Background

The Office of Foreign Assets Control reports that a paper products manufacturer located in Indonesia has agreed to pay $1.02 million to settle its potential civil liability for 28 apparent violations that arose from its exportation of cigarette paper to North Korea.

According to OFAC, the company exported cigarette paper to entities located in or doing business on behalf of North Korea, including an intermediary in China that procured cigarette paper from the company on behalf of a blocked North Korean entity while it was operating under an alias. The Indonesian company initially referenced North Korean entities on its transactional documents but at the request of its customers replaced such references with the names of intermediaries in third countries, including on invoices, packing lists, and bills of lading. The company directed payments for these exports to its U.S. dollar bank account at a non-U.S. bank, which caused U.S. banks to clear wire transfers related to these shipments in apparent violation of the North Korea Sanctions Regulations.

The statutory maximum civil monetary penalty applicable in this matter is $8.6 million and the base penalty amount (given that the alleged violations were deemed non-egregious) is $1.27 million. Aggravating factors include that company management had actual knowledge of the conduct at issue. Mitigating factors include the company’s cooperation with OFAC’s investigation and remedial measures, including implementing a new sanctions compliance program that includes procurement of sanctions screening services from a third-party provider, a formal written export control and sanctions policy that identifies red flags, and a know-your-customer process that provides for escalation and risk-based review.

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