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Microsoft to Pay $3.3M To Sell Software To Blacklisted Entities

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Microsoft to Pay $3.3M To Sell Software To Blacklisted Entities

According to the US Treasury, Microsoft has agreed to pay 25 minutes of its quarterly profits to resolve allegations. The US sanctions hold the company responsible for selling software and services to blackballed individuals and organizations in Iran, Russia and a few other countries. The net amount due is $3.3million. After negotiations with Microsoft, the US Treasury Department announced this settlement.

Microsoft headquarters immediately blocked all accounts that were linked to the individuals and companies on the blacklist.

US Treasury officials published an “Enforcement Notice” PDF earlier this week. They referred to the alleged act by Microsoft as “Reckless Disregard for US Sanctions.”

The report also states that Microsoft managers in America were unaware of the violations. These illegal activities were later discovered by them when they did a’self initiated’ lookback.

These findings prompted Microsoft officials to investigate the sales and report them back to the Office of Foreign Assets Control.

Microsoft’s Stance

Redmond, a Microsoft spokesperson stated that Microsoft had been 100% cooperative to the Treasury, allowing them complete their investigation. The company also stated that it has no grievances regarding the settlement.

Microsoft takes export control compliance and sanctions compliance very seriously. We voluntarily disclosed the infractions and screening failures of a few employees to the appropriate authorities after learning about them.Redmond, Microsoft spokesperson

The enforcement statement describes a case that explains the complex business operations module at large multinational companies such as Microsoft. It also detailed Redmond’s volume licensing sales, incentive program, and how Microsoft’s overseas subsidiaries used it to sell their software products through distributors and third-party resellers.

The Russian instances used an indirect resale model, which was operated by a third party licensing solutions partner. However, Microsoft Russia used this model to generate leads and retain bulk sales. Microsoft Ireland, on the other hand, used to bill the licensing partners each year.

Take a closer look at the numbers

The Treasury has determined that the settlement amount of $3.3M was reached after counting 1,339 cases between 2012 and 2019. Microsoft Russia and Microsoft Ireland are believed to have dealt with Iranian and Russian blacklisted agencies. They have also sold products to Syrian and Cuban organisations, and they have broken US export control regulations while sealing these deals.

These 1252 sanction-breaching deals included deals with Crimea-based Russians as well as Russian organizations.

It is worth noting that Crimea is part of Ukraine which was illegally occupied in 2014. The recent war has seen Ukraine raise its voice against Russia’s invasive approach. The Ukraine government has requested that Russia return Crimea.

The US Treasury Department found 54 sales instances for Cuba, 30 for Iran and 3 for Syria.

Microsoft will pay approximately 2.9 million dollars to the US Treasury Department, and the Commerce Department for this illegal activity. The company sold software and services to blacklisted entities for $12 million. Microsoft has stated that it does not believe there is any guilt in the settlement.

OFAC claims that the scam was perpetrated by Microsoft subsidiaries who failed to verify the identities of the victims. Resellers failed to provide sufficient information, while employees from Microsoft Russia and Ireland deliberately evaded the screening control policies of the organization when cross-verifying an end customer’s identity.

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