OFAC fines Indonesian manufacturer $1M in North Korea sanctions case

BMJ will pay approximately $1.02 million for allegedly directing payments related to its exportation of cigarette paper to the Democratic People’s Republic of Korea (DPRK). This caused U.S. banks to clear wire transfers related to these exports between March 2016 and May 2018, including shipments made to a blocked North Korean person, according to OFAC.

Aggravating factor: BMJ management had knowledge of the apparent violations and that efforts were made by employees to conceal the DPRK links from transactional documents, OFAC stated in a web notice. The agency said the settlement amount reflects that BMJ’s conduct was “non-egregious” and accounts for the company’s cooperation and response. BMJ did not voluntarily disclose the apparent violations.

Remedial measures: BMJ ceased all dealings with the DPRK and implemented a new sanctions compliance program that includes:

• A new head of compliance reporting directly to the company’s president;
• Statements by the CEO encouraging employees to report compliance concerns;
• Procurement of sanctions screening services from a third-party provider;
• A formal written export control and sanctions policy that includes guidance for compliance with U.S. sanctions and identifies red flags to educate employees when to contact BMJ’s compliance division for further assessment;
• A know-your-customer process that provides for escalation and risk-based review; and
• A requirement that all trading companies or agents who purchase goods on behalf of other end-users sign an anti-diversion agreement that includes OFAC sanctions compliance commitments.

Compliance considerations: “For companies engaged in trade with international partners, the absence of a risk-based sanctions compliance program may contribute to the likelihood of committing such a violation,” OFAC said. “This risk may be particularly acute when dealing with DPRK companies and individuals, or those who may be acting on their behalf, given the DPRK’s widespread efforts to evade U.S. and international sanctions.

Second settlement: In a related action, BMJ on Sunday agreed to pay $1.56 million as part of a settlement with the Department of Justice (DOJ) for conspiring to commit bank fraud in connection with the apparent sanctions violations.

BMJ entered a deferred prosecution agreement with the DOJ that will run 18 months. The company admitted to its sanctions misconduct, which induced U.S. banks “into executing prohibited transactions,” the DOJ stated.

“BMJ intentionally deceived U.S. banks and undermined the integrity of our financial system in order to continue doing business with North Korea,” said acting U.S. Attorney Michael Sherwin for the District of Columbia in a press release. “We want to communicate to all those persons and businesses who are contemplating engaging in similar schemes to violate U.S. sanctions on North Korea that using front companies and fraudulent invoices will not protect you. We will find you and prosecute you.”

Editor’s note: This story was updated on Jan. 19 to reflect PT Bukit Muria Jaya’s related settlement with the Department of Justice.