Apple Settles Allegations of U.S. Sanctions Violations
November 25 2019 - 7:57PM
Dow Jones News
By Mengqi Sun
Apple Inc. has agreed to pay about $467,000 to settle
allegations it violated U.S. sanctions by dealing with a
blacklisted entity for more than two years, the Treasury Department
said Monday.
The Cupertino, Calif.-based technology giant allegedly violated
U.S. sanctions by hosting, selling and facilitating the transfer of
software applications from a Slovenian software company that was
previously blacklisted by the U.S., according to the Office of
Foreign Assets Control.
"In 2017, we found that we had inadvertently paid a developer on
[the] U.S. Treasury's List of Specially Designated Nationals," an
Apple spokesman said in a statement Monday. "We reported it to the
authorities and fully cooperated with their investigation, which
has now been completed."
The settlement amount is small for a company the size of Apple,
which has a market cap of about $1 trillion. But the case
illustrates how compliance efforts by even sophisticated
multinational companies can break down.
Apple allegedly entered into an app development agreement with
SIS d.o.o., an app developer based in Trzin, Slovenia, in 2008,
according to the settlement agreement between OFAC and Apple.
In February 2015, OFAC blacklisted SIS and its majority owner
Savo Stjepanovic for allegedly being part of an international
steroid trafficking network. As a result of the designations, any
property that SIS or Mr. Stjepanovic had an interest in were
blocked, and U.S. individuals and entities were prohibited from
dealing with them. In May 2017, OFAC removed Mr. Stjepanovic and
SIS from its blacklist.
During the time SIS was blacklisted, Apple made 47 payments
related to the company's blocked apps, including making payments
directly to SIS, OFAC said. Apple also collected about $1.2 million
from customers that downloaded SIS's apps.
OFAC said the span of time over which the alleged violations
happened and the multiple points of failure within Apple's
sanctions compliance program showed "reckless disregard for U.S.
sanctions requirements," according to the agreement.
On the day Mr. Stjepanovic and SIS were blacklisted, Apple ran
the new designations against its app developer account holder
names. But the company's sanctions-screening tool failed to
identify SIS as a blacklisted entity because Apple's system listed
the company as "SIS DOO, " rather than "SIS d.o.o" on OFAC's list,
according to the agreement.
Apple allegedly failed to identify Mr. Stjepanovic as a
blacklisted individual in its system as well, because Apple didn't
screen all individual users associated with an App Store account at
the time, according to the agreement.
Apple also allegedly helped transfer the ownership of SIS's apps
to two other companies several months after the designation,
according to OFAC.
In February 2017, after making changes to its sanctions
screening tool and related processes, Apple identified SIS as a
blacklisted entity, OFAC said. Apple then suspended making payments
to the company that administered SIS's App Store account, but
continued to make payments to the other company that owned some of
SIS's apps for several months after the discovery, according to
OFAC.
Mr. Stjepanovic didn't respond to a request for comment. Efforts
to reach SIS for comment weren't successful.
OFAC credited Apple for its voluntary self-disclosure of the
alleged violations and concluded the case was nonegregious. OFAC
also said the company had made changes to its compliance program,
including increasing the role of the company's global export and
sanctions compliance officer in the review and escalation process
and expanding sanctions screening to app developers' payment
beneficiaries and associated banks.
Write to Mengqi Sun at mengqi.sun@wsj.com
(END) Dow Jones Newswires
November 25, 2019 19:42 ET (00:42 GMT)
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