London-based tobacco giant, British American Tobacco p.l.c. (BAT), has agreed to pay more than $600 million to settle civil charges related to alleged violations of the North Korea and Weapons of Mass Destruction Proliferators Sanctions Regulations, according to a statements from the US Treasury's Office of Foreign Assets Control (OFAC) and the Justice Department.
The settlement is related to BAT's role in exporting tobacco and related products to North Korea and receiving payment for those exports through the US financial system, and its subsidiary's use of US financial institutions to receive or otherwise process US dollar-denominated payments for its sale of cigarettes to the DPRK Embassy in Singapore. This caused US financial institutions to process wire transfers that contained the blocked property interests of sanctioned North Korean banks and to export financial services and facilitate the exportation of tobacco to North Korea.
OFAC determined that these apparent violations were egregious and not voluntarily self-disclosed, resulting in the statutory maximum civil monetary penalty.
The apparent conspiracy formed by BAT and its subsidiaries, the North Korea Company, and the Singapore Company caused U.S. financial institutions to process 228 payments between the North Korea Company and the Singapore Company totaling approximately $251,631,903—transactions in which two blocked entities, Korea Kwangson Banking Corporation (KKBC) and Foreign Trade Bank (FTB), had an interest.
BATM’s sale of cigarettes to the DPRK Embassy in Singapore further caused U.S. financial institutions to receive or otherwise process an additional 15 payments totaling $29,685.72. This conduct resulted in one apparent violation of the Weapons of Mass Destruction Proliferators Sanctions Regulations and 15 apparent violations of the North Korea Sanctions Regulations.
According to the OFAC statement, BAT's apparent violations began in 2001, when its Singapore subsidiary, British-American Tobacco Marketing (Singapore) PTE Ltd., and a North Korean company established a joint venture company in North Korea to manufacture and distribute BAT cigarettes.
"In 2007, British American Tobacco announced that it had ended all tobacco sales in North Korea as required by U.S. sanctions. In fact, the company continued to break the law by doing business in the DPRK using a third-party company under the control of its subsidiary. Between 2007 and 2017, this third-party company sold tobacco products to North Korea and received approximately $428 million dollars. This money was then funneled back to British American Tobacco" said Assistant Attorney General for National Security Matt Olsen announcing the settlement.
The settlement amount for the statutory maximum reflects OFAC's consideration of the General Factors under the Enforcement Guidelines. OFAC determined several aggravating factors, including
In addition to the OFAC settlement, BAT is also required to pay a penalty of $503,263,807 for its apparent conspiracy violation of the Weapons of Mass Destruction Proliferators Sanctions Regulations, as assessed by the US Department of Justice (DOJ). BAT's obligation to pay this penalty shall be deemed satisfied by payment of a greater amount in satisfaction of penalties assessed by DOJ arising out of the same pattern of conduct during the same time period..
DOJ’s press release regarding BAT deferred prosecution agreement, and BATM’s execution of a plea agreement concerning their conduct in the alleged conspiracy from 2009 to 2016. an be found here.
The settlement agreement can be found on the OFAC website: web notice, and settlement agreement
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