A Hot Topic that’s been discussed recently on several webinars, and certainly with the Bonded Warehousekeepers Association (BWA) members, is the issue of due diligence within a supply chain

This is an issue that is also under review by HMRC and was emphasised in a recent meeting with them regarding their simplification and modernisation project. 

Due diligence is very much at the core of that project, so it is imperative that the warehouse industry addresses due diligence, understands due diligence and puts in place the appropriate measures and not just to ‘tick the box.’

BWA Chairman, Clive Brady, recently spoke to BWA Company Secretary, Graham Sheen, saying…

 What we don’t want is warehouse industry professionals, including our BWA members, thinking that they have got to do this to tick a HMRC box.  Businesses should be undertaking due diligence because it is in their businesses best interest. 

As a business, you should be checking and validating who you are engaging with, and who you are wanting and wishing to do business with.

By doing that you then ‘effectively’ comply with the HMRC requirements of due diligence.  It is important that you know who you are trading.

Clive also said,  Businesses also need to look at this from another perspective.  It’s not just a HMRC requirement, but should look at it as their own business risk requirement.  If they do that, then they should satisfy themselves that they are either happy to do business with a prospective company or decide that they are not happy to do business with the company because they represent an undue risk.  

If a business is not certain about, where either their suppliers or customers products are being sourced or sold then they should avoid the risk to themselves by not engaging with that company or companies.

As an Association, the BWA support members that are going through the HMRC application process for becoming either a Customs or an Excise warehouse. We emphasise that the businesses should have the appropriate due diligence processes and procedures in place to satisfy the HMRC application conditions.

The due diligence process is becoming more and more critical these application processes, but it needs to go beyond that, it needs to be critical to your business risk reviews.

So, what does good due diligence look like?  

The industry needs further guidance and support from HMRC around that but to put it simply, make sure that you get to know your customers and suppliers. Ultimately, try to get complete visibility of their supply chains.

For example, if you are a buyer of alcohol then you need to know where that product has come from and who supplied it. This also applies if you’re a 3PL.

You don’t want your business to be dragged into an illicit supply chain and therefore potentially at risk of fines and penalties, from HMRC, because you didn’t identify issues when you onboarded a customer or supplier.

Having a due diligence policy in place means that we want to ensure that our own businesses are protected, and we don’t engage with people that we should not be, or do not want to be engaging with.

As an association, we are pushing HMRC to be more collaborative, feeding back information to businesses and informing us which traders our members shouldn’t be engaging with.  

There are fraudsters out there and HMRC know who those fraudsters are.  If HMRC are prepared to share this information that will help our members us to make informed decisions.

All genuine businesses should be trying to achieve the same thing, which is to remove the fraudster from the supply chain. This maybe over optimistic but that is the objective.

Businesses also need to work together, work with HMRC and equally HMRC have got to work with us and our members to achieve a common goal.

The key piece of guidance is to make sure that you understand the supply chain of your customers and your suppliers.

At the end of the day, you have got to protect your own business. You need to be satisfied that it’s right company, or individuals, that you want to do business with.

Clive said,  We’re all chasing business, I get that, and we are all keen to secure as much business as we can, but you do need to be seriously careful in terms of who you engage with, within this C&E arena. 

We (the BWA) will certainly continue to engage with HMRC and secure clarity on what is considered to be good due diligence This will help our members meet with the HMRC due diligence obligations as well as reducing their business risk.  

Source: BWA