Modern Slavery Compliance in Cross-Border Transactions: Statutory Risks and Due Diligence for Global Supply Chains

Key Takeaways

• Global modern slavery compliance expectations are rising, with updated UK guidance, evolving U.S. TVPA enforcement priorities, and California’s expanding disclosure and procurement requirements increasing risk for companies operating across borders.
• Sectors with complex, multi-tiered supply chains — especially hospitality, retail, and manufacturing — face heightened exposure, including inadequate disclosures, subcontractor labor risks, and active enforcement in high-risk jurisdictions.
• Companies must strengthen supply chain due diligence and governance, including mapping suppliers, enhancing contractual controls, conducting targeted audits, improving training, and preparing more transparent and remediation-focused public disclosures.

Background

As 2026 approaches, companies engaged in cross-border transactions — especially in hospitality, retail, and manufacturing — face mounting regulatory, reputational, and contractual risk related to modern slavery compliance in global supply chains. Recent updates to the UK Modern Slavery Act, new California procurement legislation, and shifting federal enforcement priorities under the U.S. Trafficking Victims Protection Act demand robust due diligence, transparent reporting, and proactive risk management.

Why This Matters Now

Global Enforcement and Legislative Updates

• UK Modern Slavery Act: The UK Home Office published updated statutory guidance in March 2025, clarifying expectations for annual Modern Slavery Statements (“MSS”) under Section 54 of the Modern Slavery Act 2015. The guidance details six recommended disclosure areas and introduces “Level 1” (basic) and “Level 2” (enhanced) reporting standards, with emphasis on continuous improvement and remediation. The six disclosure areas remain not mandatory but recommended. While no new mandatory due diligence law has been enacted, enforcement expectations and scrutiny have increased significantly.
• Trafficking Victims Protection Act (“TVPA”): The most recent reauthorization is the Trafficking Victims Prevention and Protection Reauthorization Act of 2022 (Public Law No. 117-348), signed January 5, 2023. The TVPA, codified at 22 U.S.C. Chapter 78, continues to prohibit all forms of trafficking and mandate federal support for survivors. However, under the current administration, federal enforcement priorities have shifted significantly. Resources for anti-trafficking programs at the Department of Homeland Security and State Department have been substantially reduced, staff cut, and key oversight functions suspended or delayed. While the administration emphasizes border security and gang-related enforcement, practical support for labor trafficking investigations and survivor services has declined, placing greater compliance responsibility directly on companies operating internationally.
• California Transparency in Supply Chains Act (“CTSCA”): Retailers and manufacturers with $100 million or more in worldwide gross receipts doing business in California must publicly disclose efforts to eradicate slavery and human trafficking from supply chains under California Civil Code § 1714.43. Required disclosures must address verification, audits, supplier certification, accountability, and training, and must be prominently posted on company websites.
• (Bill) California Human Trafficking Procurement Prevention Act (AB 381): AB 381 would amend Section 6108 of the Public Contract Code to require contractors and subcontractors on state contracts to certify compliance with anti-trafficking standards, implement compliance plans, and conduct supply chain due diligence. As of November 2025, the bill remains held in committee and has not become law.

Sector Spotlight: Hotel Industry Risks

The hotel sector remains particularly vulnerable due to complex supply chains, franchising models, and high-risk workforce arrangements. Recent investigations have highlighted:

• Only 25% of hotel companies met minimum disclosure requirements under the UK Modern Slavery Act in recent reporting cycles.
• Heightened risks of labor exploitation, sexual trafficking, and mistreatment of migrant workers, especially through subcontracted labor and third-party recruitment agencies.
• Active enforcement actions by the UK’s Gangmasters and Labour Abuse Authority (“GLAA”) and related agencies, with penalties including unlimited fines, supply chain audits, and significant reputational damage.

Key Legal Requirements

Modern Slavery Act (UK)

• Who Is Covered: Companies with £36 million or more in annual turnover supplying goods or services in the UK.
• Requirements: Publish annual MSS covering six disclosure areas: organizational structure and supply chains, policies on slavery and trafficking, due diligence processes, risk assessment, training, and effectiveness monitoring. Modern Slavery Act 2015, Section 54(5).
• Recent Guidance: March 2025 guidance emphasizes continuous improvement; remediation policies; and detailed, transparent disclosure using “Level 1” (basic compliance) and “Level 2” (enhanced reporting with measurable outcomes) frameworks.

Trafficking Victims Protection Act (U.S.)

• Scope: Prohibits all forms of human trafficking; mandates survivor support; and funds prevention, prosecution, and protection programs. 22 U.S.C. §§ 7101–7115.
• Current Enforcement Environment: While TVPA remains the core federal framework, enforcement priorities in late 2025 reflect the administration’s focus on border security and gang activity rather than supply chain labor violations. Federal funding for anti-trafficking NGOs and survivor services has been cut or delayed, and annual reporting obligations have been suspended. Companies should anticipate reduced government oversight and heightened responsibility for self-auditing and remediation.

California Transparency in Supply Chains Act

• Who Is Covered: Retailers and manufacturers with $100 million or more in worldwide gross receipts doing business in California. Cal. Civ. Code § 1714.43.
• Requirements: Publicly disclose efforts across five areas — verification of supply chains, independent audits, supplier certification requirements, internal accountability standards, and employee/management training. Disclosures must be conspicuously posted on company websites.

(Bill) California Human Trafficking Procurement Prevention Act (AB 381)

• Status as of November 16, 2025: AB 381 has passed the California State Assembly and is currently pending in the California State Senate, where it was read for the first time on June 4, 2025, and referred to the Committee on Rules for assignment. The bill has not yet been enacted into law.​
• Proposed Requirements (if enacted): For state contracts entered into or renewed on or after January 1, 2026, AB 381 would amend California Public Contract Code § 6108 to require contractors and subcontractors to:
  • Certify compliance with anti-trafficking standards, including prohibitions on severe forms of trafficking, forced labor, document confiscation, misleading recruitment practices, charging recruitment fees, and substandard housing.
  • Implement written compliance plans appropriate to contract size and complexity, including employee awareness programs, hotline access, recruitment and wage plans, housing standards (if applicable), and subcontractor monitoring procedures.
  • Conduct supply chain due diligence and obtain compliance certifications from all subcontractors.
  • Cooperate with state audits and investigations, disclose violations promptly, and take remedial action including employee removal or subcontractor termination when violations occur.
  • Notify employees of prohibited activities and consequences for violations.
• Sanctions (if enacted): Contractors who violate the Act’s requirements may face contract termination, penalties up to 20% of contract value, removal from bidder lists for up to 360 days, suspension of payments, loss of award fees, suspension, or debarment. Administrative law judges may consider mitigating factors (compliance plans, good faith efforts, remedial actions) and aggravating factors (failure to abate violations) when imposing sanctions.

Best Practices for Compliance and Risk Management

In an era of heightened risk and evolving federal priorities, companies must take proactive steps to ensure compliance, protect their reputations, and maintain contractual and regulatory standing:

1. Conduct Comprehensive Supply Chain Mapping: Identify all suppliers, subcontractors, labor recruiters, and staffing agencies, with particular focus on high-risk jurisdictions and sectors (hospitality, apparel, electronics, agriculture).
2. Implement Robust Due Diligence Procedures: Assess and document risks of forced labor, child labor, and trafficking at each supply chain tier. Update risk assessments annually and after significant supplier changes.
3. Strengthen Contractual Protections: Require suppliers and contractors to certify compliance with anti-trafficking laws, implement written compliance plans, and submit to periodic audits and site visits.
4. Enhance Training and Awareness Programs: Provide regular, documented training for employees, managers, and contractors on identifying and reporting trafficking indicators and supply chain risks.
5. Monitor and Audit High-Risk Suppliers: Conduct unannounced audits and site visits, focusing on labor agencies, subcontractors, and suppliers in jurisdictions with weak labor protections.
6. Prepare for Enhanced Public Disclosure: Ensure Modern Slavery Statements and California disclosures meet current guidance standards and reflect continuous improvement, measurable outcomes, and remediation policies.
7. Establish Clear Remediation and Reporting Protocols: Develop written policies for responding to discovered violations, including corrective action plans, victim support, and transparent public reporting where appropriate.

Conclusion

With global enforcement intensifying and U.S. federal priorities shifting toward border and immigration enforcement, companies engaged in cross-border transactions must assume greater responsibility for modern slavery risk mitigation in their supply chains. Robust due diligence, transparent reporting, sector-specific risk management, and early engagement with experienced counsel are essential to avoid enforcement actions, reputational harm, and contractual penalties — while positioning companies as leaders in responsible business conduct.

AGG’s International practice group advises leading companies on UK Modern Slavery Act compliance, U.S. TVPA obligations, California supply chain transparency, and cross-border due diligence. Our team delivers tailored risk assessments, compliance frameworks, and remediation support across hospitality, retail, and manufacturing sectors.

For assistance with modern slavery compliance, supply chain audits, or risk management strategies, please contact a member of AGG’s International practice group.