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Rule of LawNorth Korea

Tobacco giant to pay US fines over North Korea dealings

April 26, 2023

British American Tobacco is being hit with a historic penalty for violating US sanctions on North Korea. US officials said the company was aware it was breaking the rules.

https://p.dw.com/p/4QYgT
A packet of cigarettes
US officials say smuggled cigarettes are used to fund North Korea's nuclear and weapons programs Image: Martin Rickett/PA Wire/empics/picture alliance

British American Tobacco (BAT), one of the world's largest tobacco companies, has agreed to pay more than $629 million (€571.3 million) to settle charges that it did illegal business with North Korea in violation of US sanctions, the Justice Department said on Tuesday.

The company's Singapore subsidiary also pleaded guilty to conspiring to commit bank fraud and violating sanctions.

The case marks the largest North Korean sanctions penalty in the history of the Justice Department, said Assistant Attorney General Matthew Olsen.

BAT knowingly violated sanctions, US claims

The case concerned sales from 2007 through 2017, during which a third-party company operating under the control of a BAT subsidiary sold more than $400 million in tobacco products to North Korea.

US officials said the company knew it was violating sanctions placed on Pyongyang over its development of nuclear weapons. 

In 2007, BAT's Standing Committee, including top company executives in London, approved the scheme "due to concerns over its public association with North Korea and difficulty remitting profits out of the country," the US Treasury said in a statement.

Despite moving to pull out of the setup in 2016 due to increasing international sanctions on Pyongyang, BAT continued to sell cigarettes to North Korea's embassy in Singapore in 2017.

BAT has since taken steps to improve its business practices and ethics, the company said. BAT's brands include Lucky Strike, Kent, and Pall Mall.

British American Tobacco agreed in 2017 to take over Reynolds American Inc., which owned brands like Newport and Camel, creating the world's largest publicly traded tobacco company.

US charges filed over Pyongyang cigarette trafficking scheme

In a separate development, US federal prosecutors announced charges against a North Korean banker and two Chinese facilitators for a cigarette trafficking scheme that raised money for Pyongyang's nuclear weapons program. The State Department has announced a reward for information leading to their arrest.

North Korea has been under stringent US and international sanctions for nearly two decades for its nuclear weapons program, but has continued to research and test more nuclear weapons while evading sanctions.

According to prosecutors, the BAT operation routed dollar payments from trade through US banks, masking the origins of the funds, and operated a web of front and shell companies to supply North Korean cigarette makers.

Did German research collaboration aid North Korea's military aims?

tg/wd (AFP, AP)