British American Tobacco to pay $635 million for breaching North Korea sanctions

British American Tobacco is to pay $635m (£512m) plus interest to US authorities after a subsidiary admitted selling cigarettes to North Korea in breach of sanctions.

US authorities said the settlement was linked to BAT activity in North Korea between 2007 and 2017.

BAT chief Jack Bowles said “we deeply regret the misconduct”.

The US has imposed severe sanctions against North Korea due to its nuclear and ballistic missile activities.

Tuesday’s settlement was between BAT and the US Department of Justice (DOJ) and the Treasury Department’s Office for the Control of Foreign Assets.

BAT is one of the world’s largest multinational tobacco companies and one of the UK’s 10 largest companies. It owns major cigarette brands including Lucky Strike, Dunhill and Pall Mall.

In a statement, BAT said it had entered into a “deferred prosecution agreement with the DOJ and a civil settlement agreement with OFAC, and an indirect BAT subsidiary in Singapore has entered into a plea agreement with the DOJ”.

The DOJ said BAT had also conspired to defraud financial institutions to get them to process transactions on behalf of North Korean entities.

North Korea’s leader Kim Jong Un is known to be a heavy smoker. Last year, the US tried to get the UN Security Council to ban tobacco exports to North Korea, but this was vetoed by Russia and China.

At a briefing on Tuesday, DOJ Assistant Attorney General Matthew Olsen said the settlement was “the culmination of a lengthy investigation”, describing it as “the single largest North Korean sanctions penalty in the history of the Justice Department”.

He said BAT was engaged in an “elaborate scheme to circumvent US sanctions and sell tobacco products to North Korea” via subsidiaries.

“Between 2007 and 2017, these third-party companies sold tobacco products to North Korea and received approximately $428 million.”

Charges were also revealed against the North Korean banker Sim Hyon-Sop (39) and the Chinese facilitators Qin Guoming (60) and Han Linlin (41) for facilitating the sale of tobacco to North Korea.

A $5m (£4.4m) reward was offered for any information leading to the arrest or conviction of Mr Sim, and $500,000 (£402,905) rewards for each of the other two suspects.

They were accused of buying leaf tobacco for North Korean state-owned cigarette makers and falsifying documents to trick US banks into processing $74 million worth of transactions. North Korean manufacturers including one owned by the military earned about $700 million thanks to these deals.

Pyongyang has for years faced multiple rounds of tough sanctions in response to ballistic missile launches and nuclear tests.

However, that has not deterred Kim from continuing to develop the country’s weapons program.