Report on Supply Chain Compliance 2, no. 23 (December 12, 2019)
The United States Department of the Treasury’s Office for Foreign Asset Control (OFAC) reached a settlement with Apple, Inc. for “apparent violations of the Foreign Narcotics Kingpin Sanctions Regulations, 31 C.F.R. part 598 (FNKSR) .”[1]
According to the settlement agreement, starting in 2008 Apple had a relationship with SIS, a Slovenian software company. In 2015, OFAC designated SIS and Savo Stjepanovic, a director and majority owner of SIS, pursuant to the Foreign Narcotics Kingpin Designation Act. Despite having screening software and access to the data, Apple did not stop making payments to SIS or collecting payments from customers who downloaded SIS apps. It wasn’t until after Apple enhanced its sanctions screening tool and related processes in 2017 that the company realized it had been doing business with a designated entity.
Apple failed to identify SIS as a blocked company for over two years even though the address for SIS that Apple collected matched the address for SIS that OFAC identified and published. Apple also missed Stjepanovic’s OFAC designation because he was listed as an “account administrator” in its App Store developer account but not as a “developer.” At the time, Apple didn’t screen everyone identified in an App Store account against the SDN [Specially Designated Nationals] List, only developers.[2]
Despite these missteps, OFAC decided to go lightly on Apple:
The statutory maximum civil monetary penalty applicable in this matter is $74,331,860. OFAC determined, however, that Apple voluntarily self-disclosed the Apparent Violations, and that the Apparent Violations constitute a non-egregious case. Accordingly, under OFAC’s Economic Sanctions Enforcement Guidelines (“Enforcement Guidelines”), the base civil monetary penalty amount applicable in this matter is $576,434.[3]