Tobacco Firms to Pay $635M for Selling to North Korea and Alleged Bank Fraud

After allegedly violating sanctions rules by selling cigarettes in North Korea, two tobacco companies are facing criminal charges and agreed to pay U.S. officials over $635,000,000 in combined penalties.

According to the Department of Justice, criminal charges have been filed against British-American Tobacco Marketing Singapore as well as its parent company British American Tobacco.

The charges included conspiracy to commit fraud and violation of the International Emergency Economic Powers Act, as well as violating North Korean sanctions.

According to the New York Times, about $5 million was paid as part of a settlement between the U.S. Treasury Department and a civil party. The Justice Department received the remainder, which was the largest payment in department history related to North Korean sanctions.

According to the Justice Department, BAT announced in 2007 in a statement in a newspaper that it no longer sold tobacco to North Korea. The DOJ said BAT did business with a third-party company, while BATMS was in charge of all relevant operations.

BAT and BATMS received $418 million between 2007 and 2017 through a third-party Singaporean company that accepted payments from North Korean entities, and then transferred the money to other companies.

The National Security Division of the Justice Department’s Assistant Attorney General Matthew G. Olsen said, “British American Tobacco (BAT) and its subsidiary engaged an elaborate scheme to circumvent U.S. sanctions and sell tobacco products in North Korea. This allowed funds to flow illegally into the Democratic People’s Republic of Korea’s coffers.”

Jack Bowles said, “On behalf of BAT, I deeply regret the misconduct that resulted from historic business activities which led to these settlements.” “[We] admit that we did not meet the highest standards expected of us,” Jack Bowles said.

The authorities stated that about $74 million worth of financial transactions took place through U.S. banks. A North Korean banker, along with two Chinese nationals, procured 310 transactions to purchase leaf tobacco on behalf of the state-owned North Korean cigarette manufacturer. The DOJ stated that the North Korean military owned one of the companies, which resulted in a profit for the manufacturers of over $700 million.

North Korea is believed to have received up to a 20-fold return on its investment in smuggled cigarettes, which helped finance the country’s nuclear weapons program.

The U.S. Department of State has announced a reward of $5 million for information that leads to the capture of Sim Hyon Sop, a 39-year-old North Korean defendant. Also, the Chinese facilitators’ Qin Guoming and Han Linlin of Liaoning Province, each aged 60 and 41, will receive $500,000 in compensation.

If arrested, the defendants could face a maximum of 30 years imprisonment for bank fraud.