British American Tobacco has agreed to pay more than US$600 million to settle charges it sold cigarette materials to North Korea for years in violation of US sanctions, the US Justice Department announced on Tuesday.

In the most severe action ever taken by US authorities against a company for breaking North Korea sanctions, BAT's Singapore subsidiary also agreed to plead guilty to felony charges of bank fraud and sanctions-breaking.

The Justice Department said that over 2007-2017, BAT operated a web of front and shell companies to supply North Korea cigarette makers.

The company knew it was violating sanctions placed on Pyongyang over its development of nuclear weapons, US officials said.

In 2007, BAT's Standing Committee, including top company executives in London, approved the scheme "due to concerns over its public association with North Korea and difficulty remitting profits out of the country," the US Treasury said in a statement.

Besides trading with North Korea, the BAT operation routed dollar payments from trade through US banks, masking the origins of the funds, according to the charges.

BAT's Singapore subsidiary "maintained control over all relevant aspects of the North Korean business," the Justice Department said.

And even though BAT moved to pull out of the setup in 2016 due to increasing international sanctions on Pyongyang, it continued to sell cigarettes to North Korea's embassy in Singapore in 2017, US officials said.

"British American Tobacco and its subsidiary engaged in an elaborate scheme to circumvent US sanctions and sell tobacco products to North Korea through a corporate cutout in Singapore," said Assistant Attorney General Matthew Olsen.

"This is the single largest North Korean sanctions penalty in the history of the Department of Justice, and the latest warning to companies everywhere about the costs and the consequences of violating US sanctions," said Olsen.

The Justice Department put the full figure at US$629 million; BAT said it was US$635 million, without explaining the difference.

The company, which has already set aside US$540 million to cover the settlement, said it would have no impact on its financial guidance to investors for 2023.

"We deeply regret the misconduct arising from historical business activities that led to these settlements, and acknowledge that we fell short of the highest standards rightly expected of us," said BAT chief executive Jack Bowles.

The company said it ended its activities with North Korea in 2017. (AFP)