World’s second largest tobacco products manufacturer British American Tobacco (BAT) and its subsidiary, BAT Marketing Singapore (BATMS), has agreed to pay combined penalties of more than $629 million to resolve bank fraud and sanctions violations charges with U.S. authorities.
Department of the Treasury Office of Foreign Assets Control (OFAC) agreed $508 million settlement with BAT for its apparent violations of U.S. sanctions on the Democratic People’s Republic of Korea (DPRK) and proliferators of weapons of mass destruction (WMD). This settlement is OFAC’s largest ever with a non-financial institution and reflects the statutory maximum penalty.
Despite strict OFAC sanctions obligations, BAT engaged in doing businesses in North Korea through third party companies from China and Singapore and BATMS maintained control over all relevant aspects of the North Korean business. Between 2007 and 2017, BAT and BATMS tobacco business in North Korea resulted in approximately $418 million of U.S. dollar cash and correspondent banking transactions from North Korea to the third-party company in Singapore. Funds were later passed on to BATMS and BAT.
BAT and its subsidiaries formed a scheme in 2007 to sell its stake in a joint venture formed in 2001 by BATM Singapore and a North Korean company to a Singaporean company, but still retain effective ownership and control over it. Between 2009 and 2016, the North Korea company remitted Joint Venture profits, including payments owed to BATM, through a complex system that involved both OFAC-sanctioned Foreign Trade Bank (FTB) and Korea Kwangson Banking Corporation (KKBC). Even though BAT did not deal directly with FTB or KKBC, it exposed itself to liability when it formed and executed the broader scheme to use the U.S. financial system in furtherance of its Joint Venture-related business.
Separately, US Department of Justice unsealed charges against a North Korean banker Sim Hyon-Sop and two Chinese facilitators Qin Guoming and Han Linlin, for their roles in facilitating the illicit sale of tobacco products in North Korea.
