Godfrey Phillips India Limited OFAC Settlement: $332.5K

The conduct began on November 27, 2015, when a GPI vice president made contact with a representative for a Thailand-based company (the "Thai Intermediary"), which served as an intermediary for a DPRK tobacco company (the "DPRK Customer"). GPI then exported free samples of tobacco and cigarettes to the DPRK Customer in the DPRK via courier on at least five occasions between 2015 and 2017.

In late 2016, GPI personnel began emailing about a prospective bulk order from the DPRK Customer. A vice president, a manager, and an assistant manager discussed the logistics of exporting a shipping container of tobacco to the DPRK, including whether they could do so directly. The GPI assistant manager wrote: "right now the question is whether GPI as a company is willing to write DPR Korea on the BL [bill of lading], like other companies are doing or not. If we can write DPR Korea consignee on the BL then it is easy otherwise we will need to take the help of [the Thai Intermediary] to help us make the shipment from Dalian, China." The team ultimately decided not to include the DPRK Customer or the DPRK in the trade documentation, instead listing the Thai Intermediary as the customer and China as the destination.

The Thai Intermediary, acting on behalf of the DPRK Customer, then placed orders totaling 79,200 kg (approximately 174,600 lb) of tobacco with GPI. GPI issued three invoices to the Thai Intermediary and requested payment in USD to GPI's bank account at a non-U.S. bank in India or the India-based branch of a U.S. bank. Four Hong Kong-organized intermediaries (the "Hong Kong Intermediaries") subsequently made five payments totaling roughly $369,228 to GPI in July and August 2017. The Hong Kong Intermediaries sent four of these USD payments to the non-U.S. bank, causing three U.S. financial institutions to clear the payments, and the final payment to the India-based branch of a U.S. bank. GPI then shipped the tobacco from India to Dalian, China in September and October 2017; the tobacco was then shipped onward to the DPRK by the Thai Intermediary.

By directing the Hong Kong Intermediaries to remit payments in USD, GPI caused U.S. correspondent banks that processed payments, as well as the foreign branch of a U.S. bank, to export financial services to or otherwise facilitate the exportation of tobacco to the DPRK. Accordingly, GPI appears to have violated § 510.212 of the NKSR, 31 C.F.R. part 510, when it caused U.S. banks to apparently violate §§ 510.206 and 510.211 of the NKSR.

The statutory maximum civil monetary penalty applicable in this matter is $1,782,895. OFAC determined that GPI did not voluntarily self-disclose the apparent violations and that the apparent violations constitute a non-egregious case. Accordingly, under OFAC's Economic Sanctions Enforcement Guidelines, the base civil monetary penalty amount applicable in this matter is $475,000. The settlement amount of $332,500 reflects OFAC's consideration of the General Factors under the Enforcement Guidelines.

This action highlights how non-U.S. persons engaged in business with sanctioned actors and jurisdictions can violate U.S. sanctions regulations by causing U.S. persons to engage in prohibited transactions. These circumstances can arise when financial transactions that pertain to commercial activity with an OFAC-sanctioned country, region, or person are processed through or involve U.S. financial institutions, including foreign branches of U.S. financial institutions. Involving a U.S. financial institution in such commercial activity may violate OFAC regulations by causing U.S. persons to inadvertently export financial services, or facilitate the export of goods, to North Korea, or other comprehensively sanctioned jurisdiction.

The absence of a compliance program that accounts for potential U.S. sanctions risks may increase the likelihood of such a violation. Utilizing the U.S. financial system while exporting valued goods such as tobacco to North Korea or other comprehensively sanctioned jurisdiction may increase a person's exposure to OFAC penalties given the harm such conduct causes to U.S. foreign policy and national security objectives.

This action further highlights the deceptive practices DPRK entities use to evade U.S. and international sanctions and acquire revenue-generating goods, such as by employing intermediaries in various countries to coordinate shipping and make payments.

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