OFAC Fines UAE Manufacturer for Illegal Exports to North Korea

A United Arab Emirates manufacturer will pay about $660,000 as part of a settlement agreement for violating U.S. sanctions against North Korea, the Office of Foreign Assets Control said in a July 16 notice. Essentra FZE Company Limited, a cigarette filter and tear tape manufacturer, illegally exported cigarette filters to North Korea through a network of front companies, including companies in China, OFAC said. Essentra FZE was paid for the shipments through a bank account belonging to a foreign branch of a U.S. bank.

Essentra FZE first discussed exporting cigarette filter rods to North Korea in a 2018 meeting with a North Korean national, who asked Essentra FZE to not mention North Korea in any documents. “[D]on’t mention that customer is in my country… You just mention China or where else,” the North Korea national said in messages with Essentra FZE. Later that year, the company received an executed copy of the contract, which did not reference North Korea and instead listed the counterparties as front companies in third countries, including China. After receiving the contract, Essentra FZE was sent purchase orders to ship filter rods to an entity in China “with the knowledge the goods were ultimately destined for” North Korea, OFAC said.

The exports led to three wire transfers: one in U.S. dollars that “transited” the U.S. and two in a foreign currency that were deposited into Essentra FZE’s accounts at the foreign branch of a U.S. bank. OFAC said the wire transfers and the exports violated the U.S’s North Korea Sanctions Regulations. The value of the illegal shipments and transfers were about $330,000.

Essentra FZE did not voluntarily disclose the violations, OFAC said, which constituted an egregious case. Aggravated factors included the company's willful violations of OFAC sanctions by its senior manager and an employee, who “agreed to conceal” North Korea as the destination for the exports. OFAC also said the manager and the employee had “actual knowledge” that the deal would send goods to North Korea and said the company “significantly harmed” U.S. foreign policy objectives. It also said Essentra FZE is part of a “sophisticated commercial group” operating in global markets.

OFAC said mitigating factors were Essentra FZE’s lack of a violation in the previous five years and its substantial cooperation with OFAC’s investigation. The company “promptly” provided “well-organized submissions” in response to OFAC’s requests for information, the agency said, and agreed to “provide ongoing cooperation” as part of the settlement agreement. The company also agreed to dedicate more resources to its compliance program, appoint new senior management with specific compliance training, use third-party due diligence platforms, conduct frequent risk assessments and improve internal controls, audits and training. Essentra FZE also must annually certify for the next five years that it is complying with the compliance commitments in the settlement agreement.

The company also agreed to a deferred prosecution agreement with the Justice Department, which said Essentra FZE violated the International Emergency Economic Powers Act as well as U.S. sanctions against North Korea. The Justice Department called the public filing “the first ever DOJ corporate enforcement action for violations of these regulations.”