The Office of Foreign Assets Control of the US Department of the Treasury has announced a $332,500 settlement with Godfrey Phillips India Limited (“GPI”), a tobacco manufacturer based in Mumbai, India. The settlement resolves an investigation into GPI’s potential civil liability for five apparent violations of the North Korea Sanctions Regulations (“NKSR”).
According to the Enforcement Release, GPI knowingly shipped 79,200 kg of tobacco to the Democratic People’s Republic of Korea through a Thai intermediary, listing China as the final destination. Payment for the tobacco in US dollars was made by intermediaries organized in Hong Kong; they made five payments totaling approximately $369,228 in July and August 2017. Ultimately, three US financial institutions cleared four of the payments for a non-US bank in India, and a US branch bank in India processed the fifth payment. The tobacco was shipped in 2017 from India to Dalian, China, and onward shipped thence to the DPRK.
GPI’s action directing the Hong Kong Intermediaries to remit US dollar payments appears to have violated §§ 510.212 of the NKSR, as it caused the US correspondent banks and the foreign branch of a US bank to export financial services or facilitate the export of tobacco to the DPRK, in apparent violation of NKSR §§ 510.206 and 510.211.
In assessing the penalty, OFAC deemed the apparent violations to be non-egregious. OFAC also determined that GPI had not voluntarily self-disclosed the apparent violations. OFAC viewed as aggravating factors GPI’s reckless conduct – finding that it had failed to exercise caution or care for US sanctions laws and regulations – and the fact that several GPI managers had actual knowledge that the tobacco was being exported to the DPRK. At the same time, OFAC considered as mitigating factors GPI’s clean record of penalties and violations for the preceding five years, the company’s cooperation throughout the course of the investigation, and its subsequent implementation of a sanctions compliance policy, procedures and framework that includes screening, recordkeeping, and know your customer components.
In consideration of these factors, OFAC agreed to settle GPI’s potential civil liability for $332,500, well below the applicable base civil monetary penalty of $475,000.