MICROSOFT AGREES TO PAY NEARLY $3M FOR ALLEGED OFAC SANCTIONS VIOLATIONS
May 22, 2023
On April 6, 2023, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) issued a press release announcing a settlement with Microsoft Corporation (“Microsoft”) for $2,980,265.86 in relation to the exportation of services or software by Microsoft from the U.S. to sanctioned individuals in violation of OFAC’s Cuba, Iran, and Ukraine/Russia- related sanctions programs.
Microsoft allegedly sold and/or activated software licenses and provided related services from servers located in the U.S. and Ireland to blocked individuals known as Specially Designated Nationals (“SDNs”) located in Cuba, Iran, Syria, Russia, and the Crimea region of Ukraine between July 2012 and April 2019, which resulted in a total value of sales of over $12 million. OFAC further alleged that sales of the software and services to SDNs constituted sanctions violations as the sales were ineligible for any general licenses or other exemptions. OFAC noted that upon an investigation into the alleged violations, it found that some of the causes of the violations included Microsoft’s failure to obtain complete or accurate information on the identities of the end customers of its products, and the fact that during the time period in question, there were apparent shortcomings in Microsoft’s restricted-party screening processes. While the statutory maximum civil monetary penalty OFAC could have imposed in this case is $404,646,121.89, OFAC noted that based on the mitigating factors it found, such as the fact that Microsoft voluntarily self-disclosed the violations, and because it considered the case to be “non-egregious”, a settlement amount of $2,980,265.86 was appropriate. This is important as it shows how vital voluntary self-disclosures and having a robust internal monitoring process can be to mitigate and get civil penalties reduced for violations.
If you have any questions, please contact Evelyn Sahr (esahr@eckertseamans.com 202-659-6622) or Drew Derco (dderco@eckertseamans.com 202-659-6665).
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