UK Cigarette Manufacturer Settles Potential Liability for North Korean Sanctions Violations

A UK-based cigarette manufacturer settled potential civil liability for sanctions violations related to a scheme to export tobacco to North Korea, and causing U.S. financial institutions to process North Korean bank wire transfers.

In an Enforcement Release, OFAC stated that a manufacturer’s "top executives" approved a scheme whereby the manufacturer sold its stake in a joint venture involving a Singapore subsidiary and a North Korean company "due to concerns over its public association with North Korea." OFAC found that the purchase price of the stake was one Euro and the manufacturer then reacquired the subsidiary at a later date, again for one Euro, in order to "purposefully obscure its continued effective ownership and control over the Joint Venture." OFAC found that the North Korean company remitted USD payments that were owed by the joint venture through a "complex, multi-step process" involving several OFAC-designated companies in North Korea. OFAC concluded that the scheme ultimately caused U.S. financial institutions to process 228 payments in USD from the North Korea company to the Singapore-based trading group, totaling in $251,631,903.

OFAC added that the manufacturer continued its operations despite OFAC discovering correspondence indicating that the company's managers understood that U.S. restrictions may prohibit U.S. financial institutions from processing payments involving North Korea.

To settle the charges, the manufacturer agreed to pay a civil monetary penalty of $508,612,492. OFAC said that the settlement amount reflects the statutory maximum after determining the manufacturer’s apparent violations to be "egregious, and not voluntarily self-disclosed."