The UK defence company BAE Systems is to pay a $36m civil penalty after breaching US arms exports regulations more than 100 times, with the US Department of State announcing an administrative settlement with the company's US arm to resolve 104 violations of the Arms Export Control Act and the International Traffic in Arms Regulations. The settlement was announced on Thursday and represents a significant enforcement action by Washington as it continues to tighten oversight of defence exports.
The breaches included the unauthorised exports of technical data to multiple countries, including China, and violations of directorate of defense trade controls authorisations involving various countries. A BAE subcontractor also furnished defence services without authorisation on more than 17 separate occasions in Italy and France, and also in Indonesia. The company also accidentally exported without authorization a control system for a military gas-turbine engine to Switzerland.
Self-disclosure reduces penalty
BAE voluntarily disclosed all but one of the alleged violations, which helped it avoid a higher penalty. The company persuaded the state department to suspend half of the penalty, on the condition that the $18m was used to strengthen BAE's compliance programme. This reflects a US policy that encourages companies to report their own export control breaches rather than face full sanctions when violations are discovered through government investigation.
For an initial period of at least 24 months, BAE will engage an external Special Compliance Officer to oversee the consent agreement, which will also require at least one external audit of its ITAR compliance program and implementation of additional compliance measures. The company's compliance work will be monitored closely as part of the settlement terms.
Wider enforcement context
The settlement demonstrates the Department's role in furthering the national security and foreign policy of the United States by controlling the export of defense articles, and highlights the importance of exporting defense articles pursuant only to appropriate authorization from the Department. This settlement underscores Washington's determination to maintain strict control over the flow of sensitive defence technology and services, especially to strategic competitors like China.
“We have been working diligently to implement improvements to our BAE Systems Inc compliance programme over the last several years, and we will continue to do so. We take seriously our responsibilities in this area.”
BAE Systems is one of the world's largest defence contractors. The company has faced export control enforcement actions before. This latest settlement applies specifically to BAE Systems Inc, the company's US subsidiary, and follows a comprehensive compliance review by the State Department's Office of Defense Trade Controls Compliance.
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