Vietnamese Alcohol Firm to Pay $860,000 for Violating U.S. Sanctions on North Korea

A Vietnamese alcohol company has agreed to pay $860,000 to settle allegations from the U.S. Office of Foreign Assets Control (OFAC) that it violated North Korea sanctions by involving U.S. financial institutions in its business dealings with the regime. The North Korea Sanctions Regulations (NKSR) prohibit U.S. financial institutions from assisting in the export of alcohol and other items to North Korea as part of efforts to pressure the regime to end its nuclear missile program.

Between April 2016 and October 2018, subsidiaries of Vietnam Beverage Company Limited (VBCL) had U.S. financial institutions process $1.1 million in payments for sales of beer and spirits to North Korea. These payments were made through 43 wire transfers in U.S. dollars from 15 different third-party companies, including seven in Hong Kong, four in China, four in Turkey, and two in Singapore and the Seychelles. These companies made payments on behalf of North Korean entities, according to OFAC’s enforcement release on Thursday.

The payments passed through U.S. correspondent banks, and in one instance, a foreign branch of a U.S. financial institution, OFAC revealed. VBCL and its subsidiaries did not have sanctions programs or policies in place that considered U.S. sanctions, OFAC added.

After a reorganization in December 2019, the new management of VBCL terminated the company’s dealings with North Korea. The company voluntarily notified OFAC of its past business with the sanctioned regime and implemented an internal compliance directive that addressed sanctioned jurisdictions. Following this directive, VBCL and its subsidiaries began conducting sanctions compliance training and implemented due diligence processes for renewing and prospective customers, screening them against sanctions lists. The company adopted OFAC’s compliance framework, formed compliance teams, and hired an independent third party to conduct background checks on all customers.

The subsidiaries were found to have engaged in 43 violations of the NKSR, which could have resulted in a maximum fine of $15.8 million. However, the $860,000 settlement took into account several factors. Aggravating factors included that VBCL senior management had reason to believe that the subsidiaries were conducting business with North Korea. On the other hand, mitigating factors included VBCL’s clean record with OFAC for the previous five years, its significant cooperation with OFAC, and the remedial measures it undertook, such as implementing a sanctions compliance program.

In its enforcement notice, OFAC cautioned foreign firms transacting in U.S. dollars to "carefully consider such risks when engaging in commercial activities involving the U.S. financial system and implement appropriate mitigation." OFAC stressed that "an adequate sanctions compliance program should take into account the size and sophistication of a company’s business operations, business partners, and consumer base especially when considering the scale and frequency of sanctions risk assessments, proper due diligence, and thorough compliance training."

By fLEXI tEAM