Episode 273 — British American Tobacco’s $629 Settlement for Evasion of North Korean Sanctions

The Justice Department warned  companies that sanctions enforcement is the “new FCPA.”  Recently, DOJ delivered its first salvo to back up its message.

As part of a broad effort to prosecute funding of North Korea’s nuclear program, DOJ and the Office of Foreign Assets Control (“OFAC”) announced a joint settlement with British American Tobacco and its Asian marketing subsidiary (“BAT”), under which BAT agreed to pay combined penalties of $629 million, stemming from its scheme to conduct business in North Korea through a third-party in Singapore.

In another action, DOJ unsealed criminal charges against a North Korean banker and Chinese facilitators, both from the Liaoning Province, for their roles in the illicit sale of tobacco products in North Korea.

BAT’s Singapore subsidiary plead guilty to a one-count Information charging BAT and its subsidiary with conspiracy to commit bank fraud and to violate sanctions.  BAT entered into a deferred prosecution agreement (“DPA”).

OFAC announced a separate civil settlement with BAT under which BAT will pay a civil penalty of $508 million, the largest fine against a non-financial institution in OFAC’s history. OFAC cited the fact that BAT and its subsidiary “willfully conspired” to transfer hundreds of millions of dollars through U.S. banks and were “aware” that the transfers were blocked by U.S. sanctions.  BAT did not voluntarily disclose the conduct and OFAC characterized BAT’s violations as “egregious.”

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