So, the DOJ lays out the overall picture:
Department of Justice
Office of Public Affairs
FOR IMMEDIATE RELEASE
Tuesday, April 25, 2023
United States Obtains $629 Million Settlement with British American Tobacco to Resolve Illegal Sales to North Korea, Charges Facilitators in Illicit Tobacco Trade
Cases Part of Greater Disruption Effort to Combat Funding of North Korean Nuclear Program and Counter Nation-State Threats
British American Tobacco (BAT) and its subsidiary, BAT Marketing Singapore (BATMS), one of the world’s largest manufacturers of tobacco products based in the United Kingdom, has agreed to pay combined penalties of more than $629 million to resolve bank fraud and sanctions violations charges with U.S. authorities, arising out of the companies’ scheme to do business in North Korea through a third-party company in Singapore, in violation of the bank fraud statute and the International Emergency Economic Powers Act (IEEPA). Separately, charges were unsealed today in the District of Columbia against a North Korean banker and Chinese facilitators for their roles in facilitating the illicit sale of tobacco products in North Korea.
According to court documents, BATMS pleaded guilty to a criminal information filed in the District of Columbia charging BAT and BATMS with conspiracy to commit bank fraud and conspiracy to violate IEEPA. BAT entered into a deferred prosecution agreement (DPA) related to the same charges.
Specifically, in 2007, BAT spun off its North Korea sales to a third-party company, issuing a press statement that it was no longer involved in North Korea tobacco sales. In reality, BAT continued to do business in North Korea through the third-party company and BATMS maintained control over all relevant aspects of the North Korean business. Between 2007 and 2017, BAT and BATMS ran the payments for the tobacco sold to North Korean entities through the third-party company, resulting in approximately $418 million of U.S. dollar cash and correspondent banking transactions from North Korea to the third-party company in Singapore – money that was then passed on to BATMS and BAT. To make these payments, North Korean purchasers used front companies so that U.S. banks – which processed the transactions – would not know about the connection to North Korea. Pursuant to the DPA and plea agreement, BAT and BATMS will pay a total of $629 million in penalties and fines.
“British American Tobacco and its subsidiary engaged in an elaborate scheme to circumvent U.S. sanctions and sell tobacco products to North Korea, allowing funds to illegally flow into the coffers of the Democratic People’s Republic of Korea (DPRK),” said Assistant Attorney General Matthew G. Olsen of the Justice Department’s National Security Division. “Today’s action, which involves the largest North Korean sanctions penalty in the history of the Justice Department, should serve as a clear warning to companies everywhere about the costs and consequences of violating U.S. sanctions.”
Today, the Department of the Treasury also announced a civil enforcement action against BAT and BATMS.
“Companies that seek to profit from circumventing sanctions by obscuring their involvement will be discovered and will pay a price,” said Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson. “For years, BAT partnered with North Korea to establish and operate a cigarette manufacturing business and relied on financial facilitators linked to North Korea’s weapons of mass destruction proliferation network in the process of enriching itself. Firms that deal with blocked persons, even indirectly, will be held accountable for actions which undermine the integrity of the U.S. financial system.”
Separately today, a federal court in the District of Columbia unsealed charges against a North Korean banker, Sim Hyon-Sop, 39, and Chinese facilitators, Qin Guoming, 60, and Han Linlin, 41, both of Liaoning Province, in connection with a multi-year scheme to facilitate the sale of tobacco to North Korea.
“The United States is steadfast in its commitment to enforcing sanctions and withholding revenue for dictator Kim Jong-un,” said U.S. Attorney Matthew M. Graves for the District of Columbia. “The charges unsealed today illustrate that the Department of Justice will hold North Korean facilitators accountable for their illegal efforts to prop up the North Korean regime and assist it in obtaining funds to develop nuclear weapons.”
According to court documents, between 2009 and 2019, the defendants engaged in a scheme to purchase leaf tobacco for North Korean state-owned cigarette manufacturers and used front companies and false documentation to cause U.S. financial institutions to process at least 310 transactions worth approximately $74 million that they otherwise would have frozen, blocked, investigated or declined, had they known the transactions were connected to trade with North Korea. The transactions resulted in an estimated up to nearly $700 million in revenue for the North Korean manufacturers, one of which was owned by the North Korean military.
As alleged in the indictment, cigarette trafficking, including in counterfeit cigarettes, generates significant revenue for advancing North Korea’s Weapons of Mass Destruction (WMD) programs, including its nuclear weapons, which North Korea has been developing since at least 2006. Counterfeit cigarettes are a major source of income to the North Korean regime, as smuggled tobacco products are estimated to garner revenue of up to $20 on every $1 spent in cost.
In conjunction with today’s announcement, the U.S. Department of State is announcing a reward of $5 million for defendant Sim, and a reward of $500,000 for defendants Qin and Han, for information leading to the capture of these three charged defendants. On April 24, the Department of the Treasury designated defendant Sim as a Specially Designated National, preventing him from accessing the U.S. banking system.
“The FBI remains steadfast in its commitment to investigate North Korea’s evasion of sanctions placed on its government,” said Assistant Director Suzanne Turner of the FBI’s Counterintelligence Division. “This illegal conduct and the levied penalties show how serious of an offense it is to assist the North Korean regime to the detriment of the international community. To those contemplating similar actions, be forewarned: the full force of the FBI and its federal law enforcement partners will find you.”
If convicted, the defendants face a maximum statutory penalty of 30 years in prison for bank fraud. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.
The FBI Phoenix Field Office handled both investigations, and HSI Colorado partnered in the investigation on the individuals. The Justice Department’s Office of International Affairs provided valuable assistance.
Assistant U.S. Attorney Karen P. Seifert, with assistance from Assistant U.S. Attorney Steven Wasserman, Paralegal Specialists Brian Rickers and Paralegal Specialist Jorge Casillas for the District of Columbia, is prosecuting the cases. Trial Attorneys Beau Barnes and Emma Ellenrieder of the National Security Division’s Counterintelligence and Export Control Section partnered on these matters.
This case is part of a larger Justice Department strategy for countering nation-state threats, including the ongoing efforts of North Korea to evade sanctions and use the U.S. financial system to engage in illicit trafficking. Trial Attorney David Recker, former Assistant U.S. Attorney Michael Grady, and former FBI Special Agent David F. Williams, former FBI Special Agent Joy Gallante and former FBI Intelligence Analyst Nick Carlsen all participated in prior phases of the multi-year investigation.
An indictment is merely an allegation. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.U.S. Department of Justice Press Release
For OFAC’s part (they got the overwhelming bulk of the civil penalty), they issued the following notice on its Recent Actions page:
Settlement Agreement between the U.S. Department of the Treasury’s Office of Foreign Assets Control and British American Tobacco p.l.c.
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) today announced a $508,612,492 settlement with British American Tobacco p.l.c. (“BAT”). BAT, a London, England-headquartered tobacco company, has agreed to settle its potential civil liability for apparent violations of the Weapons of Mass Destruction Proliferators Sanctions Regulations (WMDPSR) and the North Korea Sanctions Regulations (NKSR). The apparent violation of the WMDPSR arose from BAT’s formation of a conspiracy to remit approximately $250 million in payments from a North Korean joint venture, through bank accounts controlled by blocked North Korean banks, to BAT’s Singaporean subsidiary – in a manner that involved U.S. banks in clearing the transactions – between 2009 and 2016. The apparent violations of the NKSR arose from BAT’s Singaporean subsidiary’s use of the U.S. financial system to receive payments for its exports of tobacco to the North Korean Embassy in Singapore. This settlement amount reflects OFAC’s determination that BAT’s conduct was egregious and not voluntarily disclosedOFAC Notice
and the following enforcement information document:
and the settlement agreement:
OFAC – Notice, Enforcement Information, Settlement
DOJ – Press Release, Indictments (BAT, Sim et al.), Wanted Posters (Han, Qin, Sim)
Categories: Civil Monetary Penalties Department of Justice (DOJ) Updates Enforcement Actions Indictments and Arrests North Korea (DPRK) Sanctions OFAC Updates Sanctions Lists
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