BAT Admits Violations in Selling Products to North Korea, Agrees to Pay More Than $600 Million in Fi

Today’s news, April 26: According to foreign media reports, court documents and press statements released on Tuesday show that a subsidiary of a century-old London-headquartered tobacco company admitted to violating U.S. sanctions and the Bank Secrecy Act by selling and manufacturing products in North Korea. 

British American Tobacco (BAT) admitted to evading prohibitions on doing business with the Democratic People’s Republic of Korea, a country sanctioned for producing weapons of mass destruction, and causing U.S. banks to unknowingly process hundreds of millions of dollars in its profits. 

The company announced that BAT had reached a deferred prosecution agreement with the federal government—meaning the charges will ultimately be dismissed if BAT continues to comply with the law—but the company will still pay a fine of $635,241,338. 

A press release disclosed that an indirect Singapore-based subsidiary of the company pleaded guilty to three federal charges, including conspiracy to commit bank fraud and other North Korea-related offenses.  

Matt Olsen, Assistant Attorney General for the Justice Department’s National Security Division, said this was the largest North Korea sanctions-related case in U.S. history.

According to criminal filings submitted to federal court in Washington, D.C., from 2009 to 2017, BAT and its subsidiaries maintained control over the joint venture they had established with a North Korean tobacco company, even though a 2007 announcement had indicated that they had sold all equity in the company in order to comply with international law. 

To make the scheme permanent, the companies admitted to building a global network of front companies and financial institutions to ship goods and supplies into North Korea while extracting funds out of the country.

Although BAT claimed it was no longer working with the North Korean tobacco company, court documents state that it still retained significant influence over the business and continued to profit from sales in North Korea through shell companies and unnamed intermediaries.

U.S. officials also said that, before 2017, British American Tobacco exported tobacco to the North Korean embassy in Singapore.

The charging documents show that three witnesses told investigators about cooperation between British American Tobacco, its Singapore subsidiary, and North Korea. One person told prosecutors that the company continued to provide all the raw materials needed to manufacture tobacco products. 

Another accused British American Tobacco of creating the appearance of distancing itself from its North Korean business partner while continuing to profit from the relationship. 

BAT Chief Executive Jack Bowles said in a statement on Tuesday: “We deeply regret the misconduct in the historical business activities that gave rise to these settlements, and we acknowledge that we fell short of the high standards rightly expected of us. Maintaining rigorous compliance and ethical standards has been, and remains, BAT’s top priority. In recent years, we have transformed our compliance and ethics program, including sanctions, anti-bribery, anti-corruption, and anti-money laundering.”

The Justice Department said BAT has remediated certain deficiencies in its corporate monitoring systems and will report to the department for a period of time to ensure compliance with the law.

Also on Tuesday, the Justice Department unsealed indictments against four people accused of helping facilitate the illegal sale of tobacco products in North Korea. According to the charging documents, North Korean financier Sim Hyon-Sop, Jin Guanghua, and Chinese nationals Qin Guoming and Han Linli participated in an illegal scheme to purchase materials needed to manufacture and subsequently sell tobacco products.