Apple (NASDAQ: AAPL) on Nov. 25 entered an agreement with the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) to pay a $466,912 civil penalty to settle violations of the Foreign Narcotics Kingpin Sanctions Regulations.
Between Feb. 24, 2015, and May 9, 2017, Apple conducted business with SIS d.o.o., a Slovenia-based app store developer that was placed on the Specially Designated Nationals and Blocked Persons (SDN) List for its connection to narcotics trafficking.
Apple had worked with SIS since July 2008. However, when SIS and its owner, Stavo Stjepanovic, were placed on the SDN List on Feb. 24, 2015, Apple’s sanctions screening tool failed to detect the company as a sanctioned party for nearly two years.
OFAC said, “Apple later attributed this failure to its sanctions screening tool’s failure to match the uppercase name ‘SIS DOO’ in Apple’s system with the lowercase name ‘SIS d.o.o.’ as written on the SDN List.” The term “d.o.o.” is a standard corporate suffix in Slovenia for limited liability company.
Apple also failed to screen Stjepanovic’s name in its records since he was listed as an “account administrator” in its app store developer account. “At the time, Apple’s compliance process screened individuals identified as ‘developers’ but did not screen all of the individual users identified in an app store account against the SDN List,” OFAC said.
U.S. companies and their foreign affiliates are essentially prohibited from conducting business with entities and individuals placed on the SDN List.
During the period of the violations, Apple made 47 payments associated with the blocked app store, including payments to SIS, and collected about $1.15 million from customers who downloaded SIS apps after its placement on the SDN List.
OFAC could have assessed Apple a penalty of $74 million for the violations. However, the agency took into account several mitigating factors, including Apple’s voluntary self-disclosure upon learning the violations, the lack of previous OFAC violations and its cooperation with the agency’s investigation.
Since the violations, Apple also increased the role of its global export and sanctions compliance senior manager in the review process, reconfigured its sanctions screening tool to “fully capture” spelling and capitalization variations and implemented mandatory export and sanctions regulations training for all employees, OFAC said.