British American Tobacco has agreed to pay more than $635 million in fines for selling cigarettes to North Korea through a Singapore broker in violation of US sanctions.
A small portion of the amount, about $5 million, was part of a civil settlement with the Treasury Department. The remainder, obtained and announced by the Justice Department on Tuesday, was the largest in that ministry’s history regarding sanctions against North Korea.
Although British American Tobacco said publicly in 2007 that it had agreed to sell its stake in a cigarette company it ran with a North Korean state-owned company, the London-based company and its Singaporean subsidiary continued to secretly run the venture through a third party party, an independent conglomerate based in Singapore, federal prosecutors said in a lawsuit this month.
North Korean clients paid that broker, who was not named in the filing, at least $415 million over about a decade through front companies, in some cases using U.S. banks, according to the court documents. The operation relied on “financial facilitators associated with North Korea’s weapons of mass destruction proliferation network,” Brian E. Nelson, the state secretary of the treasury for terrorism and financial intelligence, said in the Justice Department statement.
In 2016 and 2017, British American Tobacco’s Singapore subsidiary also received payments through U.S. banks or their foreign branches for cigarettes it sold to the North Korean embassy in Singapore, the Treasury Department said in a settlement agreement.
On Tuesday, British American Tobacco’s Singapore subsidiary pleaded guilty in federal court to conspiracy to commit bank fraud and to violate a 1977 law that allows the United States to seize foreign property under special circumstances. That law was used to impose sanctions on other countries after the attacks of September 11, 2001.
The settlement “should serve as a clear warning to companies around the world about the costs and consequences of violating U.S. sanctions,” Assistant Attorney General Matthew G. Olsen said in the Justice Department statement.
Jack Bowles, CEO of British American Tobacco, apologized in a separate statement for “misconduct arising from historic business activities that led to these settlements.” The company also said it ceased its business activities related to North Korea in September 2017.
A phone call to the company’s London headquarters for business hours on Wednesday went unanswered.
Separately, the same federal court on Tuesday heard charges against a North Korean banker and two Chinese nationals from a province that borders North Korea and includes a city known as a smuggler’s haven. Prosecutors have said the three men were part of a nearly $700 million scheme to buy leaf tobacco for state-owned cigarette companies in North Korea, one of which was owned by the military.
All three men are wanted by the FBI. The charges against them include bank fraud and money laundering, and the fraud charges are punishable by up to 30 years in prison.
The settlement with British American Tobacco is a victory for the Biden administration in a period of rising tensions with North Korea. The country has tested a number of missiles this year, including one it says is a solid-fuel intercontinental ballistic missile, a potentially significant advance that could make it more difficult to target its missiles. The United States has also accused North Korea of covertly shipping artillery shells to Russia to aid that country’s war effort in Ukraine.
Last year, the Biden administration imposed sanctions on several businessmen and companies in Asia, including Singapore, that it said supported the development of North Korea’s military and weapons program.
The settlement with British American Tobacco was announced during a week when South Korea’s President Yoon Suk Yeol visits Washington. His trip will include a state dinner and talks with US officials in which North Korea will certainly play a prominent role.
