Microsoft fined for violating sanctions by selling software to Russian companies

Microsoft has agreed to pay over $3 million to settle a potential civil liability for more than 1,300 alleged sanction violations. The violations reportedly involved the sale of products and services to individuals and companies in countries including Russia, Cuba, Iran, Syria, and the Crimea region of Ukraine, between July 2012 and April 2019. Microsoft allegedly sold software licenses, activated software licenses, and related services from its US and Ireland servers to “Specially Designated Nationals” and blocked users in these countries.

The company reportedly sold $12.1 million worth of services to banned customers over the course of nearly seven years. Accounting for almost 94% of all instances were the 1,252 Russian sales. A further 54 in Cuba, 30 in Iran, and 3 in Syria also occurred.

In response to the alleged violations, Microsoft and its Ireland and Russia subsidiaries agreed to a settlement worth $2.98 million with The Office of Foreign Assets Control (OFAC) of the US Department of the Treasury. The company also paid $624,013 to the Bureau of Industry and Security (BIS). BIS later issued a $276,382 credit, bringing Microsoft’s net settlement to almost $3.3 million for both bodies.

Despite a maximum fine of more than $404.6 million, the OFAC decided that less than 1% of this would be sufficient given Microsoft’s voluntary self-disclosure of the apparent violations and the non-egregious nature of the case despite the “reckless disregard for US sanctions.”

It is unclear whether Microsoft has reconsidered its business practices following Russia’s invasion of Ukraine. However, Russian media alleged that Microsoft (and Intel) had resumed some business in the country earlier this year.

In a statement, a Microsoft spokesperson said, “Microsoft takes export control and sanctions compliance very seriously, which is why after learning of the screening failures and infractions of a few employees, we voluntarily disclosed them to the appropriate authorities. We cooperated fully with their investigation and are pleased with the settlement.”

This settlement highlights the importance of companies adhering to US sanctions and export control regulations. It also emphasizes the need for companies to implement effective compliance measures to prevent similar violations from occurring in the future.