British American Tobacco (BAT) and its subsidiary, BAT Marketing Singapore (BATMS), one of the world’s largest tobacco product manufacturers, will pay more than $629 million in penalties to settle bank fraud and sanctions violation charges with US authorities. These charges stem from the companies’ scheme to conduct business in North Korea through a third-party company in Singapore, which violated the bank fraud statute as well as the International Emergency Economic Powers Act (IEEPA). Meanwhile, a North Korean banker and Chinese facilitators were charged in the District of Columbia for their roles in facilitating the illicit sale of tobacco products in North Korea.
BAT spun off its North Korean sales to a third-party company in 2007 and issued a press statement stating that it was no longer involved in North Korean tobacco sales. However, BAT continued to do business in North Korea through a third-party company and maintained control over all relevant aspects of North Korean business. BAT processed payments for tobacco sold to North Korean entities via a third-party company, resulting in approximately $415 million in US-dollar banking transactions from North Korea to the Singapore-based third-party company. This money was then distributed to BATMS and BAT. North Korean purchasers used front companies to make these payments so that US banks processing the transactions were unaware of the North Korean connection.
BATMS entered into a deferred prosecution agreement in connection with a criminal information charging BAT and BATMS with conspiracy to commit bank fraud and conspiracy to violate IEEPA.
“The United States remains committed to enforcing sanctions and withholding revenue from dictator Kim Jong-un,” US Attorney Matthew M. Graves said. “Today’s charges demonstrate 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.”
These entities have been held accountable for today’s action, which includes the largest settlement payment in the department’s history. “The FBI remains steadfast in its commitment to investigate North Korea’s evasion of sanctions imposed on its government,” said Assistant Director Suzanne Turner of the FBI’s Counterintelligence Division. “This illegal conduct, as well as the penalties imposed, demonstrate how serious it is to assist the North Korean regime to the detriment of the international community.” “Those considering similar actions should be warned: the full force of the FBI and its federal law enforcement partners will find you.”
In connection with a multi-year scheme to facilitate the sale of tobacco to North Korea, a federal judge in the District of Columbia unsealed charges against a North Korean banker, Sim Hyon-Sop, 50, and Chinese facilitators, Qin Guoming, 60, and Han Linlin, 41, both of Liaoning Province. Between 2009 and 2019, the defendants engaged in a scheme to purchase leaf tobacco for North Korean-owned entities, and they used front companies and false documentation to allow US financial institutions to process at least 310 transactions worth approximately $74 million that they would have otherwise frozen, blocked, investigated, or declined if they had known the transactions were related to trade with North Korea. The transactions generated an estimated $700 million in revenue for North Korean entities and, ultimately, the North Korean government.
In conjunction with today’s announcement, the US Department of State is offering a $5 million reward for defendant Sim and a $500,000 reward for defendants Qin and Han for information leading to their capture.
The Department of the Treasury also announced a civil enforcement action against BAT and BATMS. This case is part of a larger Department of Justice response to North Korea’s ongoing efforts to evade sanctions and engage in illicit trafficking through the US financial system.
