After Russia annexed Crimea back in 2014, the US government imposed several sanctions to restrict American companies from doing business with sanctioned individuals and entities. However, Microsoft has recently found itself in trouble with the US Treasury and Commerce Departments for allegedly violating US sanctions on Russia and other countries. As a result, the department has ordered Microsoft to pay over $3 million in fines after its products and services ended up in the hands of blacklisted companies and persons in the Crimean region of Ukraine.

The violations reportedly took place between July 2012 and April 2019, thus predating the Russian invasion of Ukraine. The US authorities accuse Microsoft of using an indirect resale model in Russia to develop sales leads and negotiate bulk sales with end customers. In simple terms, Microsoft sold its products to non-blacklisted companies, which then sold them to blacklisted entities.

“In certain volume-licensing programs involving sales by intermediaries, Microsoft was not provided, nor did it otherwise obtain, complete or accurate information on the ultimate end customers for its products,” says the OFAC’s notice.

Additionally, Microsoft’s failure to obtain accurate information about some of these end-users and the possible intentional circumvention of the company’s screening controls by Microsoft employees in Russia also contributed to these violations. For instance, Microsoft initially rejected one of Stroygazmontazh’s subsidiaries, a Russian infrastructure company, as a potential customer after blacklisting the company back in 2014. However, Stroygazmontazh still managed to get Microsoft products by using a pseudonym arranged by the company’s employees in Russia.

Microsoft’s self-discovery and reporting of violations

While this violation demonstrated a reckless disregard for US sanctions, the Treasury Department also acknowledged that Microsoft self-discovered the violations, investigated them, and self-reported them to the government. Moreover, the company has also made significant changes to its enforcement policies and measures.

“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,” said a Microsoft spokesperson.