Controls on exports and Sensitive countries
Leonardo has established an overall program for the Group – the Trade Compliance Program – in order to govern two, particularly relevant areas of risk: import, export, re-export, transfer, re-transfer or use in relation to dual or commercial defence goods or services subject to regulated requirements (with specific reference to ITAR* and EAR** rules and regulations in force in the US, European rules and regulations as well as the laws applicable in the United Kingdom and Italy); transactions in “sensitive” countries or with legal persons or individuals subject to embargoes, sanctions or other trade restrictive measures, especially with reference to the competent authorities from the US (including OFAC***), from Europe (Council of the European Union), from the UK and from Italy, as well as pursuant to resolutions of the UN Security Council.
The rules and regulations that govern such issues include the provisions of the so-called domestic legal systems (Italy, USA, and UK) and of the international and European systems, which are summarised below:
|International Traffic in Arms Regulations (ITAR)*||Products, services and brokerage in relation to defence (US)|
|Export Administration Regulations (EAR)**||Dual-use materials, goods and technologies (US)|
|Office or Foreign Assets Control (OFAC)***||Programs involving sanctions and embargoes (US)|
|Foreign Corrupt Practices ACR (FCPA)||Provisions on unlawful payments and foreign officers (US)|
|Directive 43/2009/EC||Transfer of defence products within the Community (EU)|
|European Union Council of 5 June 1998||Code of Conduct for the export of weapons|
|Council’s Common Position 2008/944/CFSP||Common rules for the control of exports of technology and military equipment (EU)|
|European Union Council of 15 February 2010||Common list of military equipment (EU)|
|Regulation 428/2009/EC||Community framework for the control on exports, transfer, intermediation, and transit of dual-use products (EU)|
|Export Control Act 2002||Licences for the marketing of goods and for the brokerage, transfer, intermediation, and transit of dual-use products (EU)|
|The UK Bribery Act 2010||Active and passive corruption, corruption of foreign officers, corruption of the Company (UK)|
|Italian Law No. 185/1990, as amended by Italian Legislative Decree No. 105/2012||Rules on the control of exports, imports, and transit of weapons (Italy)|
|Missile Technology Control Regime (MTCR)||Rules and controls on the export of missile technologies|
|Nuclear Suppliers Group (NSG) Guidelines||Rules and controls on the export of nuclear technologies|
|The Wassenaar Arrangement (WA)||Transfer of conventional and dual-use weapons (Convention)|
The Trade Compliance Programme was defined in Directive No. 21 of 9 March 2012, based on the implementation of the following requirements to be met at various levels (holding, industry holding and individual company):
Definition of roles and responsibilities
- Senior Compliance Officer (SCO): responsible for supervising the implementation of the Program at all levels, with the possibility to report potential risks or violations to the Chairman and Managing Director, as well as to the other bodies, associations and internal committees. Referee for all Trade Compliance Officers.
- Trade Compliance Officer (TCO): person appointed by every industry holding, who is responsible for ensuring the implementation of Directive 21 and of the Industry Directive and for operating as a link with SCO and with the Trade Compliance Coordinators of the companies; moreover, he or she coordinates with the Internal Audit or with the General Counsel of its company (as deemed more appropriate), with the right to report potential risks or violations to the Managing Director and the other bodies, associations and internal committees.
- Trade Compliance Coordinator (TCC): person appointed by every company, who is responsible for the implementation of Directive 21, of the Industry Directive, and of the company’s procedure, and for operating as a referee for the respective TCO; he or she works in tight contact with the Internal Audit or with the General Counsel of its company (as deemed more appropriate), with the right to report potential risks or violations to the company’s Managing Director and the other bodies, associations and internal committees.
Adoption of Group Directives, Industry Directives and Procedures
Leonardo has issued, and regularly updates, the Group’s directive that establishes the minimum requirements of the Trade Compliance Program for all companies of the Group, in order to ensure the observance of the provisions established by the applicable laws and by the relevant authorities, especially with reference to the legal systems in which the Group operates (US, UK and Italy) and the international system (in particular, the Resolutions of the United Nations Security Council) and European system (Council of the European Union). Pursuant to the above-mentioned Directive, every industry holding is responsible for the issuance of an Industry Directive containing the minimum requirements defined by Leonardo. Finally, each company of the Group exposed to Trade Compliance risks is required to adopt a specific procedure.
Establishment of a risk analysis process
The risk analysis process provided for by the directives and procedures is started and repeated on a regular basis with reference to the company transactions involving defence materials, goods and services, technical data and applications for dual use and commercial products, technologies and software, including access controls. This risk analysis must take account of the laws of the jurisdictions in which the industry holding and the respective companies are incorporated and operate (including the countries in which supplies are performed), as well as of EU and US laws (if applicable beyond the territories they cover) that define and control the export and marketing of such goods and services. The risk analysis process is subject to review on a regular basis and also on the occasion of special events that may expose to Trade Compliance risks (for example mergers, acquisitions, development of new products or services, changes in key staff members).
Performance of an activity for the classification of the goods
This process is intended for the identification of the goods and services pursuant to the specific rules and regulations applicable to defence, dual use or restricted trade, with the specification of the requirements to be investigated prior to export, re-export, transfer or re-transfer.
Implementation of a client verification process
Each industry holding has established a verification process on new or existing customers, to be carried out prior to any sale (for example type of entity, ownership structure, and any other information on the customer’s reputation and integrity that could represent a risk). On the basis of the analysis of this information, the company is capable of assessing whether there are potential risks, thus creating a process for tackling pre-defined risk indicators (“red flags”).
Implementation of a due diligence process on intermediaries
This process is intended to verify the observance, on the part of consultants, agents, brokers, distributors, intermediaries and third parties, of Directive 8 issued by Leonardo (as subsequently amended or supplemented), and of the Foreign Corrupt Practices Act (FCPA), the UK Bribery Act (BA) and Italian Legislative Decree No. 231/01.
Implementation of a system to verify the export, re-export, transfer or re-transfer of goods, software services and technologies
This system (so-called “screening”) is intended to verify whether an export, re-export, transfer or re-transfer are subject to the applicable laws, by establishing specific controls on the customers and on the relevant parties to a transaction (including brokers, agents, distributors, and consultants) in order to identify whether these are included in the lists of those people subject to trade restrictions or bans, also with reference to end users. Verifications are carried out in various phases during the transaction: (1) prior to proceeding with any contractual negotiation; (2) during the finalisation of an agreement; (3) again, immediately prior to shipping the goods or activating the service.
Establishment of a “preventive” notice and regular reporting system in relation to politically sensitive transactions
Based on this system, some transactions, even if lawful, may be sensitive from a political viewpoint, in that, for example, they could fall within the category of exports or re-exports of materials not subject to restrictions, but which are nonetheless intended for countries concerned with embargoes, sanctions or other restrictive measures issued by the United Nations, the European Union, the USA, the UK and Italy (so-called “sensitive countries”). Any contractual proposal which involves a sensitive country must be submitted to the attention of the TCO prior to starting any contractual negotiation. Industry directives must provide that every TCC shall provide the TCO with a quarterly written report on all the activities in sensitive countries. The TCO shall send a written report to the SCO containing all the reports received from TCCs.
The list of sensitive countries identified by the Leonardo Group, and subject to the SCO update, is currently the following:
|Afghanistan||Iran||Central African Republic||Sudan|
|Burma/Birmania/Myanmar||Ivory Coast||People's Republic of China||Ucraina|
|Democratic Republic of Congo||Liberia||Somalia||Yemen|
Establishment of a system for the immediate reporting of problematic issues
This system provides for the immediate reporting, decision making and corrective measures to be carried out in the event of potential violations of the applicable laws. The SCO must be notified of the potential violations and must be kept informed of the corrective measures taken.
Establishment of a system to report potential violations
This system (so-called whistleblowing) provides for the possibility for employees to report potential violations of the Directive, of the Industry Directive and of the company’s Procedure, as well as of the laws applicable to those in charge of the Legal Affairs and Internal Audits Organisational Units. The reporting system must provide for the possibility of anonymisation (or at least for the possibility to protect confidentiality), in line with the organisational models and internal control systems.
This system provides that all the employees of the Leonardo Group shall receive online training on the laws applicable in relation to trade compliance. Industry directives identify those employees working in the industry holding and in the companies of the respective Group who need advanced training (TCOs, TCCs, Internal Audits, Sales Department).
Implementation of a Program audit and assessment process
The compliance of industry directives and companies’ procedures with the Group Directive is assessed on an annual basis. This process is managed by SCOs with the Internal Audit at Group level and by TCOs and/or the competent Internal Audit at company leve .
Implementation of a documentation filing system
Every company of the Group shall retain the export documentation and the accounting records proving the transactions and the payment of fees to third parties for a minimum time period of five years or for any longer period provided for by local laws.
Finmeccanica Global Trade Council (FGTC)
This body, managed by SCO and joined by all TCOs, represents a tool for promoting the cooperation, the exchange of information, and the maintenance of trade compliance best practices. The FGTC operates both as a platform for the collective training of TCOs and of the other organisational units in charge of trade compliance, and as one of Finmeccanica’s consultation bodies in charge of studying and examining relevant trade compliance issues and developing best practices.