to the corporate defendant complying with agreed conditions. The consultation paper suggests that these conditions could include strengthening governance and compliance systems, remediating harm, providing compensation and cooperating with related investigations. 

DPA regimes (or their equivalents) exist for certain corporate crimes in the United Kingdom, Canada and United States of America, though not specifically for modern slavery. 

DPAs typically involve an agreed statement of facts and may require admissions of fault. A key design question for the proposed DPA scheme is whether an admission of responsibility will be required and whether an agreed statement of facts could subsequently be relied on in other proceedings, including proceeds of crime prosecutions or civil proceedings. If the legislative framework does not expressly address this, the policy objective of the DPA scheme, incentivising self-reporting, cooperation and remediation, may be compromised.

Civil remedies for victims  

Modern slavery is a serious abuse of human rights that can cause severe harm to victims and survivors, and is an indictable offence. Stakeholders are invited to consider the extent to which existing civil remedies for victims and survivors of modern slavery are adequate or whether it would be appropriate to introduce a new civil remedy in connection with the failure to prevent offence.

The design of any new remedy will require careful consideration of the basis for liability and its interaction with existing or proposed legal frameworks, including potential implications for the modern slavery reporting regime and proposed DPA scheme.

Key takeaways to prepare for modern slavery changes

The global proliferation of legislated bans on products or inputs produced with forced labour will increase the likelihood that instances of forced labour within corporate supply chains are detected. This heightens the risk of exposure to corporate criminal liability for Australian companies when the new ‘failure to prevent’ offence is introduced. Companies that adopt a structured, risk-based approach to supply chain due diligence, a demonstrable commitment from senior leadership to addressing modern slavery supply chain risks and ongoing monitoring and action where modern slavery risks are identified, will be best positioned to satisfy any ‘reasonable steps’ defence.

For now, companies should:

• assess the maturity of their modern slavery risk management frameworks to confirm they reflect the core principles of human rights due diligence and how they need to evolve so they are commensurate with the elevation of modern slavery risks to corporate criminal liability;
   
• ensure the role of functional teams like legal, human rights/social impact, risk, compliance and procurement understand the organisation’s obligations. Ultimately, all teams will need to develop a common understanding of the legal framework within which modern slavery risk management will sit and the human rights frameworks that will underpin the defence to the proposed offence.

Submissions close on 25 September 2026 and can be made through the Attorney-General's Department consultation hub.