PHILIP MORRIS COMPANIES INC.
POLICY STATEMENT ON COMPLIANCE WITH FISCAL,
TRADE AND ANTI-MONEY LAUNDERING LAWS
Compliance is a key business objective for each and every one of us and goes hand in hand with the
Company's financial and other goals. How we conduct our business is as important as the financial
results we achieve, and no one should act on the false assumption that business targets are more
important than legal and ethical standards. Our business goals must be achieved within the law and
without jeopardy to our reputation for integrity or how the public perceives the Company.
Accordingly, Philip Morris Companies Inc. is issuing this policy statement to all of its operating
companies (collectively, "the Company") in order to standardize procedures related to fiscal, trade and
anti-money laundering laws that apply to the sale of the Company's food, beer and tobacco products.
Included within this policy statement are measures designed to guard against the diversion of our
products into illegal trade channels and against our products being used by criminals to "launder" the
proceeds of crime. This policy therefore, concerns those laws and regulations that govern:
i. the payment of import duties, value added tax, excise taxes and other imposts applicable to
ii. the handling of payments which we receive from our customers;
iii. currency reporting and recordkeeping requirements; and
iv. trade restrictions or prohibitions.
It also includes important "know your customer" guidelines to help us meet our goal of only doing
business with firms that share our high standards of integrity and business practices. Procedures for
reporting suspicious activities in this area are also set out below. Antitrust and competition laws are
covered by separate policies and compliance programs.
As discussed below, this policy statement reaffirms the Company's commitment to compliance with the
laws that apply to its business as well as the primary responsibility of the operating companies to
implement and continually improve their compliance programs. This policy statement applies to all
domestic and international operating companies which engage in the sale, distribution or licensing of
any of the Company's products or which collect payments for such products (although the application of
certain laws, for example, anti-money laundering laws and regulations, may vary among operating
II. Compliance Programs
Each operating company shall implement a compliance program to give effect to this policy statement
("Compliance Program"). In developing its Compliance Program, each operating company's
management, working with their legal counsel, should identify the fiscal, trade and anti-money
laundering laws which are relevant to their businesses; ensure that all appropriate personnel (including
employees in sales, credit, treasury and accounting and other employees who have contact with
customers and other independent contractors) are aware of these laws as well as Company policy; and
implement procedures including appropriate education and training programs, designed to prevent and
detect violations of the law or Company policy.
The Legal Department of each operating company shall advise its operating company on the
development of a suitable Compliance Program, provide guidance as to its implementation and monitor
adherence to the Compliance Program. For these purposes, the General Counsel of each operating
company shall designate one or more members of the operating company's Legal Department to act as
III. General Standard of Conduct
As stated in the Business Conduct Policy, the Company expects a high standard of conduct and
personal integrity of all employees. The Business Conduct Policy also states:
"Conduct that is unlawful or that violates Company policies and procedures will not be condoned
under any circumstances. This includes conduct that occurs in a country which does not enforce a
restriction or a prohibition in its own law or in which the violation is not subject to public criticism or
Further, the fact that a competitor or other company may appear to be engaged in an illegal activity
apparently without incurring any penalties does not justify or mean that we can be involved in the same
type of activity or condone the involvement of our customers or anyone associated with the Company.
The operating companies' Compliance Programs should reflect these principles and standards of
IV. Types of Laws and Procedures to be Covered
Each operating company's Compliance Program should identify the applicable laws that govern the
sales of its products, taking account of jurisdictional and other issues. At a minimum, however,
Compliance Programs should cover the following substantive areas of law and procedures where
A. Customs and Fiscal Laws and Regulations
As a general rule, importation of the Company's products is subject to various customs and
fiscal laws and regulations. In particular, physical importation of products into a country must
usually comply with either:
i. the regulations that specify the import duties, value added tax, excise tax, and the
like that may be payable in relation to our products; or
ii. the tax, bonding, or other similar regulations that govern "tax or duty free"
Shipments of or trade in products in violation of these types of laws is usually known as
contraband, smuggling or tax evasion. Government agencies and law enforcement bodies
around the world are increasingly concerned by the incidence of contraband as well as its
reported relation in certain countries to money laundering. The Company's policy in this context
is clear: we will not condone, facilitate, or support contraband or money laundering and we will
cooperate with governments in their efforts in prevent illegal trade in the products that we
V. Know Your Customer Guidelines
B. Receipt of Payments
Criminals often transact business with the cash proceeds of crime or with negotiable
instruments that are the equivalent of cash (e.g., money orders and travelers checks) and that
have been purchased with the cash proceeds of crime. Criminal schemes also may involve
payments by third parties which may be non-existent or "front" persons or payment in the
currency of a country other than the country in which business is transacted. Under the laws of
the United States and other countries, in certain circumstances, dealing in criminal proceeds
can itself be considered criminal conduct.
In confirmation of our long-standing practices in this area, the operating companies' Compliance
Programs which implement this policy statement should include the following requirements:
i. acceptable forms of payment are: (a) wire transfer or check, in both cases from a
bank account in the customer's name, (b) cashier's check or bank draft, in both cases
issued by a bank in the country in which the customer is located and (c) cash, but only
where the nature and scale of a customer's business (e.g., a small retail outlet) are such
that it is not commercially feasible under local conditions for a customer to use the forms
of payment specified in (a) or (b);
ii. all payments must be made in the same currency as the invoice;
iii. third party payments are unacceptable;
iv. any overpayments must be carefully scrutinized; any request to make an
overpayment or that a refund be sent to a third party must be approved by the Chief
Financial Officer and Chief Executive Officer of the operating company or their
v. payments for each invoice or group of invoices due should be made by a single
Procedures of individual operating companies may allow for exceptions to these five
requirements to be made on a case-by-case basis but such exceptions must be approved by
the Chief Financial Officer and Chief Executive Officer of the operating company or their
designees. If exceptions are permitted, the procedures must provide that they should be
granted only in exceptional circumstances and require documentation of the reasons for
granting any exception.
Moreover, each Compliance Program should include reasonable procedures to identify
payments that do not comply with this policy statement or that merit further inquiry. Because
unacceptable or suspicious payments may be indicative of illegal activity, it is essential that in
such cases inquiries be made to determine the legitimacy of the customer and the transaction,
including the reason for the payment.
C. Currency Reporting and Recordkeeping
For fiscal control or crime prevention purposes, the United States and many other countries
have instituted various currency or other transaction reporting and recordkeeping requirements
relating to domestic and/or international transactions. Many of these requirements are
applicable only to financial institutions and financial services businesses, but others apply to
businesses generally. In general, they require customers to provide identification and other
information when conducting a transaction involving currency or cash equivalents over a certain
threshold amount (e.g., US$10,000). Each operating company should take steps to ensure that
all such requirements continue to be observed.
D. Trade Restrictions or Prohibitions
The United Nations and European Union, Switzerland, the United States, and a number of other
jurisdictions periodically impose various export and trade controls that restrict or prohibit
dealings with certain countries, entities and individuals. Trade restrictions take many forms and
i. a ban on exports to a sanctioned country;
ii. a ban on imports from or dealings in property originating in a sanctioned country;
iii. a ban on travel to or from a sanctioned country;
iv. a ban on new investments in a sanctioned country; or
v. a ban on financial transactions and dealings involving a sanctioned country or
designated individuals and entities.
The reach of these types of laws varies, but as a general rule they may restrict the activities of
citizens or residents of the sanctioning jurisdiction, including companies that are incorporated
under the laws of the sanctioning jurisdiction, with regard to the governments, financial
institutions, firms or individuals resident in or officially identified with the sanctioned country.
At present, trade restrictions that are relevant to consumer products companies (i.e., as
opposed to restrictions dealing with military or other technology) are in force against a number
of countries including the following: Afghanistan, Cuba, Iran, Iraq, Libya, Myanmar (Burma),
North Korea, Sudan and Yugoslavia (Serbia). Each Compliance Program should be designed to
ensure that the operating company complies with any trade controls or sanctions that may apply
to its activities.
In addition to covering applicable substantive laws, each operating company's Compliance Program
should include guidelines related to selecting and working with its customers. The following sections
highlight certain key elements that should be included as part of such guidelines, which serve to
reinforce Company policy and compliance efforts.
The Company wants to do business only with firms that share our standards of integrity and honorable
business practices. Otherwise, we face the possibility that even an arms'-length association with third
parties who violate the law might harm our reputation or place the Company or its employees in legal
difficulty. For these and other reasons, managers should carefully assess the integrity of potential
customers before entering into nay business relationship.
. Customer Selection
In particular, before approving any new customer for any significant volume of our products,
managers should obtain sufficient information about the customer and the customer's business
to satisfy themselves that it is: (i) an existing legal entity; (ii) creditworthy; and (iii) a reputable
enterprise engaged in a legitimate business. All such checks should be documented and
repeated periodically, including in the event of any change in control of the customer. The
frequency and extent of such checks will vary according to factors such as the nature and
extent of the relationship, the level of purchases and the geographic areas where that customer
does business. If there are any suspicious circumstances present or inconsistencies in
information additional due diligence should be undertaken. In any event, however, each
operating company's Compliance Program should require sufficient due diligence to confirm the
bona fides of customers.
All new customers should be advised of the Company's compliance expectations. Thereafter,
Compliance Programs should provide for periodic reminders of Compliance policy.
Finally, each operating company should establish a procedure for maintaining appropriate
customer records which may include the following materials:
i. a customer approval form detailing the products which the customer is authorized
to purchase and the market of intended destination (to be signed by a designated
operating company officer);
ii. a policy letter regarding fiscal and trade law compliance (to be sent periodically to
remind our customers of our policy);
iii. due diligence checks (e.g., company search report, details of owners and principal
officers, bank references and other creditworthiness checks); and
iv. any inquiries from and responses to government agencies regarding the customer
or its business.
A. Sales Only to Approved Customers
Company policy is to restrict product sales to approved customers commensurate with the
legitimate market demand therefore. Accordingly, there should be no sales to anyone other than
approved customers. Affiliates of approved customers are not themselves approved customers.
Any request to the Company by an existing customer for the supply of our products to a third
party should be handled as a request for new customer approval.
B. Continued Awareness and Monitoring
On an ongoing basis, managers should maintain a high degree of awareness of our customers'
business practices and be alert to the possibility of detrimental changes in a customer's
business practices, as well as signs of questionable conduct including suspicious transactions.
For example, if a press report alleges that a customer or a customer's customer is involved in
contraband trade or if a customer's orders suddenly increase dramatically without any clear
justification based on market conditions, further inquiries may be appropriate. Any indications of
possible violations of this policy statement should be reported in accordance with Section VII.
C. Dealings With Customers
The Company respects the commercial freedom of its customers and recognizes that antitrust
and competition laws may restrict the extent to which control can be exercised over resale
prices or other conditions under which our customers resell our products. Consistent with these
and other principles, and in accordance with the Business Conduct Policy, employees should
neither own a substantial interest in a customer or organization seeking to become a customer
unless approved in writing by the Responsible Officer (as defined in the Business Conduct
Policy), nor become involved in directing or managing a customer's business affairs. D. Licensees and Contract Manufacturers
Moreover, in no circumstances should an employee assist any person in any conduct involving
our products that violates fiscal, trade or anti-money laundering laws and/or regulations,
including evasion of applicable taxes or import duties. Nor should any employee facilitate or
participate in any activity that subverts this policy, including, for example, by agreeing to
interpose an existing or new customer to act as an intermediary purchaser which will resell our
products to another firm that has not been approved as a customer.
We expect our customers to comply with all applicable laws when they resell our products; and
we expect that our customers will, in turn, in keeping with applicable laws, seek to ensure that
their customers resell our products in their market of intended destination. We reserve the right
to stop supplying products to any customer shown to have been involved in contraband sales or
distribution of our products. We expect our customers to do the same in relation to their own
We must also continue to exercise careful judgment in selecting those we allow to use our
name or any of our trademarks, including licensees and contract manufacturers and carry out
appropriate due diligence checks to confirm that such entities are reputable. Just as we should
remain alert to possible changes in a customer's business practices, we must also be aware of
the behavior of our licensees and other business associates.
VI. Government Inquiries
From time to time, the Company may be served with legal process or receive written or oral requests
for information from law enforcement or other government agencies for records or information about
customers or business associates who may be under investigation or who may be associated with a
third party that is under investigation. As set out in the Philip Morris Companies Inc. Legal Guide for
Employees, it is Company policy to cooperate fully in these inquires within the confines of applicable
privacy and other laws and to respond to each lawful request in a timely fashion. Any employee who
receives such a request should follow the procedures of the Legal Guide, including immediate
reference to the Legal Department for review.
In keeping with out long-standing policy of supporting government actions against illegal trading in our
products, we are asked from time to time to assist in tracing the country and date of manufacture of a
particular product and our customer for that product based on markings and other records. Each
operating company should have marking systems which, with related documentation, will allow us to
assist governments with their attempts to identify purchasers of our products, and the dates and
locations of production. Also, any employee who becomes aware of any attempt to tamper with our
products or the packaging of our products or any attempt to falsify invoices or other import documents
should promptly report this to the Legal Department.
VII. Reporting of Suspected Wrongdoing
Any indications of possible violations of this policy statement or the Compliance Programs or of
suspicious activity by customers should be reported promptly to the Legal Department of the relevant
operating company for appropriate action. Actions which may be appropriate include monitoring a
customer's activity, a possible management decision to suspend or sever the business relationship in
accordance with Company policy and/or a determination of whether to report the activity to the
appropriate government authorities.
The Legal Department of each operating company shall implement a procedure to ensure that the
identify of any person reporting violations of this policy statement or its Compliance Program or any
suspicious activity by customers will be kept confidential if the reporter of that information so requests.
Consistent with the Business Conduct Policy and Legal Guide, any employee who fails to comply with
this policy statement or the Compliance Programs and policies that have been and will be promulgated
by the operating companies may be subject to disciplinary action, which may include termination and
loss of employment-related benefits. Any suspected violations of fiscal, trade or anti-money laundering
laws by customers, licensees or contract manufacturers should be reported in accordance with the
procedures set out above.
Finally, employees are urged to consider the spirit of this policy statement and to act accordingly. It is
vital that we maintain our commitment both to observing and abiding by the laws governing our
business and to the protection of our good name and reputation. Any questions regarding this policy
statement should be referred to the Legal Department.
September 13, 1999