AAPL Apple Inc

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)

Copyright (c) 2019 Dow Jones & Company, Inc.