Archive for the ‘British American Tobacco (BAT)’ Category

On tobacco and hard currency

Monday, March 8th, 2010

The Financial Times published a thorough article on the DPRKs eforts to raise hard currency through tobacco re-exports:

North Korean and other Asian trading entities started re-exporting State Express 555 cigarettes, manufactured by British American Tobacco, in February last year, just months before North Korea’s second nuclear test in four years prompted the United Nations to impose tougher sanctions on Pyongyang.

BAT sold the so-called “NK 555s”, made and packaged in Singapore for the North Korean market, to a Singaporean distributor for shipment to Nampo, a port near Pyongyang.

However, at least 15,000 cases worth $6.3m (€4.6m, £4.2m) rebounded out of Nampo to ports in Vietnam and the Philippines, according to documents seen by the Financial Times, to go to other markets where they commanded a higher price.

While the UN banned luxury goods exports to North Korea, member nations have been allowed to compile their own sanctions lists, which critics say created loopholes.

The US, Japan, Australia and Canada banned a broad range of tobacco products. Meanwhile, the European Union and Singapore sanctioned only cigars, which allowed BAT to continue exporting NK 555 cigarettes to North Korea. BAT said it halted exports of the cigarettes from Singapore to North Korea after discovering a diverted cargo of NK 555s in August.

International tobacco companies frown on “grey market” or “parallel” exports of their products to markets for which they were not intended. But national customs authorities target counterfeits rather than so-called “diverted real product”.

BAT has maintained some business ties to the country. It still supplies its former Pyongyang joint venture, from which it divested in 2007, with materials to make and sell cheaper Craven A cigarettes on the domestic market.

BAT says 175m NK 555s were exported to North Korea in 2008. They were made and packaged in Singapore which, like the EU, banned exports of cigars but not cigarettes.

The London-based company sold the NK 555s to SUTL Group, a family-controlled distributor in Singapore, for onward shipment to the North Korean port of Nampo.

“When we became aware of the diversion, we immediately launched an investigation,” Pat Heneghan, global head of BAT’s anti-illicit trade division, told the FT. “We certainly didn’t like what we found.”

While there was no evidence of any involvement by SUTL in the diversion, Mr Heneghan said BAT still had “a very hard discussion with the distributor”. SUTL declined to comment.

There is no evidence that the re-export of NK 555s by a number of unidentifiable North Korean entities and other small trading companies across Asia was illegal.

While tobacco companies consider the re-routing of legitimate cigarettes from their intended market as “illicit”, they are not necessarily “illegal” in the eyes of customs authorities focused on counterfeits and smuggling.

“In August last year, BAT discovered a diverted NK 555 shipment in Singapore, which we assumed could be for transhipment to other markets in Asia,” said a BAT spokeswoman. “But we were unable to inspect the shipment as we could not demonstrate any breach of Singapore law to the authorities.”

On April 10 2009, the NK 555 re-exports were discussed in an e-mail sent by a Singapore-based cigarette trader to a potential buyer in Manila.

“We have to confirm by next week,” wrote Bert Lee of Compass Inc. “Empty containers will have to start moving into Nampo . . . So kindly speak and plan with your buyer and let me know if you want to take up this new NK 555 Blue.”

Compass began to sell cases of NK 555 to a Hong Kong-based trading company in early 2009. E-mails and shipping documents show the cigarettes were first diverted to Dalian, a Chinese port, and then shipped on to Singapore before finally landing in Haiphong in Vietnam.

While the trail ran cold in Haiphong, people tracking the shipment suspected its ultimate destination was China.

“They sell it to someone who can handle it for the China market,” said one person involved in the trade, who asked not to be identified.

Invoices sent from Compass to its Hong Kong buyer in February 2009 do not reveal the North Korean source of the NK 555s. But Mr Lee left no doubt about the cigarettes’ provenance.

“Stocks are now in NK and sample already send [sic] out to us,” he wrote to his potential buyer in Manila. “I hope we can work on this New Blue [555] and controlling the market and stocks as soon as possible.” Mr Lee did not reply to phone calls, e-mails and faxes from the FT.

“As a trader, we just get the product and buy and sell,” said one Compass executive who declined to identify himself or comment on the NK 555 shipments when contacted by telephone. “Where it goes, who knows?”

Read previous tobacco posts here. Read previous BAT posts here.

To date I have been unsuccessful in locating the BAT factory in the DPRK.  If any readers have knowledge of its whereabouts, I would appreciate it. 

Read the full article here:
N Korea draws on tobacco for cash
Financial Times
Tom Mitchell, Pan Kwan Yuk


Tobacco company pulls out of North Korea

Friday, June 8th, 2007

The Guardian
Julia Kollewe

British American Tobacco is pulling out of North Korea, but insisted the move had nothing to do with political pressure.

The world’s second largest cigarette group, whose brands include Lucky Strike, Kent and Dunhill, said it had agreed to sell its 60% share in Taesong BAT, its joint venture in Pyongyang with the Korea Sogyong Chonyonmul Trading Operation, a state-owned company.

BAT is selling the stake to SUTL, a Singapore-based trading group that invests in business ventures in South East Asia. The price has not been agreed yet but will be small in relation to the group. The sale is expected to be completed later this year.

Read their press release here.


Treasury Reportedly Set to Act to Free North Korean Money

Wednesday, March 14th, 2007

NY Times
Steven R. Weisman

The Treasury Department is expected to move formally this week to bar American banks from engaging in transactions with a bank in Macao linked to North Korea, clearing the way for North Korea to regain possession of money at the bank frozen since 2005, a Bush administration official said Tuesday.

American officials see such a step by the Treasury, which has been expected for weeks, as a crucial part of the recent deal to disarm North Korea’s nuclear program. The deal, announced last month, requires North Korea to disarm its nuclear facilities in return for economic and energy benefits.

The Chinese government effectively froze about $25 million connected to North Korea a year and a half ago, when the Treasury Department listed Banco Delta Asia, a small family-owned bank in Macao, as a “primary money laundering concern.” As much as half of the money is expected to be returned to North Korea.

American officials charged in 2005 that the bank was helping North Korea conduct counterfeiting, narcotics trafficking and transactions related to its nuclear weapons program, a charge that North Korea and the bank denied.

The initial Treasury announcement put American banks on notice that after further investigation, the department would decide whether to bar United States banks formally from facilitating transactions with the bank.

However, the practical effect was to make all United States banks voluntarily cease transactions with Banco Delta Asia.

Without the ability to acquire dollars, Banco Delta Asia collapsed. Macao froze all its funds related to North Korea, and most of its other customers withdrew their money in a run on the bank. The bank was then taken over by the authorities in Macao, a semiautonomous province of China.

Subsequently, American and Chinese authorities pored over more than 300,000 documents describing the transactions with North Korea. These included accounts of 20 North Korean banks, 11 North Korean trading companies, 9 North Korean citizens and 8 Macao-based companies that did business with North Korea, according to bank records filed with the Treasury Department.

The Treasury announcement expected this week would formalize what is already in place. It would probably mean that the bank could do only a modest amount of business, without the benefit of dollar transactions.

But it would mean that the Chinese government would be in a position to return some of the funds to North Korea that are not linked to counterfeiting, drugs, nuclear arms or other illicit activities.

For example, some of the funds belong to a North Korean unit of British American Tobacco, American officials say, and those funds are expected to be returned to the company, which is owned by British interests.

When the North Korea nuclear deal was announced last month, no mention was made of returning funds to North Korea from the bank, but American officials now say that the return of those funds was a major incentive for North Korea to reach an accord.

The disarmament agreement was negotiated with the United States, China, South Korea, Japan and Russia as part of what were called six-party talks.

Christopher R. Hill, the assistant secretary of state for East Asian and Pacific affairs and the central envoy in the talks, said this month that North Korea was “concerned about the fact that we were able to go after an important node of their financing” but that the United States would continue to monitor its illicit activities.


Daedong fights U.S.-imposed sanctions on North Korea banks

Thursday, March 8th, 2007

International Herald Tribune
Donald Greenlees

Last August, Colin McAskill, a British businessman, agreed to buy a small bank in North Korea. On the face of it, Daedong Credit Bank was not a brilliant investment.

The agreement that McAskill signed with the management of Daedong Credit at a hotel in Seoul came as the bank was caught in the grip of financial sanctions that had virtually cut off North Korea from the global financial system.

Financial institutions around the world were shunning any links to North Korean banks, making it almost impossible to transact business.

Daedong Credit was using couriers to carry cash in and out of the country in amounts as high as $2.6 million because it could not make electronic transfers to other banks.

Since September 2005, Daedong Credit had also been fighting to recover $7 million that had been frozen in a Macao bank as part of efforts by the United States to put a financial squeeze on North Korea over alleged illicit financial transactions. This was a big sum for Daedong Credit. When McAskill had examined the bank’s books, its total assets were just $10 million.

None of this has deterred him. He said during an interview in Hong Kong that he planned to execute the sale agreement within the next two weeks and take full control of the only foreign-managed bank in North Korea. The Hong Kong- based Koryo Asia, chaired by McAskill, will take control of the banking license and a 70 percent stake owned by British investors through a Virgin Islands company. The remaining 30 percent is held by the state-owned Daesong Bank. “I think it’s a magnificent deal,” McAskill said, although he would not disclose the purchase price. “The bank has been running for 12 years. It is trusted and it has been profitable since day one.”

Despite McAskill’s optimism, the future of Daedong Credit has been under a cloud since the imposition of the U.S.- orchestrated banking embargo on North Korea 18 months ago and the viability of the business remains precarious.

Even amid signs of a thaw in relations between Pyongyang and Washington, the start of a bilateral dialogue that began in New York on Monday and an agreement in six-nation talks in Beijing on Feb. 13 to start to denuclearize the Korean Peninsula, analysts say banks in North Korea will struggle to restore contacts with the global financial system.

The trigger for the financial embargo of North Korea was a declaration by the U.S. Treasury Department under section 311 of the Patriot Act that the Banco Delta Asia, based in Macao, was a “primary money laundering concern” because of its links to a number of North Korean banks, individuals and companies alleged to have engaged in product and currency counterfeiting, drug trafficking and weapons proliferation.

The U.S. and Macanese authorities began separate investigations into Banco Delta Asia and the bank was placed under Macao government supervision.

Along with about 50 North Korean banks, trading companies and individuals, Daedong Credit had its account frozen. The total amount put into “suspense accounts,” according to Banco Delta Asia, was about $25 million, with Daedong Credit accounting for the largest share. Since then, almost all foreign banks that had correspondent relations with Daedong Credit have severed contact for fear of being excluded from the U.S. financial system.

Jack Pritchard, president of the Korea Economic Institute in Washington, said it was unlikely that the United States would send an explicit signal to the financial community to resume trading with North Korea, regardless of whether Pyongyang starts to address concerns about its foreign financial transactions.

He said that although a portion of the frozen money was likely to be released soon, there would not be a “100 percent reversal” of the American stance on financial transactions with North Korea.

Daedong Credit is likely to be one of the first North Korean account holders in Banco Delta Asia to get its money back from the Macao Monetary Authority where it has been earning no interest.

In recent months, McAskill has circled the globe from his home in London acting under a mandate from Daedong Credit to persuade officials in Washington and Macao to release the account. At 66, McAskill has spent 28 years doing business with North Korea, including as a consultant to North Korean banks on debt negotiations and helping to operate North Korean foreign gold sales. He said that at no stage in his meetings with officials from either the U.S. or Macao governments had he seen any specific reason for freezing the Daedong Credit money or been told of any specific allegation about its origins.

McAskill has produced what he calls a “dossier of proof” to establish the identity of all the customers whose money is frozen and the sources of the money. Since it was founded by the failed Hong Kong finance group Peregrine in 1995, Daedong Credit has filled a valuable niche serving the foreign community in Pyongyang. It has about 200 customers among foreign-invested joint ventures, foreign relief organizations and foreign individuals, according to McAskill. The biggest single amount frozen in Macao is $2.6 million belonging to British American Tobacco, which owns a cigarette plant in North Korea.

“We irrefutably established that the money was legal,” McAskill said. “The U.S. Treasury have been going around the world saying to banks ‘close this account, close that account’ but not offering any proof of wrongdoing.” He said his due diligence of Daedong Credit had convinced him that it was a “fully legal, legitimate operation” that did not manage state accounts or had ever been connected to illicit practices.

One of the Treasury’s main allegations against Banco Delta Asia is that it facilitated the spread of counterfeit $100 bills. But McAskill said Daedong Credit had put $49 million into Banco Delta Asia in 2005 and all that money had been forwarded to HSBC for verification.

Only three of the $100 notes belonging to Daedong Credit were confiscated because they were “suspect,” he said.

McAskill has charged the Treasury with harassment after two correspondent banks — one in Vietnam and the other in Mongolia — informed Daedong Credit late last year that they would immediately close accounts because of pressure from the United States.

But it is likely to prove difficult to persuade banks, nervous about the effect on Banco Delta Asia of the long- running Treasury investigation, to take the risk of dealing with a North Korean counterpart, regardless of the pedigree of its shareholders and board.

Last week, at a meeting in Macao, McAskill was finally told by the head of a government-appointed committee supervising Banco Delta Asia, Herculano de Sousa, that it was likely that the money in Daedong Credit would be returned by the end of March.

In the meeting, McAskill told de Sousa that once the funds were freed, Daedong Credit intended to leave the money in Banco Delta Asia and resume operating its old account.

But Banco Delta Asia has informed the U.S. Treasury that as part of its cleanup both the administrative committee and the shareholders were adamant that they no longer would do business with any North Korea entities. In doing so, the bank hopes to avoid the United States making good on a threat to ban Banco Delta Asia from having any correspondent relationships with U.S. banks.

Still, McAskill insisted that Daedong Credit has not broken any law in Macao or elsewhere and that there were no grounds for it to be forced to close its account.

“I am not going to take my money back and cut and run,” he said.


Difficult to Recover British-American Tobacco Funds

Wednesday, December 20th, 2006

Daily NK
Yang Jung A

Difficult to Recover British Funds Caught in BDA North Korea Accounts

In amongst the North Korean accounts that were frozen from Macao’s Banco Delta Bank (BDA) was joint funds from a British tobacco company which has been deemed difficult to recover.

The U.K. Financial Times reported on the 18th that the $7mn of the $24mn in North Korea funds frozen in BDA accounts is from Korean trusts and banks of which half the funds is estimated to from a joint account by British American Tobacco (BAT) and a tobacco company trading by North Korea.

BAT’s spokesperson Catherine Armstrong revealed in an interview with Radio Free Asia (RFA) on the 18th “The money has been certified as legal so we’re very keen to get the money out of the frozen account.”

Regarding the amount of frozen funds, Armstrong said “As there are no substantial data, an actual figure cannot be revealed but I am aware it is nearing tens and hundreds of thousands of dollars.”

Raphael Perl, a specialist at the U.S. Congressional Research Service (CRS) said “We don’t necessarily know on its face that the North Korean tobacco company is not also involved in criminal activity” and revealed “As North Korea sells fake cigarettes on a large scale, every tobacco company in North Korea is being suspected of conspiring illegal acts.”

Perl said “Even in the case a company is internationally based, a company is not completely owned internationally but if a joint ownership, it is even more difficult to discern whether or not the transaction was legitimate.”

In another sense, as reports suggest that “The U.S. Administration told North Korea $12mn of the $24mn frozen funds appears to be unrelated to North Korea’s illegal actions,” others are cautiously anticipating progress from the six party talks as North Korea’s legitimate funds are released.


Smoke signals from BAT’s North Korea venture

Wednesday, February 8th, 2006

Asia Times
Lora Saalman

On January 10, North Korean leader Kim Jong-il traveled in a luxury train to China’s Guangdong province to sample socialist-flavored capitalism. Just a few months earlier, the North Korean Workers Party introduced reform measures granting foreign investors tax cuts and allowing them to sell goods produced in North Korea without tariffs.

For an economy that ostensibly issued halting economic reforms in 1984, these new measures constitute a revolution, albeit one with Chinese characteristics. In accordance with its giant neighbor’s model, North Korean economic reform is predicated as an alternative to the instability of political liberalization. Unforeseen social and political shifts are to be cushioned by financial solvency to keep the regime intact. With China’s assistance and unofficial aid, sustainable growth may one day be achieved in North Korea. Yet a darker side to North Korea’s economic awakening remains.

Kim Jong-il’s visit comes on the heels of accounts of North Korean money-laundering in Macau and the US decision last June and again in October to freeze the assets of various North Korean companies and financial institutions. While many of these firms are beyond the reach of US sanctions, implied misconduct has already led to runs on the North Korean-affiliated financial institution Banco Delta Asia in Macau.

As allegations swirl of money-laundering through counterfeit cigarettes and currency, a less-known story has emerged on British American Tobacco’s previously undisclosed four-year-old joint venture in North Korea. It presents the dilemma of doing business in a country in desperate need of revenue but with a poor track record of allocating resources to its people. This cautionary tale begs the question as to where exactly Pyongyang’s joint-venture profits are going.

For North Korea, which lacks many of the basic laws for financial transparency and good governance, capital investments are more than economically precarious. Shared contact information and dubious management practices among North Korean companies are ubiquitous.

Daesong-BAT is one of a handful of Western joint ventures in North Korea. The far-reaching tentacles of its North Korean partner illustrate the complexity of verifying the background and connections of any North Korean entity. Like many of its compatriots, North Korea’s Sogyong General Trading Corp (Sogyong) boasts circuitous and often indirect ties to entities engaged in proliferation, international trade, shipping, and money-laundering. These indicators point to larger concerns as to whether joint ventures, particularly Western ones, can be manipulated by North Korea for illicit financing of the regime or even to sustain its alleged WMD (weapons of mass destruction) programs.

Joint ventures and front companies
In establishing Daesong-BAT, British American Tobacco teamed up with Sogyong General Trading Corp, a Pyongyang-based state trader best known for its carpet exports. Sogyong, however, also exports such products as handicrafts, furniture and agricultural produce, while importing machinery, electronics, fishing tackle, chemicals and fertilizer. It is not uncommon for North Korean state-run enterprises to deal in everything from machinery to fishing tackle. Yet eclectic product lists make trade in illicit drugs and weapons all the more difficult to track. Cigarettes are just one more product in the Sogyong export-import pantheon.

North Korean company product lists also rarely convey their full range of trade. Seemingly innocuous industries are often manipulated as front companies. Last year, for example, Japan’s Ministry of Economy, Trade and Industry (METI) listed what appeared to be an innocuous North Korean food manufacturer, Sosong Food Factory, for its participation in nuclear, missile, chemical and biological-weapons proliferation. Cigarettes, like food, have been used at times to mask the real objects being transferred. In one case, Japan in 2002 seized a Chinese vessel and found that the declared store of cigarettes on board actually contained drugs thought to have come from North Korea.

While not as licentious as drug or human trafficking, even the black-market trade of cigarettes could have a tangible impact on North Korea’s financing, as seen in Eastern European illegal cigarette rings. These factors highlight the danger of taking a North Korean food or even carpet manufacturer at face value.

North Korea’s network
Among the elements of obfuscation, the company name Daesong-BAT merits attention. Rather than combining or modifying the titles of the two partner companies to form Sogyong-BAT, Daesong-BAT combines British American Tobacco’s acronym with a name that could either point to North Korea’s Daesong district or Daesong General Trading Corp (Daesong). If it turns out to be the latter, Japan and other governments have prominently featured Daesong for its ties to missile and nuclear proliferation.

Incidentally, Daesong maintains one of the most extensive and convoluted North Korean networks, with more than 10 subsidiaries. It also is suspected of falling under Bureau 39, which earns foreign currency for North Korea. A direct connection between Daesong-BAT and the sinewy Daesong franchise has yet to be established but, as illustrated below, nothing is clear cut in North Korean business relations.

Because of the lack of transparency and convoluted nature of North Korean companies, contact information often serves as the first stencil for tracing overlap between industries. In the case of Daesong, the US Central Intelligence Agency’s Open Source Center follows the use of the same fax number to establish potential business and branch linkages. If the same logic is applied to Sogyong, another pattern emerges. Sogyong shares common fax numbers with at least two companies, Korea Foodstuffs Trading Corp (Foodstuffs) and Korea Kwail Trading Corp (Kwail). These companies in turn share fax numbers with nearly 100 companies in North Korea.

Among North Korean firms sharing contact information with Sogyong-linked entities, Japan’s METI and official European export monitors have listed at least six as end-users associated with North Korean WMD programs. In October, the US government targeted one in particular, Korea Ryonha Machinery Joint Venture Corp (Ryonha), freezing its assets under US jurisdiction and placing it on the US Specially Designated Nationals and Blocked Persons list. Ryonha is a prime example of the complex web of North Korean subsidiaries. Last June, the US Treasury Department also targeted the assets of its parent company Korea Ryonbong General Corp, formerly known as Lyongaksan, which heads five other US-designated entities.

Ryonha is not an aberration among companies converging with Sogyong. Among other Foodstuffs and Kwail-connected entities, Korean company databases list Korea Pyongyang Trading Corp as a distributor of methane gas derived from animal excrement. Apparently, effluent is not its only fetid source of income. The Japanese government has listed the very same company, along with subsidiaries of two other firms tracing back to Sogyong, namely Korea Ryonhap Trading Corp and Korea Jangsu Trading Corp, for nuclear, missile, chemical and biological weapons proliferation.

Proliferation networks may not be the only mechanisms at Sogyong’s fingertips. Contact information also links the two Sogyong-connected associates with at least four North Korean financial institutions. Among these, Koryo Bank and Korea Joint Bank have alleged ties to the now-infamous Banco Delta Asia in Macau. Banco Delta Asia’s own purported involvement in counterfeit-currency distribution and counterfeit-cigarette smuggling does not bode well for Daesong-BAT, no matter how convoluted their connections. Banco Delta Asia may have three degrees of separation between it and Sogyong, but in North Korea’s fishbowl of finance this does not preclude cooperation.

Banco Delta Asia is also reported to maintain a close business relationship with Macau-based Zokwang Trading, which its own vice general managing director claims is a part of North Korea’s Daesong General Trading Corp. Daesong, as mentioned earlier, has a pervasive proliferation record. It also has reported links to Changgwang Sinyong Corp (Changgwang), which has been repeatedly sanctioned by the United States for its missile-proliferation activities and sales to Iran and Pakistan. Zokwang in turn deals in missiles and nuclear-power-plant components, all the while maintaining a partnership with the notorious Changgwang. Combined with Sogyong’s branch in the joint \-venture hub Shenyang, China, even indirect ties to Macau suggest that Sogyong has the ability to tap into proliferation, industrial and financial networks in China and beyond.

Proliferation, industry and finance mean little without the means to transport goods and technology. Sogyong-associated entities Foodstuffs and Kwail share fax numbers with North Korea’s national airline Air Koryo, which has also been cited by official European monitors for proliferation. A 2003 Far Eastern Economic Review article even named Air Koryo as the transportation mechanism for Daesong’s suspected military assistance to Myanmar. Sogyong’s own shipping vessels Sogyong 1 and 2, which were detained in Japan on safety violations in December 2004 and January 2005, complete the final leg of the contact-linked proliferation, financing and shipment triangle. This network belies a much more intricate set of alliances than the domestic-consumption-based joint venture touted by British American Tobacco and Sogyong General Trading Corp.

Standards of business conduct
British American Tobacco’s website advocates transparency in international business and laudably eschews bribery, corruption, illicit trade, and money-laundering. In October, BAT executives further contended in The Guardian that the company’s North Korean cigarette joint venture fuels only domestic consumption, not exports to China or elsewhere. In spite of these reassurances, BAT is no stranger to the dangers of black-market cigarette production and transshipment. A February 2000 article in The Guardian even accuses BAT of complicity, by knowingly allowing illicit smuggling of its cigarettes to occur.

In the case of Daesong-BAT, British American Tobacco officials have admitted to knowing little of the company’s North Korean joint-venture operations. Ominously, BAT has stated that an unnamed Singapore division controls its North Korean joint venture. Lack of oversight combined with a dubious North Korean offshore mechanism for managing an ostensibly domestic industry raises significant warning signs. The incestuous relationship between state-run North Korean entities that share fax numbers of companies and banks listed for WMD procurement and money-laundering through counterfeit tobacco should also elicit concern. These are not simply dilemmas for British American Tobacco, but pose challenges to any companies forming joint ventures in North Korea.

Economic integration, as in China’s case, may bring North Korea more into step with international norms and standards. Ironically, engagement that is likely to lead to greater future transparency may also be manipulated for North Korea’s short-term illicit gains.

In 2003, the British government pressured BAT to close down its cigarette factory operations in the military dictatorship of Myanmar because of concerns over that country’s lack of human rights. Given the legion of obstacles impeding transparency in North Korea, BAT and other Western firms could be contributing to the worsening of more than human rights. They could be aiding and abetting illicit North Korean financing that is alleged to fuel Kim Jong-il’s slush fund and WMD programs.


The North Korean Criminal State, its Ties to Organized Crime, and the Possibility of WMD Proliferation

Tuesday, November 15th, 2005

Nautilus Institute
David L. Asher

I am very pleased to be invited back to the Wilson Center to speak today. I enjoyed my time here this summer and want to thank my colleagues for the chance to be affiliated with the Center, which I consider the finest organization of its kind in Washington. I also wish to thank my former boss, Assistant Secretary Jim Kelly and the many members of our inter-agency team for kindly attending today. In particular, I want you to know of the extraordinary work that our friends and colleagues here from the United States Secret Service have done recently to safeguard our nation and our currency from a determined adversary.

I left the State Department in July and I want to be very clear that my remarks today are personal in nature. They in no way should be interpreted as representing the view of the US government, the Department of State or the Department of Defense. They also are drawn strictly from unclassified sources (the vast amount of information now in the public domain is indicative of the scale of the problem of DPRK criminality).

Let me make clear, I am a believer in the Six Party Talks. I applaud the efforts of my former colleagues, Chris Hill, Joe Detrani, and Jim Foster to effect positive diplomatic movement via direct dialog and clearly demonstrate to all the parties seated at the big table within the Diaoyutai State Guesthouse that the US is sincerely willing to join the international community in engaging North Korea to facilitate its denuclearization, its economic development, and its opening to the outside world. At the same time, given this objective, there should be no further room for tolerating the unacceptable and in many ways outrageous criminal and proliferation activities that the North Koreans continue to engage in.

Allow me to begin my remarks by laying out the major aspects of North Korean trans-national criminal activity. I will then look at the specific question of how the DPRK’s growing ties to Organized Crime groups and illicit shipping networks could be used to facilitate WMD shipments. I’ll propose a possible way to reduce this risk. I will conclude by frankly commenting on the nature of state directed criminality in the DPRK and its implications for international law and the DPRK’s status in the international community and the United Nations.

My research topic this summer at the Wilson Center was on the rise and fall of “criminal states” – government’s whose leaders had become intimately involved with trans-national criminal activity. I compared North Korea under Kim Jong Il with Serbia under Milosevic, Romania under Ceausescu, and Panama under Noriega. I won’t get into the details of this comparative research now but, suffice to say, the scale and scope of the other cases pale in comparison with present-day North Korea.

The rise of the criminal state in North Korea is no secret. It has occurred in full view of foreign governments and with increasing visibility to the world media. Over the last three decades agents, officers, and business affiliates of the DPRK have been implicated in hundreds of public incidents of crime around the globe. Incidences of illicit activity have occurred in every continent and almost every DPRK Embassy in the world has been involved at one time or another. This should be no surprise. North Korea is perhaps the only country in the world whose embassies and overseas personnel are expected to contribute income to the “Party Center,” not rely on central government funds for their operations. Such repeated illicit actions from diplomatic premises amount to a serial violation of both articles 31 and 41 of the Vienna conventions on Diplomatic Relations, which respectively convey that A. commercial, and most certainly, criminal activities for profit shall not be conducted by accredited diplomats or via accredited facilities and B. mandate that officials posted abroad must obey the laws of the nation to which they are posted. The DPRK routinely pays no attention to either critical provision of the Vienna conventions.

I am frequently asked “how much is this stuff going on?” Although it is hard to pin down the exact scale of the illicit activity we can make a rough guess. In 2003 the DPRK ran a trade deficit of at least $835 million and that if more broadly measured to exclude concessionary trade with the ROK was more like $1.2 billion. Even making a very bold estimate for informal remittances and under the table payments for that year, the DPRK probably ran a current account deficit of at least $500 million. Moreover, North Korea’s accumulated trade deficit with the ROK and China alone since 1990 is over $10 billion. North Korea has not been able to borrow on international markets since the late 1970s and has at least $12 billion in unrepaid debt principal outstanding. Yet, until recently – at least – it has managed to avoid self-induced hyper-inflation (which should have occurred given the need to reconcile internal and external monetary accounts, even in a communist country). Instead, the street stalls in Pyongyang and other North Korean cities seem to be awash in foreign made cloths, food, and TVs and the quality of life of the elite seems to have improved. What’s apparently filling the gap and accounting for the apparent improvements to the standard of living for the elite? The short answer as I see it: Crime. And if I am right, then the criminal sector may account for as much as 35-40% of DPRK exports and a much larger percentage of its total cash earnings (conventional trade profit margins are low but the margin on illegal businesses is extremely high, frequently over 500%).

Whatever the precise size of the criminal surplus, all analysts and law enforcement authorities agree that overseas illicit and weapons trading activities have become increasingly important sources of foreign exchange for the DPRK. These earnings have provided support to North Korea’s “military-first” economy and contributed to Pyongyang’s ability to resist demands from the international community for an end to its nuclear weapons program. They also apparently have persuaded the Kim Jong II regime it can affordably maintain its political isolation and resist the imperative for sweeping economic and social reforms that all other communist states have had to engage in. Given that periodic exposure of illegal dealings by North Korean officials overseas in the past has not resulted in serious or lasting consequences, Pyongyang may believe that an open door for global criminality exists.

Let’s review the scale and scope of the North Korean “soprano state.” As is well known the North Korean government is involved in a wide range of illicit businesses in partnership with organized crime groups or unilaterally. These include:

1. Production and overseas distribution of narcotics, in particular heroin and methamphetamines:

DPRK Narco trafficking continues as a major income generator, although less prominently perhaps than before. China continues to be the major market for North Korean drugs and the situation became so bad that in March of last year the Vice Minister of the MPS called a highly unusual “press conference” to announce his determination to cut into DPRK drug rings in Jilin province, on the border with North Korea (which some Chinese law enforcement officials have stated is “out of control”). Japan probably still comes in second. From 1998-2002 Japanese police interdicted nearly 1500 kg of meth that in six separate prosecuted cases was shown to have originated in the DPRK. This amounts to thirty-five percent of all methamphetamine seizures in Japan in that period and had a wholesale value of over $75 million and a street value of as much as $300 million. Given the chemical profile for DPRK produced meth (essentially of extremely high purity) several Japanese authorities I spoke with the week before last believe that a fairly large percentage of the meth coming in from Northern China today is consistent with DPRK origin. As elsewhere, in Japan to mask their fingerprints the North Koreans are going through triads, snakeheads, and other indirect channels. This has been less true with Heroin where North Koreans continue to be observed selling the drugs. The Australian seizure of 125 kg of Heroin worth $150 million off the Pong Su – a Worker’s Party linked vessel and with a KWP secretary on board – in my mind was hardly a random or isolated incident (it is not surprising given that the North Koreans had established an Embassy in Canberra the year before that one would assume needed to produce income for the center – it was Pyongyang’s way of saying “thanks very much”).

2. Production and international distribution of counterfeit currency, in particular the US dollar, as well as counterfeiting or illegally reproducing and selling numerous other items, in particular counterfeit cigarettes and pharmaceuticals.

Under International Law, counterfeiting another nation’s currency is an act of causus belli, an act of economic war. No other government has engaged in this act against another government since the Nazis under Hitler. North Korea has been counterfeiting the dollar and other currencies of importance the entire time it has been on the international engagement bandwagon. What does this say about the regime’s intentions?

As the recent DOJ indictment of Sean Garland and other members of the Official IRA for their partnership in the criminal distribution of counterfeit US currency reads: “Beginning in or about 1989, and continuing throughout the period of this Indictment, a type of high-quality counterfeit $100 FRNs began to be detected in circulation around the world. Their high quality made it particularly difficult for them to be detected as counterfeit by untrained persons. The United States Secret Service initially designated these counterfeit notes as “C-14342” and they came to be known as “Supernote” or “Superdollar.” Quantities of the Supernote were manufactured in, and under auspices of the government of, the Democratic People’s Republic of Korea (“North Korea”). Individuals, including North Korean nationals acting as ostensible government officials, engaged in the worldwide transportation, delivery, and sale of quantities of Supernotes.”

The Royal Charm and Smoking Dragon investigations that were concluded this summer revealed a willingness to sell millions of dollars in DPRK supernotes into the US by Asian OCs linked to the North Korea government. Whether this was a deliberate act of policy decided in Pyongyang or just business among crooks is hard to tell but it seems unusual that according to the public indictment the cost of the notes was less than 40 cents per dollar, far below the market value associated previously with the counterfeit supernotes, given their ability to be circulated without ready detection by the naked eye. One wonders how such a price could be obtained unless the notes were coming from a very high source inside the country in question.

The relatively sophisticated shipping methods for transporting supernotes uncovered in the FBI-USSS Royal Charm/Smoking Dragon investigations also needs to be given scrutiny, especially given our topic today. The following slides, reproduced from a Taiwanese newspaper article gives you a sense of how they move the notes around, falsely manifesting the cargo as a non-dutiable item (in this case as “toys”), falsifying port of origin information (to indicate a port in Northern China instead of in the DPRK), and cleverly concealing the contraband.

The production of counterfeit cigarettes also appears to be a very large and profitable business for North Korea and one with global reach. Indeed, Counterfeit cigarettes may well be North Korea’s largest containerized export sector with cargoes frequently coming from the ports of Najin and Nampo for shipment via major ports in China and the ROK throughout the world. Phillip Morris International, Lorillard, Japan Tobacco and others have identified numerous factories producing counterfeit cigarettes in North Korea. Affected industry participants have worked assiduously with relevant government authorities around the world to stop this trade. The numbers explain why. A forty foot container of counterfeit cigarettes might cost as little as $70,000 to produce and have a street value of 3-4 million dollars, so it’s not surprising that the North has focused on this business line-with its profits increased if tax stamps are forged (something that has been observed repeatedly of late, costing affected states such as California tens of millions in stamp revenue per year). A 1995 Associated Press article reported the seizure by Taiwan authorities of 20 shipping containers of counterfeit cigarette wrappers destined for North Korea. According to officials of the cigarette company whose label and trademark were being violated, the seized materials may have been used to package cigarettes with a retail value of $1 billion. Increasingly DPRK counterfeit cigarettes, counterfeit pharmaceuticals (especially counterfeit Viagra), and counterfeit currency are being moved in parallel. Royal Charm revealed that weapons, too, potentially even manpads might be run through the same channels. What could be next?

3. Smuggling sanctioned items, including conflict diamonds, rhino horn and ivory, and endangered species, utilizing official diplomatic means

I find this to be one of the most outrageous and unacceptable of the DPRK’s criminal acts, absolutely contravening international law, including the Convention on International Trade in Endangered Species of Wild Fauna and Flora. There are numerous notorious examples to cite. In the early 1980’s, five North Korean diplomats were forced to leave Africa for their attempts to smuggle rhino horns. The horns were transported from Luzaka to Addis Ababa to South Yemen. From there, they traveled to the consulate in Guangzhou, which ran operations in Macau, Zhuhai, and Hong Kong. This kind of activity has apparently not changed. As Stanford researcher, Sheena Chestnut, noted in a recent thesis, in the years since 1996, “at least six North Korean diplomats have been forced to leave Africa after attempts to smuggle elephant tusks and rhinoceros horns.” Ivory seizures directly linked to North Korean officials amounted to 689 kg in Kenya in 1999; 537 kg in Moscow in 1999; and 576 kg in France in 1998. I don’t have more recent data I can share publicly but I don’t think they have given up on the illicit ivory trade.

4. Money laundering for its own account and in partnership with recognized organized crime groups abroad:

The extent to which the DPRK uses banking partners around the world to launder funds has recently gotten a lot of attention in the wake of the Macau based Banco Delta Asia designation under Section 311 of the USA Patriot Act. The Treasury Department’s website paints a pretty clear picture: “One well-known North Korean front company that has been a client of BDA for over a decade has conducted numerous illegal activities, including distributing counterfeit currency and smuggling counterfeit tobacco products. In addition, the front company has also long been suspected of being involved in international drug trafficking. Moreover, Banco Delta Asia facilitated several multi-million dollar wire transfers connected with alleged criminal activity on behalf of another North Korean front company.”

5. Weapons smuggling and trading in WMD

Even while its customer base diminishes, North Korea defiantly remains in the business of selling MTCR class missiles and base technologies. It also continues to field more advanced systems domestically that could be exported. Logically speaking, as its stockpile of WMD grows so could its willingness to export technologies, systems, and even materials. Business and ideology conveniently mix in the minds of North Koreans, it seems, as they calculate where, when, and how to sell weapons and weapons systems.

Moreover, in the face of increased surveillance of DPRK flagged vessels, the threat of using conventional shipping means to move cargoes increases as does the incentive to use organized crime channels.

There are several thousand containers each year coming out of North Korea from its two main container cargo ports: Najin on the east coast and Nampo on the west coast. To get into the international maritime transport system, they have to go through friendly ports, typically in China, the ROK, and Japan. Virtually none of these containers in China is subject to inspection and few in the ROK. Japanese customs has made a bigger effort but it remains insufficient in regard to cargoes destined for non Japanese ports.

As we learned from the investigations concluded this summer, containers of counterfeit cigarettes, counterfeit currency, weapons, and other illicit items apparently produced in the DPRK or linked to a distribution chain it has ready access to have managed to make their way into the US. So could North Korean WMD if we don’t create a system to better scrutinize cargoes and enhance Maritime Domain Awareness to protect our SLOCs.

Unfortunately, neither the PSI no the CSI are attuned to addressing these threats. The Container Security Initiative is a worthy effort to move US customs outward, inspecting select cargoes destined for US waters overseas before they embark in our direction. I am impressed by the work being done by US Customs and ICE officers overseas to look into suspect cargoes and the dedication of personnel at the National Tracking center to identify ships and cargoes that may have not been covered by the CSI or fallen through the loop. Nonetheless, the CSI has no application to containers destined for non-US ports and, moreover, it is only operating in a small number of foreign venues. What happens to the majority of containers coming here or going elsewhere? Nothing.

Moreover, the hallowed Proliferation Security Initiative unfortunately remains much more talk that action. I support the initiative but it is not sufficient and does not substitute for a dedicated DPRK counter-proliferation policy. It is nice to see countries getting together to agree to intercept shipments but it is another to engage in such interdictions. There has not been one single PSI interdiction of a DPRK flagged vessel that I am aware of. Does this mean they have stopped sailing? A quick look at the “Lloyd’s List” database reveals this to not be true with many notorious North Korean vessels like the Sosang, which was interdicted shipping missiles to Yemen in December 2002 (before the PSI existed), still plying the high seas. What are these ships carrying? Moreover, I find the implicit premise that interdiction alone is adequate for stopping proliferation unsettling. Stopping a weapons shipment on the high seas is like stopping a drug shipment under dark of night-easier said than done. The odds are not good, especially when you face an adversary with access to near state of the art communications, excellent denial and deception, diplomatic immunities, and friendly criminal partners to facilitate its activities.

More decisive action is required, well beyond the PSI’s current scope. The AQ Khan network was brought down by a network disruption strategy that utilized all aspects of national power. Such a strategy may need to be mounted soon to stop a determined North Korea engaged in the weapons trading business.

Fortunately, there are some things in the area of peaceful international cooperation we can do to minimize the chance North Korean contraband, missiles, or WMD will get into the international distribution system. I propose that a special Container Security Initiative be created and applied to the DPRK, beginning in China and the ROK. Specifically, all containerized cargo out of North Korea should be mandated for inspection at the first international port of conveyance. Legitimate trade would be allowed to pass but illicit cargoes would be stopped. The US could not accept containers from ports that do not wish to join this special inspection regime. Such a regime would dramatically reduce the risk of weapons proliferation and cut into crime. Were all ships coming from the DPRK, whether bearing containers or not, subject to first order inspection the system would be even more effective. Given that DPRK trade represents a drop in the bucket for even major Chinese and Koreans ports, instituting such a regime should not be particularly onerous.

Down the road a more elegant solution is possible, whereby only smart containers can gain access to the international shipping system. The President recently announced a new policy on Maritime Domain Awareness (MDA). As Vice Admiral John Morgan has recently written, “MDA is the collection, fusion and dissemination of enormous quantities of data – intelligence and information to form a common operating picture (COP) – a web of integrated information which will be fully distributed among users with access to data that is appropriately classified.” Through the COP, specialists should eventually be able to monitor vessels, people, cargo and designated missions, areas of interest within the global maritime environment, access all relevant databases, and collect, analyze and disseminate relevant information.

This goal of Maritime Domain Awareness may sound overambitious, if not down right impossible. However, within the next five years, we likely will see the global deployment of such “smart-containers.” These sophisticated containers will be equipped with RFID tags that can not only broadcast the precise geo-location of the container but also be linked to relational databases that reveal detailed information on the container’s cargo: where it was loaded and by whom, when and where it was produced, and a host of other important information. IBM and Maersk have in fact just announced a pilot project to validate this smart container concept and allow the data to be trackable via an open information architecture.

In effect, driven by industry requirements even more than government regulations, by the end of the decade we can look forward to the development of a “world wide web of things” – the physical data tracking equivalent of the internet. Such a web promises to dramatically enhance supply chain management for multinationals, expedite and safeguard trade, and reduce counterfeiting. This is not science fiction: companies like Walmart have already demanded that their suppliers insert RFID tags into products with the goal of eventually being able to track in near real-time the status of virtually every asset in the company’s supply chain domestically and – relatively soon – globally.

Countries, ports, or companies not subscribing to smart container standards would be subject to automatic inspection or simply not be allowed to engage in international trade with countries participating in the initiative.


North Korea is the only government in the world today that can be identified as being actively involved in directing crime as a central part of its national economic strategy and foreign policy. As a result, Pyongyang is radically – and perhaps even hopelessly – out of synch with international law and international norms. In essence, North Korea has become a “soprano state” – a government guided by a Worker’s Party leadership whose actions, attitudes, and affiliations increasingly resemble those of an organized crime family more than a normal nation.

North Korea’s serial violation of international laws and agreements begs the question whether it should be allowed normal protections granted to states under the United Nations treaties.

Its reliance on illicit activity for maintaining what my former colleague Bill Newcomb has termed the “palace economy of Kim Jong Il” perhaps makes it very hard for North Korea to abandon such activities and also provides Pyongyang a means to avoid serious engagement with the outside world. Thus, unless and until the North finds itself censured for its involvement in such activities and its illicit finances come under great pressure it may have few incentives to be cooperative and come clean and act normal.

The North must cease its dealings with trans-national organized criminals, its illicit export of weapons, its nuclear reprocessing, its threats to engage in nuclear proliferation, etc. Instead it should accept the extremely reasonable terms the US, with the others parties in the talks, have offered for promoting a positive and peaceful transformation of relations in the context of full denuclearization. If it does then next month’s talks should represent a turning point in the history of our relations with the DPRK. If it does not, as I have shown the evidentiary ground exists for the DPRK’s comprehensive diplomatic isolation and a systematic denial in diplomatic privilege, if not as a pariah state with nuclear weapons but as a criminal state engaged in causus belli acts against the United Nations, its laws, and its principles. I hope Mr. Kim Jong Il makes the right decision.


Tobacco firm has secret North Korea plant

Monday, October 17th, 2005

The Guardian
Ian Cobain and David Leigh

Firm with Tories’ Ken Clarke on payroll runs factory in country with grim human rights record

British American Tobacco, the world’s second largest cigarette company, has secretly been operating a factory in North Korea for the past four years, the Guardian has learned. The company opened the plant in a joint venture with a state owned corporation shortly before the regime was denounced by George Bush as a member of the “axis of evil”, and despite widespread concern over the country’s human rights record.

BAT has never mentioned the factory in its annual accounts, and it is thought that many shareholders are unaware of its links with the country.

The discovery of the secret factory comes two years after BAT was forced to pull out of Myanmar, formerly Burma, under pressure from the UK government and human rights campaigners. The human rights record of the communist regime in North Korea is widely regarded as even worse than that of the brutal military dictatorship in Burma.

The disclosure of the existence of the plant comes a day before the first ballot in the Conservative leadership election in which Ken Clarke, BAT’s non-executive deputy chairman, is a candidate.

BAT confirmed that Mr Clarke, who has been on the company’s payroll since 1998, was aware of the decision to invest in North Korea. The firm has also said that as chair of BAT’s corporate social responsibility audit committee, Mr Clarke “would oversee human rights reports on all countries where we operate”.

Mr Clarke declined to comment, although he has previously denied any impropriety in his role with BAT.

The anti-smoking group Ash said: “It seems that there is no regime so awful and no country so repressive that BAT does not want to do business there. It beggars belief that an MP like Ken Clarke could be taken seriously as a candidate to lead a major political party.”

Mr Clarke could face an investigation by the Commons health committee over accusations that he gave false evidence to parliament when he denied BAT was embroiled in international cigarette smuggling. Mr Clarke dismissed the smuggling claims as “nonsense” five days after BAT’s lawyers had confirmed that certain claims were true, in an internal letter which subsequently came to light in the US. Mr Clarke has denied giving false evidence.

BAT launched its business in North Korea in September 2001 after forming a joint venture company with a state-owned enterprise called the Korea Sogyong Trading Corporation, whose main interest had previously been exporting carpets. BAT made an initial investment of $7.1m in the enterprise, and owns 60% of the company they formed, which is known as Taesong-BAT. It has since increased its investment, but declines to say by how much. This company employs 200 people at its factory in Pyongyang, the capital, producing up to two billion cigarettes a year. It initially produced an inexpensive brand called Kumgansan, named after a mountain in the east of the country, and is now producing brands that are known as Craven A and Viceroy. Despite its previous involvement in smuggling, BAT denies that any of its cigarettes produced in North Korea are intended for the Chinese market, and insists that they are all for consumption in North Korea.

The company says that it has worked to improve the working conditions of its employees in Pyongyang, that it provides workers with free meals, and that they are “well paid”. When asked how much the employees were paid, however, the company said it did not know. BAT even said that it had “no idea” how much its cigarettes cost on the North Korean market as the operation was run by the company’s Singapore division.

Questioned about its apparent reluctance to disclose the existence of its North Korean operation, BAT said that it listed only its “principal subsidiaries” in its accounts, and added that it was not obliged to inform investors about an investment of that size.

“It is a very small entity within the BAT group and, therefore, does little to justify a mention,” a spokeswoman said.

The spokeswoman denied the factory was “a secret”, adding: “If we are asked about our investment there, we respond appropriately. The investor community know of it.” Asked about North Korea’s human rights record, a company spokeswoman said: “It is not for us to interfere with the way governments run countries.” She said BAT could “lead by example” and assist the country’s development by meeting internationally accepted standards of businesses practice and corporate social responsibility.

In launching its North Korean enterprise, however, BAT is quietly doing business in a country which is regarded by some as having the worst human rights record in the world. Even one of BAT’s own public relations officers, in Japan, was astonished when questioned about the joint venture company. “Business with North Korea?” he asked. “Where there are no human rights?” The depth of concern about the suffering of people in North Korea is expressed in a series of reports by the United Nations and human rights watchdogs.

Last August, in an excoriating report presented to the UN General Assembly, Vitit Muntabhorn, special rapporteur on North Korea for the UN’s Commission on Human Rights, pointed to the “myriad publications” detailing violence against detainees. He expressed “deep concern” about reported torture, the killing of political prisoners, the large number of prison camps and use of forced labour. Finally, he protested at the “all pervasive and severe restrictions on the freedom of thought, conscience, religion, opinion and expression, peaceful assembly and association and on access of everyone to information”.

In its latest report on the country, Amnesty International highlighted concerns about the torture and execution of detainees, and worries over the lack of basic political freedom. The charity said that millions of North Korean people were suffering hunger and malnutrition. It added that there had been reports of public executions of people convicted of economic crimes, and that Christians, whose churches have been driven underground, were reported to have been executed because of their faith.

According to human rights observers in South Korea, about 200,000 people are held in prison camps in the north.

Human Rights Watch, meanwhile, describes the Pyongyang regime as being “among the world’s most repressive governments”, adding that its leader, Kim Jong Il, “has ruled with an iron fist and a bizarre cult of personality” since the death of his father, Kim Il Sung, in 1994.

BAT carried on its business in Myanmar for four years, running a cigarette factory in a joint venture with that county’s military dictatorship. It pulled out only after the UK government had asked it to withdraw and after Mr Clarke had been forced to admit, at a shareholders’ meeting, that “Burma is not one of the world’s most attractive regimes”.

FAQ: BAT in North Korea

What’s wrong with investing in North Korea?
Britain says it will not officially support investment there because of North Korea’s nuclear ambitions. Others, such as Action on Smoking and Health (Ash), object to investment which props up a notoriously cruel communist regime.

What is BAT’s track record as a company?
BAT has refused to stop selling cigarettes around the world, despite proof that its product is addictive and bad for health. Instead, it has sought to increase profits despite western governments imposing more legal restrictions, by selling to unsophisticated consumers in the developing world.

What is Ken Clarke’s role in BAT?
He collects £170,000 a year in pay and perks, in return for the title of deputy chairman. As a former health secretary and chancellor, he gives BAT credibility and international connections.

Why has his behaviour caused controversy?
When the company was accused of being involved in the lucrative smuggling trade in China and Latin America, Mr Clarke falsely claimed to parliament the accusations were “nonsense”.