Tech Company Settles Charges for Sale of Products into Sanctioned Jurisdictions

A U.S.-based multinational technology company settled coordinated enforcement charges by the Commerce Department Bureau of Industry and Security ("BIS") and OFAC for failing to identify and prevent the sale of technology products to blocked persons and into sanctioned jurisdictions.

In a Settlement Order, BIS stated that a Russian subsidiary of the technology company knowingly caused an Irish subsidiary to sell software licenses that were used to give access to two Russian entities that were on BIS’s Entity List. BIS determined that the software at issue was subject to Export Administration Regulations and that the Russian subsidiary committed seven violations of those regulations. To settle any potential civil liability, the technology company agreed to pay a civil penalty of $624,013. Additionally, BIS stated that compliance with the terms of the Settlement Agreement and Order are conditions to the continuing validity of any export license granted to the technology company.

In an OFAC Agreement, the company settled apparent civil liability violations under Cuba, Iran, Syria and Ukraine-/Russia-related sanctions programs. The apparent violations took place between 2012 to 2019 and occurred in the context of the technology company’s volume licensing and sales program, by which third-party licensing solution partners ("LSPs") would negotiate commercial supply agreements with end customers. OFAC found that the technology company’s Irish subsidiary would bill the LSPs, who would, in turn, bill and collect payment from the end customers. OFAC stated that for some of these license and sales programs, the technology company did not obtain complete and accurate information on the end users, leading to 1,300+ sales to specially designated nationals, blocked persons, and end customers in sanctioned jurisdictions. OFAC noted that the process of facilitating software downloads, license activations, product key verifications, and subsequent usages relied, at least in part, on U.S.-based servers and system, thus providing a U.S. nexus for the apparent violations. To settle its potential civil liability with OFAC, the technology company agreed to a settlement payment of $2,980,265.