UK fines Apple subsidiary over Russia sanctions breach - Computing UK

UK fines Apple subsidiary over Russia sanctions breach

Apple Distribution International fined £390,000

The UK government has fined an Irish subsidiary of Apple £390,000 after it breached sanctions by making payments to a Russian app developer linked to a designated entity.

The penalty was issued by the Office of Financial Sanctions Implementation (OFSI), which found that Apple Distribution International (ADI) transferred more than £600,000 to Okko LLC in 2022 using a UK bank.

Okko, a Russian-language video streaming service operator, had previously been available on major app platforms, where companies such as Apple and Google process subscription and in-app payments on behalf of developers.

However, OFSI said the payments were prohibited under the UK's Russia sanctions regime because the recipient was "wholly owned and controlled by a designated person".

Okko was acquired by Sberbank in 2018, but following Russia's full-scale invasion of Ukraine in February 2022, it was sold to JSC New Opportunities. The UK government placed that company under sanctions in June 2022.

The payments from ADI were made shortly afterwards, in June and July of that year, totalling £635,618.75.

Sberbank itself had already been among the first Russian firms sanctioned by the UK in response to the invasion.

The Washington-based Foundation for Defense of Democracies suggested the sale of Okko to what it described as an "obscure company" may have been an attempt to shield assets from Western sanctions.

OFSI said ADI had voluntarily disclosed the breach and that the fine followed settlement discussions. It added there was no evidence the company knew at the time that the payments violated 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," the regulator said [pdf].

The watchdog also warned that companies outside the UK could still fall foul of sanctions rules if they use UK financial institutions.

In a statement, Apple said it takes compliance obligations seriously.

"We follow the laws in the countries where we operate and take sanctions compliance extremely seriously," a spokesperson said.

"After identifying two payments to a developer that days earlier had become affiliated with a sanctioned entity, we promptly reported our finding to the UK government."

The company added it is continuing to strengthen its compliance systems.

Fines issued by OFSI, part of HM Treasury, remain relatively uncommon, with fewer than 20 penalties imposed since 2019.

The case marks the second enforcement action this year, following a January fine against Lloyds Banking Group related to an account linked to an associate of Russian President Vladimir Putin.

It is also the first case concluded under a new settlement scheme designed to speed up enforcement. Under the scheme, companies can receive reduced penalties in exchange for waiving their right to appeal.

OFSI said Apple faced a potential maximum fine of £1 million, but the penalty was reduced due to the firm's voluntary disclosure and agreement to settle.