Lessons Learned from the Apple Settlement: The Challenge of Over-Reliance on Database Screening Tools

Apple, Inc.’s recent settlement with the Department of Treasury’s Office of Foreign Assets Control (OFAC) for violations of sanctions due to the flaws in its screening system has refocused attention on how screening tools should be used in compliance programs. The settlement highlights the importance of detailed screening procedures for the use of sanctions screening software and adequate employee training to resolve potential red flags.

Due to the complexity of the regulations under which compliance teams must keep track of the parties with which they interface, the use of database screening tools has become an important pillar in any compliance program. Apple, like many organizations of its size, used a sanctions screening tool to vet its third parties. In this case, Apple screened app developers to determine if they were on the OFAC’s List of Specially Designated Nationals Blocked Persons (the “SDN List”) as a significant foreign narcotics trafficker (“SDNTK”). However, the screening failed to identify a Slovenian software company “SIS, d.o.o.” (“SIS”) which provided software applications to Apple as an SDNTK.