Following the public consultation published last year, on 26 July 2024, the Bank of Italy, COVIP, IVASS and the Italian Ministry of Economy and Finance ("Supervising Authorities") published instructions for enhanced controls on a wide range of supervised entities pertaining to the financial, banking, insurance and pensions sector - including Italian branches of certain foreign entities - (“Obliged Entities”) in order to counter the financing of companies producing antipersonnel mines, cluster munitions and submunitions ("Instructions").
The Instructions implement Law No. 220 of 9 December 2021 ("Law") which prohibits intermediaries operating in the banking, pension, insurance and financial sectors to finance companies which directly or indirectly engage in certain activities (including but not limited to the production, storage, sale, transportation and distribution) related to antipersonnel mines, cluster munitions and submunitions.
Obliged Entities are required to adopt adequate procedural safeguards aimed at ensuring compliance with the prohibition to finance businesses involved in activities related to the above-mentioned weapons. Such procedures must include at least: (i) the obligation to consult publicly available lists of companies producing antipersonnel mines, cluster munitions and submunitions before granting the financing and (ii) procedures for assessing the risk of involvement of the potential borrowers in said activities based on factors like their activities, registered office and place of business. Enhanced control measures are required for entities considered to be high risk.
When control procedures determine that a potential borrower is involved in prohibited activities, Obliged Entities must implement measures to ensure the prohibition of financing, such as denying the funding, and report such violation together with remedial actions to the competent Supervising Authority.
For the purpose of verifying compliance with the financing prohibition, Supervising Authorities may, among other things, carry out inspections on Obliged Entities. Failing to comply with the Instructions may entail administrative fines and in certain cases criminal sanctions.
Further details may be found in our previous news here.
The Instructions (available in Italian only) are available here.
Next steps
The Instructions will be published in the Official Gazette and enter into force the day following the publication. Obliged Entities will need to comply with the Instructions within 6 months from their entry into force.
Authored by Jeffrey Greenbaum and Elisabetta Zeppieri.
