The tobacco sales to the isolated communist nation at the heart of Tuesday’s settlement took place from 2007 to 2017, according to both the company and the Department of Justice. North Korea faces an array of United States sanctions to choke off funding for its nuclear and ballistic missile programme.
“This case and others like it do serve as a warning shot to companies,” Matthew Olsen, Assistant Attorney General of the Department of Justice’s National Security Division, told a news conference.
The case represents the “single largest North Korea sanctions penalty” in Department of Justice history, he said.
BAT, the world’s second-biggest tobacco group, makes Lucky Strike and Dunhill cigarettes.
Its annual report for 2019 said the group had operations in a number of nations that are subject to various sanctions, including Iran and Cuba, and that operations in these countries exposed the company to the risk of “significant financial costs”.
In a statement, British American Tobacco said it has entered into a deferred prosecution agreement with the Department of Justice, while one of its indirect subsidiaries in Singapore – BAT Marketing Singapore – pleaded guilty.
It also separately entered a civil settlement with the US Treasury’s Office of Foreign Assets Control.
The $635.2m payment to US authorities is the total to cover the three cases, the company said.
“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,” the company’s CEO Jack Bowles said in a statement.
In a court filing, the Department of Justice said the company also conspired to defraud financial institutions in order to get them to process transactions on behalf of North Korean entities.
North Korean leader Kim Jong Un is known as a chain smoker – frequently seen with a cigarette in hand in photographs in state media. A US push for the United Nations Security Council to ban exports to North Korea of tobacco and manufactured tobacco was vetoed by Russia and China in May last year.
Illicit transactions
In addition to the settlement with BAT, the Department of Justice on Tuesday also disclosed criminal charges against North Korean banker Sim Hyon Sop, 39, and Chinese facilitators Qin Guoming, 60, and Han Linlin, 41, as part of a “multi-year scheme to facilitate the sale of tobacco to North Korea”.
From 2009 through 2019, the Department of Justice said they bought leaf tobacco for North Korean state-owned cigarette manufacturers and falsified documents to trick US banks into processing at least 310 transactions worth $74m that would have otherwise been blocked due to sanctions.
The government said North Korean manufacturers, including one owned by the North Korean military, were able to reap about $700m in revenue thanks to those illicit transactions.
The three defendants remain at large.
The US Department of State is offering a reward of $5m for Sim, and a reward of $500,000 Qin and Han, for information leading to their capture.
On Monday, the Treasury also imposed sanctions on Sim, a move that cuts him off from accessing the US banking system.