One of the largest manufacturers of cigarettes and tobacco products in the world – British American Tobacco (BAT) – for years circumvented sanctions against North Korea by continuing to do business with a local company and sell its products to Pyongyang. For its activities, which were also approved by the BAT central office, the tobacco manufacturer will receive a record fine in the history of such cases – $ 635 million. The Financial Times, which analyzed the open case materials, tells about the multi-million dollar scheme created by the greedy top management of BAT.
Employees of the company began to consider a bypass scheme only after the DPRK imposed tough sanctions on the part of the United States and the United Nations in 2017, although almost all financial relations with the rogue state were stopped at the end of the 2000s, when Pyongyang announced the development of nuclear weapons. The management of BAT's Singapore division was discussing with a representative of a local distributor how they could cover their tracks and not lose a customer. The BAT partner suggested that the use of "Northern" in the name of the buyer should be abandoned, writing simply "Embassy of Korea" on all invoices, but after discussions they went even further and renamed North Korea as the most abstract "Client".
The US Department of Justice, the US Office of Foreign Assets Control and the Treasury have revealed that for several years BAT not only continued to cooperate with the North Korean Ryugyong Corporation, but actually directly controlled all transactions with it. The manufacturer of Kent, Dunhill and Lucky Strike, through its distributor, supplied filters, tobacco and paper to North Korea for production. According to the materials of the case, the Singaporean British-American Tobacco Marketing regularly violated US and UN sanctions, direct deliveries to the North Korean embassy in Singapore alone are estimated by the US authorities at a total of $30 million. Moreover, the same unit received about $250 million through a simple scheme from sanctions North Korean banks.
“There is no other example of a Western multinational corporation interacting with North Koreans on such a scale and in such a sustainable way, although such risks are typical for tobacco companies,” Hugh Griffiths, a former UN sanctions coordinator, said in a conversation with the publication.
The money flowed as follows: the North Korean sanctioned banks sent payments to a Chinese bank, which, through an American correspondent bank, sent a similar amount to the accounts of the Singapore office of BAT, and from there the proceeds went to the American accounts of BAT, so the American authorities did not actually see that the money come from North Korea. The publication also claims that the central office of BAT in London could not have been unaware of the connections of its Singaporean division with a distributor who continued to cooperate with the North Korean company. Moreover, BAT's central office not only supported the decision to keep the relationship with the distributor, but also "actually controlled it" through a joint venture for the production of cigarettes inside North Korea, which one of the managers of the central office confirmed in correspondence with the Singapore office.
The tobacco giant had to finally abandon cooperation with the DPRK just in 2017, when a new stage of sanctions against Pyongyang was being considered, but BAT received money and supplied its products until the end of 2016, while in 2017 the company was simply trying to cover its tracks. Griffiths notes that this case will be instructive for other companies that continue to take risks for the sake of profit, because it "shows that such greed is too expensive."