08 Apr Microsoft To Pay $3.3M For Selling Software To Blacklisted Entities
A report from the US Treasury confirms that tech giant, Microsoft, has agreed to pay approximately 25 minutes of its quarterly profit to fix allegations. The US sanctions have held the company responsible for selling services and softwares to blackballed organizations and individuals in Iran, Russia, and a few other countries. The net payable amount is $3.3 million. The US Treasury Department declared this settlement after negotiating with Microsoft.
The Microsoft headquarters immediately blocked the accounts linked to the blacklisted companies and individuals.
The US Treasury officials released a PDF named ‘Enforcement Notice‘ earlier this week, where they pointed out the alleged act of Microsoft as “Reckless Disregard for US Sanctions.”
The report also mentions that Microsoft managers in America were completely unaware of the violations. They later found these unlawful activities when carrying out a ‘self-initiated’ lookback.
These findings encouraged Microsoft officials to investigate those sales and report them to the Office of Foreign Assets Control (OFAC).
Redmond, a Microsoft spokesperson, declared that Microsoft had been 100% cooperative with the Treasury, allowing them to complete their investigation successfully. In addition, the company has no grievances with the settlement.
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.Redmond, Microsoft spokesperson
The enforcement statement outlines a case that describes the complex business operations module of giant multinational companies like Microsoft. It also described Redmond’s volume licensing sales and incentive program, which Microsoft’s overseas subsidiaries abused to sell software products through third-party resellers and distributors.
While the Russian instances followed an indirect resale model operated by a third-party licensing solutions partner, Microsoft Russia used to fetch leads and retain bulk sales by leveraging this model. On the other hand, Microsoft Ireland used to bill the licensing solution partners every year.
A Close Look at the Numbers
According to the Treasury, the settlement figure of $3.3M has been fixed after counting a total of 1,339 cases that took place between 2012-2019. It’s being said that Microsoft Russia and Microsoft Ireland have dealt with Russian and Iranian blacklisted agencies. In addition, they have also sold products and services to Syrian and Cuban organizations, and they have violated US export controls regulations while sealing those deals.
Those alleged 1252 sanction-breaching sales included deals with Crimea-based Russians and Russian organizations.
It’s worth mentioning that Crimea falls under a part of Ukraine that was illegally occupied by Russia in 2014. After the recent war, Ukraine is continuously raising its voice against this invasive approach of Russia, and the Ukraine government has asked Russia to give back Crimea.
The US Treasury Department has found 54 sales instances cited for Cuba, 30 for Iran, and 3 for Syria.
Given this unlawful activity, Microsoft will pay around 2.9 million dollars to the US Treasury Department and the commerce department. Overall, the company has sold software and services worth $12 million to hundreds of blacklisted entities. Microsoft has declared that it doesn’t find any guilt in the settlement.
OFAC says that this scam happened because the subsidiaries of Microsoft overlooked verifying the customers’ identities. Resellers didn’t provide adequate information, while employees in Microsoft Russia and Ireland employees intentionally avoided adhering to the organization’s screening control policies when cross-verifying the ultimate end customer’s identity.