Vietnam Beverage Company Limited (VBCL), a holding company based in Vietnam whose subsidiaries are involved in the production and sale of alcoholic drinks, has agreed to pay USD860,000 on behalf of two of its subsidiaries to settle its potential civil liability for apparent breaches of OFAC sanctions on the Democratic People’s Republic of Korea (“North Korea” or the “DRPK”).
Between April 2016 and October 2018, VBCL’s subsidiaries sought and received approximately USD1,141,547 in payments through U.S. financial institutions for the sale of alcoholic beverages to North Korea, causing these U.S. financial institutions to export financial services to North Korea

The settlement amount reflects OFAC’s determination that VBCL’s subsidiaries’ apparent breaches were not voluntarily self-disclosed and non-egregious. It also accounts for VBCL’s cooperation with OFAC’s investigation, including its proactive notification to OFAC of its internal findings, and VBCL’s remedial measures implemented after discovering the apparent breaches.

n late 2017, VBCL acquired a majority ownership interest in several alcoholic beverage companies in Vietnam (collectively, the “Subsidiaries”). The Subsidiaries exported alcoholic beverages to customers globally, including certain legacy customers in or connected to North Korea. Since at
least 2016, the Subsidiaries made export sales on terms requiring payment from the customer prior to delivery; the Subsidiaries issued invoices in U.S. dollars to the customer and then arranged for shipment. As a general practice, the Subsidiaries executed contracts with customers for specific types and quantities of alcohol, valued at a price specified in U.S. dollars, for delivery to the customer free on board at a port in Vietnam. From time to time, these goods were delivered in separate shipments pursuant to one contract, which sometimes resulted in multiple invoices issued under a single contract.

Between January 2016 and September 2018, the Subsidiaries executed 26 contracts for the sale and export of beer and spirits to North Korea. The contracts were approved by the Subsidiaries’ senior managers and signed with two North Korean entities, Korea Samjin Trade Company (“Korea
Samjin”) and Korea Zo-Ming General Corporation (“Korea Zo-Ming”), and two third-party companies, Sunico Co. Ltd. in Singapore and Alttek Global Corporation in the Seychelles. The Subsidiaries then issued 47 invoices to the two North Korean entities and the two third-party
companies pursuant to the 26 contracts. 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.

Following issuance of the invoices, the Subsidiaries received 43 wire transfers totalling approximately USD1,141,547 between April 2016 and October 2018 for these sales from 15 different third-party companies (seven in Hong Kong, four in China, and four in Turkey), as well as the two
aforementioned in Singapore and the Seychelles, all of whom were making payment on behalf of either Korea Samjin, Korea Zo-Ming, or unknown entities located in North Korea. All 43 wire
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transfers were processed by U.S. correspondent banks or, in one case, initiated by a foreign branch of a U.S. financial institution. Neither VBCL nor the Subsidiaries had sanctions compliance programmes or policies concerned with U.S. sanctions in place at the time the conduct at issue occurred.

When the Subsidiaries’ senior management underwent organisational changes in December 2019, the new management team learned of the Subsidiaries’ past sales of alcoholic beverages to North Korea and ordered the termination of any further dealings with North Korea by the Subsidiaries.
VBCL also proactively submitted a letter to OFAC providing additional information regarding the conduct at issue. In addition, the Subsidiaries’ senior management issued a compliance directive prohibiting business with comprehensively sanctioned jurisdictions, including North Korea. This
directive required due diligence on all prospective and renewing customers, including screening customers against sanctions lists. VBCL developed a sanctions compliance programme modelled after OFAC’s May 2019 Framework for Compliance Commitments. Furthermore, VBCL mandated the
creation of sanctions compliance teams and engaged an independent third party to undertake background checks on all customers. VBCL also arranged sanctions compliance training for its Subsidiaries.

By issuing invoices in U.S. dollars and subsequently receiving approximately USD1,141,547 in payments that were processed by U.S. financial institutions for the sale of alcoholic beverages to North Korea, the Subsidiaries appear to have caused U.S. financial institutions to export financial services to the DPRK in apparent breach of § 510.206 of the North Korea Sanctions Regulations,

31 C.F.R. part 510 (“NKSR”). As a result, between April 2016 and October 2018, the Subsidiaries appear to have breached § 510.212 of the NKSR on 43 occasions when they caused U.S. financial institutions to export financial services to the DPRK (the “Apparent breaches”)