(STL.News) – Essentra FZE Company Limited (Essentra FZE), a global supplier of cigarette products and 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 violations of the International Emergency Economic Powers Act (IEEPA) and defrauding the United States in connection with evading U.S. imposed North Korea Sanctions Regulations.
According to court documents, Essentra FZE knowingly and willfully agreed to participate in an illicit scheme of deception and fraud to push multiple transactions equivalent to several hundred thousand dollars through the U.S. financial system to ultimately supply North Korea with tobacco products. 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).
“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.”
“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.”
In entering the deferred prosecution agreement, Essentra FZE admitted and accepted responsibility for its criminal conduct in violation of IEEPA and defrauding the United States. Essentra FZE further agreed to pay a fine of $665,112 in connection to these violations. 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.
A one-count felony criminal information was filed today in the District of Columbia charging Essentra FZE with knowingly and willfully conspiring to commit violations of IEEPA and in doing so defrauded the U.S. Government by interfering with and obstructing the U.S. Government enforcement of the North Korea Sanctions Regulations. 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.
According to admissions contained in the deferred prosecution agreement, Essentra FZE engaged in the scheme from October 2017 to December 2018, and involved the use of several front companies and the falsification of multiple official documents.
For example, in the deferred prosecution agreement, in early 2018, Essentra FZE participated in a meeting with a North Korean official and other co-conspirators with prior dealings with North Korea. The ensuing discussion concerned Essentra FZE’s ability to produce a specific type of cigarette filter for exportation to North Korea. Soon after this meeting, Essentra FZE began exchanging messages with the North Korea official, which included the following conversation:
North Korean Official: But don’t mention that customer is in my country.
Essentra FZE Employee: Ok sure
North Korean Official: You understand what I mean?
Essentra FZE Employee: Yes
North Korean Official: You just mention China or where else. Contract will be signed by other foreign company
Essentra FZE Employee: Understood
Essentra FZE was aware that its products were destined for North Korea. Essentra FZE and its co-conspirators employed false end-user information for shipments to North Korea to facilitate these shipments. Essentra FZE addressed several commercial invoices to a front company, and falsely listed a company in China as the consignee in order to not alert regulators, banks, or shippers that the true customers were in North Korea.
In April 2018, during negotiations surrounding the product specifications, quantity, and price, Essentra FZE received a draft “revised contract” from a co-conspirator that identified a front company as the producer and exporter of filter rods, stated the filter rods would be exported from the UAE to China, but did not specifically identify the buyer. In late May 2018, Essentra FZE contacted a co-conspirator asking “Any news on NK contract… Eagerly awaiting the progress[;]” to which the co-conspirator replied “We have got the contract signed now waiting for the payment[.]” In early June 2018, an executed version of this contract between two separate front companies were provided to Essentra FZE.
To fulfil tobacco component supply to North Korea, Essentra FZE ultimately caused at least three wire transfers denominated in USD or AED to be deposited into Essentra FZE’s bank account at the foreign branch of a U.S. financial institution between September 2018 and December 2018 with a total approximate value of $333,271.94. These three payments, which caused a U.S. financial institution, including its foreign branch, to export financial services to North Korea, and otherwise facilitated export transactions that would have been prohibited if engaged in by U.S. persons, all in violation of the North Korea Sanctions Regulations.
In addition, Essentra FZE admitted that, in at least 2017, they were in discussions with a separate co-conspirator about a similar scheme for the production, procurement, and export of tobacco products to North Korea with the use of front companies facilitated through the U.S. financial system.
For example, in October 2017, a co-conspirator told Essentra FZE, “Before that I (sic) need to clarify one thing regarding with dual charcoal filter…it is North korean (sic) requesting filter, 8 containers per month.” The employee of Company 3 further informed Essentra FZE,
I want to know you to clear point about this North Korean client’s requesting filters: Our Chinese client those who do tobacco produce in North Korea, they are looking for cheap price filter accordance with above specifications and we found supplier to them and all the invoice and payment process will go through [Redacted] cause of sanction and also agreement.
This investigation was conducted by the FBI’s Baltimore Field Office. This case is being handled by Assistant U.S. Attorney Zia M. Faruqui, Paralegal Specialist Brian Rickers, and Legal Assistant Jessica McCormick of the U.S. Attorney’s Office for the District of Columbia, and National Security Division Trial Attorney David C. Recker.