British American Tobacco to Pay $629M to Settle North Korea Sanctions Violation Charges
British American Tobacco and its subsidiary BAT Marketing Singapore will pay over $629 million to settle charges that the companies violated U.S. sanctions on North Korea. BAT, a cigarette manufacturer, allegedly participated in a scheme to conduct business in North Korea via a Singapore-based third party in violation of the International Emergency Economic Powers Act's bank fraud statute, DOJ said April 25. Concurrent with the settlement announcement, the U.S. filed charges against a North Korean banker and Chinese facilitators for their role in the scheme.
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"Today’s action, which involves the largest North Korean sanctions penalty in the history of the Justice Department, should serve as a clear warning to companies everywhere about the costs and consequences of violating U.S. sanctions," Assistant Attorney General Matthew Olsen said.
BAT CEO Jack Bowles said in a statement the company has transformed its compliance program for sanctions and anti-corruption measures in recent years, and "continued refinements" will be made as part of the settlements. "On behalf of BAT, we deeply regret the misconduct arising from historical business activities that led to these settlements, and acknowledge that we fell short of the highest standards rightly expected of us," Bowles said. "Adhering to rigorous compliance and ethics standards has been, and remains, a top priority for BAT."
In 2007, BAT "spun off its North Korean sales to a third-party company," declaring publicly it no longer was involved in North Korea tobacco sales, when in reality, the company continued to do business in North Korea via the unnamed third-party firm, DOJ said. From 2007 to 2017, BAT and its subsidiary ran the payments for the tobacco sold to North Korean companies via the third party, leading to around $418 million cash and bank transactions, DOJ said.
BAT's subsidiary pleaded guilty to conspiracy to commit bank fraud and violate the IEEPA while BAT entered into a deferred prosecution agreement pertaining to the same charges. Separately, the Treasury Department announced a civil enforcement action against BAT and its subsidiary.