On July 8, 2025, the United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) announced a settlement with Harman International Industries, Inc. (“Harman”) for $1,454,145 to settle potential civil liabilities stemming from eleven apparent violations of the Iranian Sanctions Program. Harman, a Connecticut-based audio electronics company, ultimately shipped its products to Iran through a distributor in the United Arab Emirates (“UAE”). Overseas employees at Harman Professional, Inc. (“Harman Pro”)—a U.S. subsidiary of Harman—made these transactions over a period of more than two years.
Harman Professional, Inc. Sells Goods Intended for Iran
From May 22, 2018 through October 27, 2020, 13 British employees at Harman Pro sold products to a UAE distributor with full knowledge that those products would eventually end up in Iran. These employees were all middle-level managers with titles including sales Director, Director of Sales Operations, Senior Director for Finance, Senior Commercial Director, Regional Director, Technical Director, and an Account Manager.
Now typically Harman Pro would not have visibility into the end destination for many of its products that are sold through distributors. This particular UAE distributor purchased goods on an “ex works” basis, where the distributor collected the product from Harman Pro’s Danish distribution center. The distributor would then assume responsibility for the goods from there. Any shipping documents would state that the goods were bound for the company’s warehouses in Dubai and tariffs would be paid to the Emirati government.
Despite this, this group of middle managers at Harman Pro were aware that the goods were ultimately destined for Iran. This became apparent in the group’s internal communications and presentations, as they used codewords in an attempt to obfuscate the true destination of the goods. In a reference to Iran’s geographical proximity to the UAE, the group frequently referred to Iran as “the northern region,” “North Dubai,” or “up north.” The UAE distributor was in on this too, at times requesting discounts for goods it planned to send to “the northern region.” Harman subsequently sent a termination letter to the distributor on November 5, 2019 and fully terminated that relationship on October 27, 2020.
Despite a “rigorous investigation,” neither the company nor OFAC could definitively determine the extent of the violations. The investigation revealed that the sales team at issue failed to keep proper records and, as previously discussed, worked to obfuscate any sales that might end up in Iran. Following the investigation, OFAC extrapolated that the value of goods sold to Iran was approximately $148,261 across eleven shipments.
OFAC’s Findings
OFAC ultimately identified several aggravating factors, the most serious being that several Harman Pro staff members had actual knowledge of the violations and willfully engaged in efforts to conceal and obfuscate the sales to Iran indicating an understanding that the transactions were likely prohibited. OFAC also noted that Harman is a large and sophisticated company and should have had more effective compliance controls in place.
For mitigating factors, OFAC noted that Harman did not have any prior violations; it undertook a rigorous internal investigation utilizing outside counsel and an external auditor; it enhanced its sanctions compliance program with additional resources, reporting guidelines, and enhanced autonomy and resources for the Legal Department and Global Trade Department; and was highly cooperative with OFAC during the course of the investigation.
Key Compliance Pointers
Ultimately, this type of violation is relatively common, as OFAC previously highlighted in its sanctions compliance guidance, “A Framework for OFAC Compliance Commitments.” OFAC highlighted that one of the most common root causes of sanctions violations is from a foreign subsidiary or brand of a U.S.-based corporation not realizing or understanding that U.S. sanctions laws still apply to them. These foreign entities are still considered U.S. Persons under the sanctions regulations by virtue of being owned and operated directly by their U.S. headquarters. Too often, these foreign entities don’t receive proper sanctions training and guidance, or are just left to their own devices without any oversight.
In addition, OFAC noted the danger in allowing business units to police themselves. Without effective controls and oversight, business units may be incentivized to chase revenue and profits at the expense of compliance. This danger is especially apparent in a sales-driven organization, which Harman was.
Finally, companies should always take a risk-based approach towards compliance. Resources and efforts should be focused on those areas that present that highest risk. Here, the UAE is a known transshipment point for goods destined for Iran. This distributor needed additional controls to better manage the potential risks here, especially when the decisions are left to sales staff outside the U.S.
Lessons Learned from the Harman International Settlement with OFAC
1. U.S. Sanctions Apply to Foreign Subsidiaries
A common root cause of sanctions violations, as highlighted by OFAC, is the failure of foreign subsidiaries to recognize their obligations under U.S. sanctions laws. As a U.S.-owned entity, Harman Pro was subject to ITSR, yet its British employees facilitated prohibited transactions.
Action Item: Ensure foreign subsidiaries receive comprehensive sanctions training tailored to U.S. requirements. Implement clear policies and regular audits to align global operations with OFAC regulations.
2. Beware of Business Units “Self-Policing”
Harman Pro’s sales-driven culture may have incentivized revenue over compliance, exacerbated by insufficient oversight. Allowing business units to self-police without robust controls can lead to violations, particularly in high-risk regions.
Action Item: Establish centralized compliance oversight with clear reporting lines to the Legal or Compliance Department. Conduct regular risk-based audits or reviews of business units, and provide frequent compliance trainings and communications.
3. Heightened Risk in Transshipment Hubs
The UAE’s role as a known transshipment point for Iran-bound goods amplified the risk in this case. “Ex works” arrangements, where distributors assume shipping responsibilities, can obscure the true destination of goods.
Action Item: Apply enhanced due diligence (EDD) to distributors in high-risk jurisdictions like the UAE. Require end-use certifications and conduct periodic post-shipment audits to verify compliance with sanctions requirements.
4. Recordkeeping is Critical
Incomplete recordkeeping hindered Harman’s investigation and OFAC’s ability to quantify the violations. Poor documentation can complicate compliance efforts and increase enforcement exposure.
Action Item: Implement standardized recordkeeping protocols for all transactions, especially those involving distributors. Ensure records capture end-user details and are accessible for audits and investigations.
5. Proactive Remediation Helps Mitigate Penalties
Harman’s voluntary self-disclosure, cooperation, and remediation efforts led to a reduced penalty. This underscores the value of transparency and proactive compliance enhancements.
Action Item: Develop internal protocols for identifying, escalating, and reporting potential violations promptly. Document remediation efforts, such as policy updates or training, to demonstrate good faith to OFAC.