On November 25, Apple agreed to pay OFAC approximately $470,000 to settle its potential civil liability in relation to alleged violations of dealings with parties on the SDN List. Between 2015 and 2017, Apple dealt in the property and interests in property of SIS d.o.o. (SIS), a Slovenian software company, despite the fact that SIS and its owner were both placed on the SDN List in 2015. Specifically, Apple hosted, sold, and facilitated the transfer of SIS’s software applications and made 47 payments to SIS in connection with downloads of SIS’s apps from Apple App Store users. This is the second OFAC enforcement action in almost a year that occurred because of a breakdown in denied party screening procedures.
Apple initially entered into an app development agreement with SIS in 2008, and SIS was designated in Apple’s system as “SIS DOO.” On the day OFAC added SIS and its owner to the SDN List in 2015, Apple screened its app developer account holder names using its sanctions screening tool (presumably a tool that conducted daily screenings). However, the software failed to match the upper case name “SIS DOO” in Apple’s system with the lower case name “SIS d.o.o.” as written on the SDN List, and Apple failed to identify SIS as an SDN for over two years. In addition, Apple failed to identify SIS’s owner, who was listed as an account holder, as an SDN, even though Apple was in possession of his name. At the time, Apple’s compliance process did not screen all individual users associated with an App Store account against the SDN List.
After enhancing its sanctions screening tool in February 2017, Apple noticed the mistake and immediately suspended all activity with and payments to SIS, as well as voluntarily disclosed their violations to the government.
In November 2018, Cobham Holdings, Inc. (Cobham) agreed to pay OFAC $87,507 to settle potential violations of OFAC’s Ukraine Related Sanctions because of a denied party screening lapse. Cobham shipped goods to Almaz Antey Telecommunications (AAT), an entity 51% owned by JSC Concern Almaz-Antey, who is listed on the SDN List. AAT was not on the SDN List. Cobham’s denied party screening software used an all word match criteria that would only return matches containing all of the searched words, even though Cobham had set the search criteria to “fuzzy” to detect partial matches. This meant that the software failed to match “Almaz Antey” when Cobham searched for “Almaz Antey Telecom.”
These enforcement actions exhibit the potential failures in a denied parties screening software system and the importance of ensuring that comprehensive screening measures are in place, including utilizing software that fully reviews all potential identifying information of a screened entity and accounts for discrepancies that may occur during the screening process.
For more information on how these could impact your business, contact:
- Martin Lutz, Partner (firstname.lastname@example.org, 512-495-6024),
- Lindsey Roskopf, Attorney (email@example.com, 713-615-8534), or
- Another member of the McGinnis Lochridge International Trade and Transactions Practice Group