Leonardo Group Trade Compliance Program: trade controls, import/export, international sanctions, monitoring of transactions with sensitive countries and respect of human rights

Leonardo has established an Internal Compliance Program (ICP) for the Group – the Trade Compliance Program – in order to ensure full compliance with the applicable Trade Compliance laws and regulations issued by the competent authorities.
The Trade Compliance Program ensures the timely identification and fulfilment of the requirements related to the applicable national, European Union and international legislation, in particular, regarding the import and export of defence, dual-use and commercial products and services subject to export control laws and regulations as well as to embargoes, sanctions or other trade restrictions.
In 2018 Leonardo joined the UN Global Compact and in 2021, Leonardo was confirmed as a United Nations Global Compact Lead Company. In line with its commitments, in 2021 Leonardo has developed and implemented, in line with its policy on the respect of human rights, the “Human Right Impact Assessment” (HRIA). This tool which is a core element of Leonardo Trade Compliance Program aims at identifying the main risk factors related to the respect of human rights and the potential impact of the activities carried out by the Company.

2021 report to the Italian Chamber of Deputies Report on export, import and transit of defence products (Italian version only)

The main laws and regulations related to these matters include the following:

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Laws and regulations / Authorities of reference /  Control regimes
Topic
Directive 43/2009/EU
Transfers within the Community of defense products;
Law n. 185/1990, as amended by Legislative Decree no. 105/2012
Export control rules;
Missile Technology Control Regime (MTCR)
Rules for the export of missile technologies;
Nuclear Suppliers Group (NSG) Guidelines
Rules for the export of nuclear technologies;
Office or Foreign Assets Control (OFAC)
Sanctions programs and embargoes;
Common Position of the Council 2008/944/ CFSP
Common rules for the control of exports of military technology and equipment;
Regulation 821/2021
establishing a European Union regime for export control, brokering technical assistance, transit and transfer of dual-use items (recast);
ST/5470/2020/INIT of the Council of the European Union February 17, 2020
Common list of military equipment;
The UK Anti-Bribery Act 2010
Active and passive bribery, bribery of foreign officials, bribery of society;
The Wassenaar Arrangement (WA)
Transfers of conventional weapons and dual-use items (Convention);
UK Export Control Act 2002
UK Export Control Regime;
US Foreign Corrupt Practices Act (FCPA)
The payment of bribes to foreign officials to assist in obtaining;
US Export Administration Regulations (EAR)
Items and technologies subject to the jurisdiction of the US Department of Commerce, Bureau of Industry and Security (BIS);
US International Traffic in Arms Regulations (ITAR)
Items and technologies subject to the jurisdiction of the US Department of State, Directorate of Defence Trade Controls  (DDTC);
US Department of Justice Criminal Division
Evaluation of Corporate Compliance Programs (Updated June 2020);
US Department of Treasury
A Framework for OFAC Compliance Commitments (05/02/2019)

The Trade Compliance Program includes the following core elements:
a) Governance;
b) Trade Control (export, import, transit, brokering, re-export, transfer or use of defence products, dual-use or certain types of commercial products if subject to restrictions);
c) Import/Export;
d) Reporting.

 

Core sections of the trade compliance program

The risk analysis is performed and repeated on a periodic basis with reference to the company transactions involving defence dual-use and commercial materials, goods and services, technical data and applications in order to ensure the mapping, measurement and mitigation of risks on the basis of the laws and regulations which are applicable at national and international level. This analysis takes into account the laws in force in the jurisdictions in which Leonardo and the subsidiaries of the Group are established or operate including the countries in which Leonardo is conducting business. The review is renewed on the occasion of particular events that may involve Trade Compliance related risks (e.g. mergers, acquisitions, development of new products or services).
Verification of new customers/end-users, shall be carried out prior to any sale (taking into account, among other, the type of entity, ownership structure and any other information on the customer’s reputation and integrity) assessing the related potential risks ("red flags").
The monitoring of counterparties requires to carry out the appropriate verifications on the customers and on the relevant parties to a transaction, including end-users, in order to verify and identify if they are included on lists of control as proscribed persons being subject to trade restrictions or prohibitions.
Any transactions which, directly and indirectly, involves a Sensitive Country is subject to monitoring. 
The list of Sensitive Countries for Leonardo Group, subject to periodical review by the TCO, is currently the following:
Afghanistan, Angola, Belarus, Burma, Burundi, Cambodia, Central African Republic, Cuba, Cyprus, Democratic Republic of Congo, Egypt, Eritrea, Ethiopia, Haiti, Iran, Iraq, Lebanon, Libya, Mali, Nicaragua, North Korea, People Republic of China including Hong Kong and Macau, Republic of Congo, Russia, Rwanda, Saudi Arabia, Somalia, South Sudan, Sudan, Syria, Tanzania, Turkey, Uganda, Ukraine, United Arab Emirates, Venezuela, Yemen, Zambia, Zimbabwe.

 

 

the HRIA is integrated in Leonardo Trade Compliance processes, in particular with reference to the Monitoring of Politically Sensitive Transactions. The HRIA is carried out both at “country-risk” level as well as at “transaction-risk” level.
 
  • Concerning HRIA at “country-risk” level: through specific “red flags” risk indicators, such tool aims at identifying those countries towards which national and international governmental bodies and organizations (e.g. UN and EU) raised concerns in relation to the respect of human rights, even if they are not yet the target of any international sanctions regime, considering among other the following reasons:
            i) internal repression;
            ii) violations of international humanitarian law;
            iii) trafficking in so-called conflict minerals “3TG”. 

On the basis of the above assessment, the related transaction shall be subject to monitoring for the respect of human rights.
 
  •   Concerning HRIA at “transaction-risk” level
     
HRIA risk-driver indicators are assessed for the related transactions.
The Program provides for constant training of employees on the applicable internal and external Trade Compliance rules as well as the advanced training of the personnel more involved in the related processes.
The Trade Compliance Program requires the immediate notification of critical issues to TCO who shall involve SCO in case of non-mitigable risks..
A periodic assessment of the Trade Compliance Program shall be carried out in line with Guideline 16/2021 and Directive 5/2021.
Record keeping is required for a minimum time period of five years or for any longer period provided for by local laws.
The Council, chaired by the SCO, promotes the cooperation, exchange of information, training and development and maintenance of best practices in the field of Trade Compliance.