A company headquartered in England has agreed to pay combined penalties of more than $629 million to settle charges arising out of a scheme to do business in North Korea through a third-party company in Singapore. The company has also committed to take a wide range of measures to promote future compliance, including conducting regular risk assessments, implementing written policies and procedures, establishing effective internal controls, and employing appropriate testing or audit procedures.
According to the Office of Foreign Assets Control, the apparent violations arose from the company’s formation of a conspiracy to export cigarettes to North Korea and receive payment through the U.S. financial system. The company thus caused U.S. financial institutions to process wire transfers that contained the blocked property interests of sanctioned North Korean banks and to export financial services and facilitate the exportation of products to North Korea.
OFAC is imposing the statutory maximum civil monetary penalty applicable in this case – $508.6 million – something it does not often do. The apparent violations were not voluntarily self-disclosed and constitute an egregious case, OFAC explains, and there were a number of aggravating factors, including the willful nature of the conspiracy, active concealment of violative conduct, ignored requests for information, and substantial monetary benefits to North Korea, which has been shown to use revenues from cigarette trafficking to advance its weapons of mass destruction programs. The company’s lack of penalties in recent years and its cooperation with OFAC’s investigation apparently warranted no mitigation.
OFAC states that this case shows that creating the illusion of distance between a firm and apparently violative conduct does not shield that firm from liability. It further demonstrates that, without a culture of compliance driven by senior management and attendant policies and controls, firms increase the risk that they may engage in apparently violative conduct.
To help avoid these types of problems, OFAC recommends that firms reevaluate their sanctions risk exposure as regulatory developments occur. Particularly for multinational corporations, employing a risk assessment in a manner and with a frequency that adequately accounts for potential risks may help identify and halt apparently violative conduct early or before it happens.
For more information on making sure your company complies with U.S. sanctions, please contact attorney Kristine Pirnia via email.
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