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Source: Smith Pachter McWhorter
On July 16, 2020,
the U.S. government announced criminal and civil enforcement actions against Essentra FZE Co. Ltd. (“Essentra”), a global supplier
of cigarette products incorporated in the U.A.E., for North Korea Sanctions
violations. In the criminal enforcement
action, Essentra entered into a deferred prosecution agreement (“DPA”) with the
U.S. Department of Justice (“DOJ”) for conspiring to violate the International
Emergency Economic Powers Act and defrauding the United States in connection
with evading sanctions on North Korea. This DPA is noteworthy because it marks
the DOJ’s first ever corporate enforcement action for violations of sanctions
on North Korea. In the civil enforcement
action, Essentra entered into a settlement agreement with the U.S. Department
of Treasury’s Office of Foreign Assets Control (“OFAC”). Under these agreements, Essentra admitted
that it received payments in bank accounts operated by the foreign
branch of a U.S. financial institution that were for the sale of cigarette
products that Essentra knew were destined for North Korea. It is notable that Essentra was targeted for
criminal enforcement for receiving U.S. dollar or other currency payments into
accounts held at a non-U.S. branch of a U.S. bank. By contrast, OFAC’s 2017 landmark TransTel
enforcement action involved a company initiating U.S. dollar payments, thereby
causing U.S. intermediary banks to export financial services to a sanctioned
country. Here, DOJ and OFAC make clear
that, regardless of which way the money flows, the facts may support liability
under U.S. sanctions regimes. These
actions signal that OFAC and the DOJ may be adopting a broader approach to
sanctions enforcement.
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For
questions regarding the report, kindly contact: Vincent Li, vli@smithpachter.com and or
Daniel Solomon dsolomon@smithpachter.com