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UAE company admits to defrauding the US goverment, violating North Korean sanctions; agrees to pay $665,000

Department of Justice. (Scott "Skippy"/Flickr)
July 16, 2020

Essentra FZE Company Limited (“Essentra FZE”), a global supplier of cigarette products that is incorporated in the United Arab Emirates (“UAE”), has agreed to pay a $665,112 fine and enter into a deferred prosecution agreement with the Justice Department for conspiring to violate the International Emergency Economic Powers Act (“IEEPA”) and defrauding the United States in connection with evading sanctions on North Korea.  Today’s public filing against Essentra FZE is the first ever DOJ corporate enforcement action for violations of these regulations.  Essentra FZE has also entered into a settlement agreement with the Treasury Department’s Office of Foreign Assets Control (“OFAC”).

Assistant Attorney General John C. Demers for the Justice Department’s National Security Division, Acting U.S. Attorney Michael R. Sherwin of the District of Columbia, and Special Agent in Charge Jennifer C. Boone of the FBI’s Baltimore Field Office made the announcement.

In entering the deferred prosecution agreement, Essentra FZE admitted and accepted responsibility for its criminal conduct and to pay a fine.  Essentra FZE also agreed to implement rigorous internal controls and to cooperate fully with the Justice Department, including by reporting any criminal conduct by an employee.

“The sanctions the United States has imposed on the North Korean regime are of the utmost importance to the national security of our nation, and the enforcement of U.S. sanctions and related financial criminal laws is a major priority of the National Security Division” said Assistant Attorney General for National Security John C. Demers.  “Essentra FZE devised a criminal scheme to use a deceitful web of front companies and financial entities to manipulate U.S. banks into processing prohibited U.S. dollar transactions for the benefit of North Korea.  The company has now committed to working with our prosecutors to bring those individuals responsible for these acts to justice.”

“Essentra FZE undermined the integrity of our financial system and harmed our national security by deliberately providing North Korea with coveted access to the U.S. economy,” said Acting U.S. Attorney Sherwin.  “Foreign companies transacting through the U.S. financial system or overseas branches of U.S. banks must comply with U.S. sanctions or else face punishment.”

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“This is an important case as it demonstrates the FBI will not hesitate to hold businesses accountable for violating sanctions involving North Korea,” said Alan E. Kohler, Jr, Assistant Director of the FBI’s Counterintelligence Division. “We will aggressively go after enterprises using front companies, false documents, or other illegal methods to evade sanctions. We want North Korea and private industry to know that efforts to dodge our laws will never be tolerated as business as usual.”

“Today’s agreement shows that attempts to skirt U.S. sanctions, no matter how complicated the trail or how complex the scheme, will be discovered and met with serious consequences,” said Jennifer Boone, Special Agent in Charge of the FBI’s Baltimore Division. “I want to thank the FBI team. This result is a testament to their hard work.”

U.S. sanctions prevented correspondent banks in the United States and overseas branches of U.S. banks from processing wire transfers on behalf of customers located in North Korea. According to admissions and court documents, beginning in at least October 2017 and continuing until at least December 2018, Essentra FZE deceived banks in the U.S. and in the U.A.E. into processing transactions for a North Korean tobacco company.  Essentra FZE and its co-conspirators utilized financial cutouts and front companies to conceal the North Korean nexus, as well as falsified shipping records.

Assuming Essentra FZE’s continued compliance with the deferred prosecution agreement, the government has agreed to defer prosecution for a period of three years, after which time, the government would seek to dismiss the charges.

This press release was originally published by the U.S. Department of Justice.