BAT fined $629M for North Korea sanction breaches
April 28, 2023
Cigarette maker British American Tobacco (BAT) has paid penalties totalling more than $629 million (£503.5 million) to US authorities to settle charges related to breaches of sanctions against North Korea.
The UK-listed company was accused by US authorities of “bank fraud and sanctions violations” related to doing business in North Korea, according to a press release from the US Department of Justice (DoJ).
The DoJ said BAT had spun off sales of tobacco in North Korea to a separate company in 2007 but continued to do business with it through a Singapore-based subsidiary. Payments worth $418 million were processed through the third party to BAT and its Singapore unit.
The DoJ said: “To make these payments, North Korean purchasers used front companies so that US banks – which processed the transactions – would not know about the connection to North Korea.”
Matthew Olsen, assistant attorney general of the DoJ’s National Security Division, described the arrangement as “an elaborate scheme to circumvent US sanctions and sell tobacco products to North Korea, allowing funds to illegally flow into the coffers of the Democratic People’s Republic of Korea”.
“Today’s action… should serve as a clear warning to companies everywhere about the costs and consequences of violating US sanctions,” Olsen added.
The penalties include more than $508 million paid to the Treasury Department’s Office of Foreign Assets Control (OFAC). The fine is the largest levied on a non-financial company, according to OFAC.
Although BAT was barred from commenting on the documents related to the authorities’ investigations, chief executive Jack Bowles said: “We deeply regret the misconduct arising from historical business activities that led to these settlements, and acknowledge that we fell short of the highest standards rightly expected of us.”
Bowles added that BAT had “transformed our compliance and ethics programme, which encompasses sanctions, anti-bribery, anti-corruption and anti-money laundering”.
“The significant steps already taken, as well as the continued refinements to the programme that will be made as part of these settlements, will leave us even better equipped to lead a responsible and sustainable business,” he added.
Last Updated: 28 April 2023