Half of penalty suspended contingent on BAE compliance investment
The US Department of State announced on Thursday that it had reached an administrative settlement with BAE Systems Inc, the American arm of the British defense contractor BAE Systems, to resolve 104 violations of the Arms Export Control Act and the International Traffic in Arms Regulations. The settlement carries a $36 million (£26.7 million) civil penalty.
BAE voluntarily disclosed all but one of the alleged violations, according to the State Department. The disclosure helped the company avoid a higher penalty and persuaded the department to suspend half of the $36 million on the condition that the remaining $18 million is directed to BAE’s compliance programme.
The breaches described in the settlement included the unauthorized export of technical data to multiple countries and violations of directorate of defense trade controls authorizations. Among the alleged violations was the transmission in December 2023 of technical data related to printed wiring boards for use in global positioning systems (GPS) to a manufacturer in China. The settlement did not specify the particular GPS application or end-use.
According to the State Department, BAE “recognised its supply chain team did not fully understand the export control and compliance regulations” and that its secure file transfer networks did not surface export-control warnings before the data was sent.
Additional breaches identified in the settlement included the September 2021 transmission to Canada of printed-wiring-board technical data intended for military GPS use, sent after a license agreement had expired. BAE also transmitted the technical specification of what the State Department described as an “explosive mixture” to the United Kingdom, and sent technical data related to a US Navy guided-missile destroyer to Germany.
A BAE subcontractor “furnished defence services without authorisation” on more than 17 separate occasions in Italy, France and Indonesia, according to the settlement. In a separate incident, BAE accidentally exported without authorization a control system for a military gas-turbine engine to Switzerland.
In a statement, BAE Systems said the company remained committed to ensuring full compliance with all applicable export control laws and had “thoroughly cooperated” with the State Department’s review. “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,” the company said. “We take seriously our responsibility to protect critical information and support all our customers’ security.”
The State Department said the settlement highlighted “the importance of exporting defence articles pursuant only to appropriate authorisation from the department.” The department did not identify individuals responsible for the breaches or announce any criminal charges.
Under the settlement’s terms, BAE will pay $18 million directly and the remaining $18 million will be suspended for a period contingent on BAE investing the suspended sum in compliance upgrades approved by the State Department.