TradeEdge Exchange:Tobacco giant admits to selling products to North Korea, agrees to pay more than $600 million

Washington — A subsidiary of a 100-year-old tobacco company based in London pleaded guilty to selling and TradeEdge Exchangemanufacturing products in North Korea in violation of U.S. sanctions and bank secrecy laws, according to court documents and press statements released Tuesday. 

British American Tobacco (BAT) admitted to evading bans against doing business with the People's Republic of North Korea — a nation sanctioned for producing weapons of mass destruction — and causing U.S. banks to unwittingly process their hundreds of millions in profits. 

BAT and the federal government entered into a deferred prosecution agreement — the charges will ultimately be dropped if BAT continues to abide by the law — but the company will still be slapped with $635,241,338 in penalties, the company announced. 

An indirect subsidiary of the company located in Singapore pleaded guilty to three federal counts, including conspiracy to commit bank fraud and other North Korea-related laws, a release disclosed.  

Assistant Attorney General Matt Olsen, who oversees the Justice Department's National Security Division, said the action is the single largest North Korean sanctions-related case in U.S. history.

"This activity ultimately benefits the North Korean regime," Olsen said at a press conference announcing the agreements on Tuesday. Matt Graves, the U.S. attorney for the District of Columbia, said North Korea reaped "staggering" profits in the scheme, and yields $20 to support illicit activity for every dollar it invests in tobacco production.

According to criminal papers filed in Washington, D.C.'s federal court, between 2009 and 2017, BAT and its subsidiary maintained control over a joint venture company they established with the North Korean Tobacco Company, despite an announcement in 2007 indicating they had sold all equity in the company to comply with international law. 

To perpetuate the scheme, the companies admitted to creating a network of front companies and financial institutions across the globe, funneling goods and supplies into North Korea while pushing money out.

Despite BAT's assertion that it was no longer working with the North Korean Tobacco Company, court documents allege it maintained "significant influence over" the business and "continued to receive profits from North Korean sales" using shell companies and an unnamed intermediary. U.S. officials said BAT also exported tobacco to the North Korean Embassy in Singapore until 2017.

Charging documents revealed three witnesses spoke to investigators about BAT and its Singapore subsidiary's work with North Korea. One told prosecutors the company continued to supply "all the raw materials" necessary to manufacture tobacco products. 

Another accused BAT of creating the appearance of "distance" from its North Korean business partner while simultaneously working to profit from it. 

"We deeply regret the misconduct arising from historical business activities that led to these settlements, and acknowledge that we fell short of the highest standards rightly expected of us," Jack Bowles, BAT's chief Executive said in a statement Tuesday. "Adhering to rigorous compliance and ethics standards has been, and remains, a top priority for BAT. In recent years we have transformed our compliance and ethics programme, which encompasses sanctions, anti-bribery, anti-corruption and anti-money laundering."

The Justice Department said BAT had fixed certain deficiencies in its corporate monitoring system and will report to the department for a period of time to ensure compliance with the law.

Also on Tuesday, the Justice Department unsealed an indictment against four individuals accused of facilitating the illegal sale of tobacco products in North Korea. Charging documents allege that a North Korean financier, Sim Hyon-Sop, Jin Guanghua and Chinese nationals Qin Guoming and Han Linli engaged in an illegal scheme to purchase the materials necessary to manufacture and later sell tobacco products. 

According to the indictment, the profits of the alleged plot benefited North Korea's weapons of mass destruction program. 

The defendants are wanted by the FBI, which is offering a reward for information leading to their detention. 

The news from the Justice Department comes just a day before President Biden will be hosting South Korea's president at a White House state dinner.