Microsoft admits that it sold its software and services to Russian companies under sanctions amid the invasion of Ukraine. Furthermore, Microsoft says it also sold software to blacklisted organizations in Syria, Iran, and Cuba. The U.S. Treasury and Commerce Departments said last week Microsoft is now paying over $3 million to settle the case.
According to an announcement from the department last week, the matter is now closed. Microsoft had over 1,300 violations of U.S. sanctions and export controls between 2012 and 2019. While the violations happened before the ongoing Ukraine war, many happened during Russia's invasion of and annexing of the Crimea region in Ukraine in 2014.
According to the Treasury Department, Microsoft failed to identify and prevent the use of its products by prohibited parties, due to a lack of complete or accurate information on the end customers and shortcomings in its restricted-party screening. The report suggests Microsoft brought over $12 million in revenue from sales to the sanctioned companies.
It is worth noting the company self-disclosed the issue, which seems to have helped in reaching a settlement. The violations were discovered by Microsoft's internal audit and voluntarily disclosed to the authorities.
“The settlement amount reflects Office of Foreign Assets Control's (OFAC) determination that the conduct of the Microsoft Entities was non-egregious and voluntarily self-disclosed, and further reflects the significant remedial measures Microsoft undertook upon discovery of the apparent violations,” The Treasury Department said last week in a report from Office of Foreign Assets Control (OFAC).
Tech Companies Must Maintain Standards Over Profit
The settlement is a wake-up call for the tech industry, which faces increasing scrutiny from regulators over its global operations and potential national security risks. The U.S. government has imposed sanctions and export restrictions on several countries and entities that pose a threat to its foreign policy interests, such as Iran, North Korea, China's Huawei Technologies Co. and Russia's Rusal PLC.
Tech companies that sell software and services to these markets must ensure that they have robust compliance programs and controls in place to prevent their products from falling into the wrong hands. Otherwise, they risk facing hefty fines, reputational damage and loss of business opportunities.
In a statement to Reuters, Microsoft acknowledged its failures in complying with the sanctions and said it had cooperated with the investigation and was pleased 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.”
Microsoft's Proactive Approach to Russia's Invasion of Ukraine
Despite the violations and settlement, Microsoft has been a leader amongst major tech companies in punishing Russia for its illegal invasion in Ukraine.
Following the invasion of Ukraine, major brands ranging from Microsoft to Coca-Cola have stopped sales in Russia. Google chose its own punishment in Russia, including suspending all payments on Google Play Store.
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