Earlier quoted context omitted.
It is a defense. Even in a court of law not knowing about something can potentially protect you from punishment. It is just a part of the nature of outsourcing. Your supplier might just choose to outsource himself and have the work done by companies you couldn't possibly work with. For a digital good this is extremely hard to monitor. How would a Californian studio possibly know what company their supplier outsources…
Don’t outsource. If you outsource, have boots on the ground ensuring working conditions and no re outsourcing. Pick one. Pretty straightforward.
But yes, please let management know that outsource is only attractive on paper. Every experience I have had with it is has been bad. The communication gap is just so much larger and your ability to oversee what gets done and how it gets done just evaporates. The ethical/legal problem is just one result of that, but even without it outsourcing often just costs far more in hidden expenses.