Tobacco giant BAT slides on report of US criminal investigation

British American Tobacco (BAT) (BATS.L) is the subject of a US criminal investigation over suspected sanctions-busting, The Times reported on Tuesday, sending the company's shares down more than 5 percent.

The world's second-biggest tobacco group on Tuesday said it was cooperating with the US Department of Justice (DoJ) and Office of Foreign Assets Control (OFAC) without elaborating and declined to say whether the case was a criminal investigation.

"As the investigations are ongoing, it would be inappropriate for us to provide further comment at this time," company spokeswoman Anna Vickerstaff said in an email.

Neither the DoJ nor OFAC responded immediately to Reuters' requests for comment.

BAT, which makes Lucky Strike and Dunhill cigarettes, last month disclosed in its annual report that it was aware of the investigation by the DoJ and OFAC, a financial intelligence and enforcement agency under the US Treasury department. It did not provide detail on the nature of the investigation.

Shares in the company fell 5.5 percent to 28.54 pounds in early trading, erasing gains made last week.

BAT's annual report for 2019 said the group has operations in a number of nations that are subject to various sanctions, including Iran and Cuba, and that operations in these countries expose the company to the risk of "significant financial costs".

With respect to the US investigation, the company said in its annual filing that "the potential for fines, penalties or other consequences cannot currently be assessed but may be material".

Britain's Serious Fraud Office (SFO) is conducting a separate ongoing investigation into BAT, relating to "suspicions of corruption in the conduct of business by group companies and associated persons".

Jefferies analyst Owen Bennett said on Tuesday that the US investigation could be linked to the SFO inquiry but that it "likely sounds worse than it is".

"If we are right, and it (the US probe) does relate to the same accusations (as in SFO probe), the fact this has been ongoing in some form since 2017 with no apparent conclusion, we would not worry too much about it for now," Bennett wrote.