Apple subsidiary fined by UK government over Moscow sanctions breach

The UK government has fined a subsidiary of Apple £390,000 for breaching sanctions against Moscow over payments it made to a Russian streaming platform.Apple Distribution International (ADI), based in the Republic of Ireland, instructed an unnamed UK-based bank to make two payments to a company owned by a sanctioned Russian entity.The payments, worth more than £635,000 in total, were made to the streaming service Okko from an ADI bank account based in Britain. ADI is responsible for selling Apple products in Europe and the Middle East, including from the iPhone maker’s app store.The fine was imposed by the Office of Financial Sanctions Implementation (OFSI), the UK’s sanctions watchdog and part of the Treasury.“OFSI imposed a monetary penalty on ADI because it was satisfied, in relation to these payments, that on the balance of probabilities ADI had breached prohibitions imposed by financial sanctions legislation,” the watchdog said.Okko had been bought by Sberbank, Russia’s largest bank, in 2018 but after the Russian invasion of Ukraine in February 2022 it was sold to a company called JSC New Opportunities, which was placed under sanctions by the UK government in June 2022. The Okko payments were made in June and July of that year.Sberbank was among the first Russian companies to be added to the UK’s sanctions list after Russia’s full-scale invasion of Ukraine.The Foundation for Defense of Democracies, a US thinktank, said the sale of Okko by Sberbank to an “obscure company” was probably an “attempt to shield those assets from western sanctions”. JSC New Opportunities was created in March 2022.OFSI said ADI voluntarily disclosed the payments and the fine had been imposed after settlement talks. It said ADI had no reason to suspect that the payments would have been in breach of sanctions.“Whilst there were publicly available press articles stating that Okko was wholly owned by a designated person, there is no evidence that ADI was aware of those press articles at the relevant time or that third-party diligence providers were aware of this information,” OFSI said.It said the case underlined that non-UK companies could be found in breach of sanctions if they used UK financial institutions to conduct payments. It added that firms should ensure they have robust due diligence frameworks to monitor their client and customer base, and that using third-party sanctions screening firms – as the tech company did – carried risks.An Apple spokesperson said: “We follow the laws in the countries where we operate and take sanctions compliance extremely seriously. After identifying two payments to a developer that days earlier had become affiliated with a sanctioned entity, we promptly and proactively reported our finding to the UK government. We are constantly working to enhance our already robust compliance protocols, which are consistent with industry standards.”