Vietnamese Firm’s Alcohol Sales to North Korea Violated US Sanctions, OFAC Says

Vietnam Beverage Company Limited reached an $860,000 settlement with the Office of Foreign Assets Control after the agency said two of the company’s subsidiaries violated U.S. sanctions against North Korea. OFAC said the subsidiaries, which produce and sell alcoholic drinks, illegally received more than $1.4 million in payments through U.S. banks for sales of alcohol to North Korea.

The subsidiaries violated the North Korea Sanctions Regulations 43 times between April 2016 and October 2018, OFAC said. Although the businesses didn’t disclose the violations, OFAC said Vietnam Beverage Company cooperated with the agency’s investigation and put in place “remedial” compliance measures after discovering the issues.

OFAC said Vietnam Beverage Company acquired the subsidiaries in late 2017, though they had been exporting alcoholic drinks under contracts with North Korean companies, including through invoices in U.S. dollars, since at least 2016. Some of the contracts were approved by the subsidiaries’ “senior managers” and signed with various North Korean entities, including Korea Samjin Trade Company and Korea Zo-Ming General Corporation, along with Sunico Co. Ltd. in Singapore and Alttek Global Corporation in the Seychelles.

“Nearly all of the associated business documents for these dealings made specific references to North Korea and the receipt of payment in U.S. dollars,” OFAC said.

Other sales involved third-party companies in mainland China, Hong Kong and Turkey, OFAC said, “all of whom were making payment on behalf of either Korea Samjin, Korea Zo-Ming, or unknown entities located in North Korea.” The agency added that the wire transfers were processed by U.S. correspondent banks or, in one case, initiated by a foreign branch of a U.S. bank.

Vietnam Beverage Company and its subsidiaries had no sanctions compliance programs or “policies concerned with U.S. sanctions in place at the time the conduct at issue occurred,” OFAC said.

After the subsidiaries shuffled their senior management in 2019, new leaders learned about the sales to North Korea and canceled all future dealings with the country and issued a “compliance directive prohibiting business with comprehensively sanctioned jurisdictions.”

This directive required the company to carry out due diligence on all new and renewing customers, including by screening them against sanctions lists, and the company hired an outside firm to conduct background checks on its customers. OFAC also noted that Vietnam Beverage Company submitted a letter to the agency “providing additional information” about the sales.

OFAC said it could have imposed a maximum civil penalty of about $15.8 million against Vietnam Beverage Company but decided on a lower amount after taking into account several mitigating factors, including the fact that the company hadn’t received a penalty notice from OFAC in the previous five years. The company also “provided substantial cooperation” to OFAC’s investigation and “undertook significant remedial measures” on “its own initiative.”

The agency also pointed to aggravating factors. Including the fact that the company’s subsidiaries “failed to exercise due caution or care” when they invoiced customers in U.S. dollars and received payments processed by U.S. banks for sales to North Korea. OFAC also said the company’s senior management either knew or had reason to know the company was receiving payments from North Korean companies through U.S. banks, and said the sales harmed U.S. foreign policy objectives against North Korea.