【Nanda van Bergen】

Drug dealers and Nanda van Bergenweapons of mass destruction manufacturers like to shop on Amazon as much as the next guy. But that doesn't mean they're allowed to.

On Wednesday, the Department of the Treasury announcedit had reached a settlement with Amazon for trade sanctions violations. Amazon voluntarily disclosed to the government that between 2011 and 2018, its automatic screening processes had failed to stop blacklisted individuals as well as people residing in countries under trade sanctions such as Iran, Syria, and Crimea from buying goods and services on the site.

The maximum penalty for the violations is a bit over $1 billion. However, Amazon will be paying just under $135,000.

That amount might sound paltry, especially for a company worth around $1.5 trillion. However, to experts, the number checks out.

"It is low," said Richard Nephew, a Brookings Institute senior fellow and author of The Art of Sanctions,"but probably consistent with the cooperative approach taken by Amazon."

The Office of Foreign Assets Control (OFAC), which is in charge of levying sanctions violations, is intentionally moderate on some penalties as a way to encourage companies to self-report and fix their mistakes. One OFAC statute automatically cuts potential penalties in half if a company comes forward on its own (as Amazon did).

"OFAC is always trying to foster compliance with sanctions regulations and it uses its enforcement actions as a key part of its overall strategy to promote compliance," Perry S. Bechky, a partner at the law firm Berliner Corcoran & Rowe LLP, who specializes in international trade law, said via email.

Then, it's under OFAC's discretion to determine whether the violation was "egregious" or "non-egregious"; largely, if the violation was intentional or by mistake. Egregious violations get the hammer dropped on them, while non-egregious ones get more leniency. Since OFAC determined Amazon's violation was non-egregious, and they are fixing their systems, that provided further reason for leniency.

Thanks to these "mitigating factors," instead of paying up to $300,000 per transaction for at least hundreds, and potentially thousands, of transactions, OFAC is basing its fine on the total value of the transactions: The $135,000 number Amazon will pay is half of the total amount of the transactions made by sanctioned parties, roughly $269,000.

"OFAC has discretion to raise or lower a penalty from the baseline penalty where there are aggravating or mitigating factors, but in this case it seems to have concluded that the aggravating and mitigating factors offset each other," Bechky said. "I think that what was especially important for Amazon as a mitigating factor was its major commitment to improve its screening to minimize future violations."

So what were these sanctioned and "blacklisted" entities buying? With a few exceptions, mostly the same run of the mill junk as everyone else.

"The apparent violations consisted primarily of transactions involving low-value retail goods and services," the announcement reads. "Some of the apparent violations related to Amazon’s processing of orders for personal security products on behalf of persons located at the Iranian embassies in Tokyo, Japan, and in Brussels, Belgium."

In addition to the Iranian embassy shoppers, other parties implicated in the sanctions were shoppers "located in or employed by the foreign missions of" Crimea, Cuba, Iran, North Korea, Sudan, and Syria. OFAC also "blacklists" specific individuals from doing business with American companies, including known drug traffickers, WMD manufacturers, and organized crime leaders. Mob bosses apparently love an Amazon deal, too!

It's American companies' job to screen for individual names and shoppers by location, to make sure they can't do business with American companies. Amazon did not catch the names of the blacklisted individuals, even when they were spelled correctly. Its systems also failed to screen for locations of embassies located in other countries, and common misspellings of trade-sanctioned places (e.g., "Krimea").

OFAC's announcement says Amazon has made significant investments in improving its systems. Even so, it notes that "such large and sophisticated businesses should implement and employ compliance tools and programs that are commensurate with the speed and scale of their business operations."

Given Amazon's "speed and scale," that's a tall order. So if there's a next time when it comes to these violations, maybe OFAC won't be so nice.