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Trade sanctions and export controls

We take care to know and follow the rules

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What it's all about

Most countries in which Serco operates impose restrictions on the movement of information, products and services across borders. 

This is a normal part of international trade and we need to know what the laws and rules regarding imports and exports are in the countries where we work, so that we always follow them.

But there are three specific kinds of restrictions that need special attention relating to trade sanctions, export controls and boycotts. For example, in some countries there are laws covering the transfer of equipment, software, services or technology to a foreign country or foreign person. These can include potential transfers to other parts of Serco.

Where legitimate restrictions apply on trade and exports/imports and all legitimate sanctions and boycotts we will comply with them.

“When do I need to get a license to import software and certain special equipment?”

What we all need to know and do

  • We must always comply with recognised and lawful trade sanctions and export control regulations.

  • We need to check whether a country we are working in has laws covering the transfer of equipment, software, services or technology to a foreign country or foreign person. This can include potential transfers between different parts of Serco. It can even apply to any foreign nationals working on our team.

  • We must ensure third-parties we deal with have been through due diligence and properly screened against sanctions lists.

  • We also need to take care to understand international and national laws. Sometimes these can be complex and even contradictory and can result in a legal conflict. So we should always seek legal advice from our divisional General Counsel or Ethics and compliance Leads.

  • We must always be careful to check how the export of “dual use” or “controlled goods” is licensed and whether these apply to Serco, as while they are normally used for civilian purposes, they can also have military applications.

  • We always obtain, retain and communicate correct customs and export control classification on all goods and software moved internationally. For physical movements of goods and software, valuation and origin information are also required.

  • We carefully check the applicable trade rules and always apply them when arranging any cross-border transactions, including financial transactions, technology transfers, transactions that are free of charge, returns, or hand-carried goods.

  • If we think there’s anything suspicious, or any ‘red flags’ appear in our dealings with third-parties, we stop and immediately seek assistance from our Legal and Ethics and Compliance Department.

  • We never deal in a sanctioned country or with a sanctioned party unless we have been specifically authorised in accordance with company procedures.

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Most people think that trade sanctions and export controls are all about the laws and restrictions that govern moving physical items across borders. 

But it’s often when you’re dealing with things like software or documents or even emails that it can get extremely complicated. And unless you take every care, you can make a mistake that could put you and the whole company into a lot of trouble.

We had an experience like that which nearly resulted in disaster. It was to do with one of our defence contracts. Quite rightly the International Traffic in Arms Regulations (ITAR) are extremely tight and detailed. That’s to ensure that nothing that shouldn’t ever gets into the wrong hands. 

But it can sometimes be really hard to understand what is meant by ‘nothing that shouldn’t’ and exactly whose hand might be wrong. 

Anything that is produced or modified locally like hardware or software or data that happens to incorporate ITAR controlled technology automatically becomes subject to the same restrictions (we call it ‘ITAR taint’). Which means that only people authorised to receive or access ITAR items, including data, can do so. If an Unauthorised Person receives anything to do with a restricted item – including an email – then that’s a serious violation and the consequences can be very serious indeed.

Well, that’s exactly what happened to us, We had a complex project to undertake on one of our defence contracts, and recruited some new personnel onto the team. They were highly skilled and highly trained, and we’d taken everyone through our vetting process. 

The team was working remotely, with some of them in different parts of the world. So we needed to establish a highly secure environment in which key documents and data could be shared. 

We checked everything out, and started working. Everything was going well, despite all the COVID difficulties that were happening. And then one of the new members of the team raised his hand to ask a question. Despite being born and living all his life in an authorised country, his mother came from a country that was subject to strict sanctions. Did that then mean that he was in fact an Unauthorised Person? And because by then he’d received a lot of critical details about the project, he even wondered whether he might be considered a potential spy. 

It was a very frightening moment for him and for us. Somehow in our checks this had slipped through the net. 

We immediately reported what had happened. It was regarded as an extremely serious incident and a major failure in our compliance procedures. For quite a while we thought we’d be facing a big fine and would no longer be allowed access ITAR – which would have meant we could no longer conduct business. 

In the end after a lot of work on our part the incident was resolved in our favour. But it was a very close-run thing. 

Which just shows you how you need to take the greatest care to check every detail when walking out across the minefield.    

We must always comply with recognised and lawful trade sanctions and export control regulations.

We need to know what the laws and rules regarding imports and exports are in the countries where we work, so that we always follow them.

Last week I went fishing with an old friend from another company. We were talking about the current international situation and how complicated it had all become, and we got onto the subject of exports and imports - the different trade sanctions and embargos we all had to be so aware of now. had all become. And he told me a story about what had happened to his team.

They’d been supplying essential equipment to various companies in the Middle East for a long time. All the equipment was for civilian use, although one or two items could have had military applications, so these were regarded as ‘dual use’ and therefore subject to strict controls.

His team conducted regular extensive due diligence checks on all organisations they did business with. Nothing irregular or worrying had ever come up. 

One evening he’d arranged to have supper with a colleague he’d worked with a while back out in the region. They began discussing one of the companies my friend’s team was doing business with, and the colleague said, ‘You know, word is that they are now supplying equipment to end users in Iran.’

There were very strict controls in place around trading with that country. And one of the real ‘watch outs’ was making sure that you were not supplying anything to anyone who would then go on to supply it to any country that was subject to sanctions.
 
My friend said the hairs literally stood up on his neck. He rang his team and discovered that a shipment was due out on a cargo plane that night. So he got straight into his car and drove to the airport in the desperate hope that he could stop the shipment going ahead. 

He had huge problems getting to the right people and then convincing him that he had the authority to do this. But fortunately for him the guy in charge was ex-army and knew exactly what issues were at stake. So just in the nick of time the shipment was halted. 

It turned out that this particular company wasn’t trading with Iran after all. But we both went through some of the awful consequences that might have happened if they had been and the shipment had been made. 

‘Thing is,’ he said, ‘all the due diligence in the world sometimes isn’t enough. Really you need X ray vision as well! And unless you’re looking down the line at who the people you’re selling to are selling to, and who they in turn may sell to, you could make a fatal mistake.’ 

We must always be careful to check how the export of “dual use” or “controlled goods” is licensed, as while these are normally used for civilian purposes, they can also have military applications.

We were very excited when the opportunity to do business with a new customer came up. 

We did a lot of work preparing our bid, gave an in-depth virtual presentation, and a week later were delighted to learn that we had won the contract. It was great news for us after a very tough year in which the pandemic seemed to cast a shadow over everything.
 
We began to bring a team together to get things underway. Then a month in I got a call from a Serco colleague working in the US. The first thing he said was, ‘I’m afraid I’ve got some bad news.’

‘What is it?’ I asked.

‘You have to drop the contract and everything to do with it. Right now.’

I honestly thought he was joking, but he wasn’t. His department had been looking into how they might help to support us with IT and other resources, and he’d discovered that while the company we’d won the contract from appeared to be bona fide, his team had just found out that it was a majority-owned subsidiary of a Russian parent company. 

This meant that the strict Russian/Ukranian sanctions that applied to the parent company also applied to the subsidiary. If we did any business with them we would be in direct breach of those sanctions.

I found out later that a great deal of effort had gone into trying to hide the relationship between the parent and its subsidiary. But I’m pretty sure that wouldn’t have given us a leg to stand on with the UK and US governments, or with our banking and insurance facilities. After all it’s only a few years back when they imposed the largest fine in history on a well know finance institution for doing essentially exactly what we might have done.

Where legitimate restrictions apply on trade and exports/imports and all legitimate sanctions and boycotts we will comply with them.

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