Company officials admitted to selling tobacco through a North Korean government-connected business. Image: Supplied.
A subsidiary of one of the world's largest tobacco companies pleaded guilty in a D.C. courtroom Tuesday morning to conspiring to commit bank fraud and violating US sanctions by selling tobacco products to North Korea and illegally concealing those sales so American banks would process the transactions.
British American Tobacco, a London-based company with a subsidiary based in Singapore, must pay $630 million in fines to the US government.
Company officials admitted to selling tobacco through a North Korean government-connected business between 2009 and 2017 and receiving payments in US dollars.
The United States has imposed strict sanctions against North Korea because of that country's nuclear weapons development program, including prohibiting American banks from processing transactions that originate in North Korea.
To evade this prohibition, according to court documents, British American Tobacco and co-conspirators "enacted an elaborate scheme of utilizing a network of front companies located throughout the world" to conceal the origin of the payments.
"This is the single largest North Korean sanctions penalty in the history of the Department of Justice," Matthew G. Olsen, who heads the Justice Department's national security division, said at a news conference Tuesday afternoon.
The documents lay out how the company allegedly tried to deceive banks and regulators by issuing a statement in 2007 that said it would no longer be doing business in North Korea and had "agreed in principle" to sell its share of a cigarette company in North Korea. But, in reality, the Singapore-based subsidiary of British American Tobacco maintained significant control over the North Korea operations, the documents state.
"During the relevant time period, the U.S. banks unknowingly processed correspondent banking transactions for U.S. dollar transactions originating in North Korea," a charging document unsealed Tuesday said. "Which they would not have processed had they known the true nature of the transaction."
British American Tobacco said in a statement Tuesday that it ceased all business in North Korea in 2017.
"We deeply regret the misconduct arising from historical business activities that led to these settlements," the statement said.
"In recent years we have transformed our compliance and ethics programme, which encompasses sanctions, anti-bribery, anti-corruption and anti-money laundering," Jack Bowles, the company's chief executive, said in the statement.
At the plea agreement and sentencing hearing Tuesday morning, U.S. District Judge Beryl A. Howell said that while British American Tobacco terminated its business with North Korea in 2017, before U.S. officials launched their investigation, the company failed to properly disclose the violations.
Howell said British American Tobacco is being "appropriately punished for that."
Separately, a federal judge in D.C. unsealed charges against a North Korean banker and two Chinese facilitators for their alleged involvement in a separate multiyear scheme to facilitate tobacco sales to North Korea.
According to the Justice Department, the three men purchased leaf tobacco for North Korean-owned entities and used front companies and fake documentation so that U.S. banks would process more than 310 transactions, worth about $74 million, between 2009 and 2019. Had the banks known the payments originated in North Korea, they would have either blocked, frozen or investigated them, officials said.
The suspects - Sim Hyon-Sop of North Korea and Qin Guoming and Han Linlin of China - have not been arrested. The State Department announced a reward of $5 million for information that leads to the capture of Sim and $500,000 for information that leads to the captures of Qin and Han.
"If you try to circumvent our sanctions, there will be serious consequences," said Brian E. Nelson, undersecretary of the treasury for terrorism and financial intelligence.
The Washington Post