We must be aware of, and fully comply with, all applicable sanctions regimes and export controls affecting our business. We must ensure that we never directly or indirectly:

• supply our products, or allow our products to be supplied, to any person
• purchase goods from any person, or
• otherwise deal with any person or property in contravention of any applicable sanction, trade embargo, export control or other trade restriction

Sanctions may be imposed by individual countries, such as the US or UK, or supranational bodies, such as the UN and EU.

Sanctions do not just target whole countries with economic, trade or diplomatic restrictions. Increasingly, they capture direct or indirect dealings with sanctioned individuals, companies, organizations and groups located worldwide and sanctioned for a variety of different policy reasons. Some sanctions regimes are very broad; for example, US sanctions can apply even to non-US persons, such as BAT, when acting entirely outside the United States. In particular, US sanctions prohibit the use of US dollars and US banks even for payments between non-US parties involving Sanctioned Territories or Sanctioned Parties, as well as exports/re-exports/transshipments of US-origin products and products with US-origin content to or for Sanctioned Territories or certain sanctioned persons.

Separate from sanctions, export controls impose licensing obligations on the cross-border movement of certain types of items, such as “dual-use” goods, and associated software and technology because of their potential for military use, and regardless of who is involved. Examples of “dual-use” items include certain types of machinery, encryption software and IT equipment. Where export controls apply to a particular item, we must always ensure that we have the appropriate license(s) in place before exporting it.

Breaching sanctions and export controls carries serious penalties, including fines, loss of export licenses and imprisonment, in addition to significant reputational harm.

In line with the Sanctions Compliance Procedure, Group Companies’ and business units’ internal controls must minimize the risk of breaching sanctions and export controls, and provide training and support, to ensure that Employees understand them and implement them effectively, particularly where their work involves international financial transfers or cross-border supply or purchase of products, technologies or services.

The list of Sanctioned Territories and Sanctioned Parties changes frequently. If our work involves the sale or shipment of products, technologies or services across international borders, we must keep up-to-date with the rules and at all times fully comply with our Sanctions Compliance Procedure.

Despite sanctions being in place, it is often still lawful for us to engage in business that directly or indirectly involves or benefits a Sanctioned Territory. However, this analysis is complex, and so LEX approval is required before we conduct any business involving a Sanctioned Territory. We must also consult with LEX where there are red flags for a transaction that may involve a Sanctioned Territory.

All Group Companies must follow the M&A Compliance Procedure.

We must also notify our local LEX Counsel immediately if we receive any sanctions-related communications or requests from official bodies or our business partners (including our banks). Our banks often have expectations beyond the law which we address through our transparency requirements. We must ensure that we are transparent with our banks and other business partners about whether we intend to involve them in activities that are sanctions sensitive. In particular, we must never hide or disguise the fact that a particular business activity is sanctions sensitive.

For more information on sanctions and measures we take to mitigate these risks, see the Sanctions Compliance Procedure.

• Your line manager
• Higher management
• Your local LEX Counsel
• Head of Compliance: sobc@bat.com