UK fines Irish Apple outpost over sanctions-busting payments to Russian dev
The UK government has fined an Apple subsidiary £390,000 for breaching sanctions on Russia after it sent more than £600,000 to a developer linked to a designated entity.
The penalty, issued by the Office of Financial Sanctions Implementation (OFSI), targets Apple Distribution International (ADI), the iGiant's Irish arm responsible for moving products and payments around Europe, the Middle East, and Africa. The watchdog said ADI used a UK bank to make two payments in 2022, totaling £635,618.75, to Okko LLC, a Russian app developer linked to a sanctioned party.
The app maker operates a popular Russian-language video streaming service, which was previously available on the Apple App Store and Google Play. Apple and Google routinely collect payments for subscriptions and in-app purchases from users in their respective platforms, keeping a fee before giving the rest of the money to developers. In this case, the issue is that the money flowed to an entity "wholly owned and controlled by a designated person," making the payments prohibited under the UK's Russia sanctions regime.
Apple said in a statement to several outlets in Monday that it takes compliance with sanctions "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," it stated.
As OFSI put it: "Both payments were made directly to an entity wholly owned and controlled by a designated person. By breaching prohibitions and providing financial benefit to this entity, ADI undermined the asset freeze and diminished its intended impact on Russia's behavior."
"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 regulator said [PDF]. "No penalty was imposed on, nor findings of a breach made against, Apple Inc."
There is no suggestion this was a deliberate attempt to evade sanctions. Instead, the notice reads like a case of compliance lag meeting fast-moving geopolitics. The payments landed in mid-2022, not long after sanctions were imposed on Russian financial institutions following the invasion of Ukraine, and before ADI's systems had fully caught up.
That did not prevent the penalty. OFSI operates under a strict liability regime, meaning companies can be fined whether or not they meant to break the rules.
Neil Dooley, partner at Quillon Law, told The Register that the case "illustrates the importance of companies having robust sanctions policies to ensure payments are not made inadvertently to sanctioned entities," adding that while there is "no suggestion that Apple sought to circumvent sanctions," the company was "slow to update their payment systems and failed to spot several red flags."
Apple did eventually flag the issue itself and entered into what Dooley described as years of back-and-forth with the regulator. "By settling with OFSI, Apple was able to secure a 35 percent reduction in the fine imposed," he said, framing the outcome as a template for how to handle sanctions missteps: own up early, cooperate, and hope for a discount.
Apple did not respond to The Register's questions. ®
