Harman International OFAC Settlement: $1.5M (2025)

From at least May 22, 2018 through October 27, 2020, Harman's longtime UAE distributor sold Harman products to customers in Iran with the knowledge and support of 13 British employees (the "British Sales Team") employed directly by Harman's U.S. subsidiary, Harman Professional, Inc. ("Harman Pro"). These middle level managers included a Sales Director, a Director of Sales Operations, a Senior Director for Finance, a Senior Commercial Director, a Regional Director, a Technical Director, and an Account Manager.

Harman Pro shipped goods to the Distributor on an "ex works" basis, with the Distributor collecting products from Harman's Danish distribution center and assuming responsibility for onward shipment and export. The Distributor would file export declarations with Danish customs authorities, ship products to its Dubai warehouses, and pay applicable Emirati tariffs. While Harman Pro had no direct visibility into the disposition of goods after collection, members of the British Sales Team understood the Distributor's practice of channeling Harman goods to Iran. Some suspected such dealings may be prohibited, and at least one end user was the Iranian government.

To obscure references to Iran in internal emails and sales presentations, from at least December 2016 to July 2019, the British Sales Team used terms such as "the northern region," "North Dubai," and "up north" as apparent references to Iran's geographical location directly north of the UAE. On August 22, 2017, the EMEA Vice President and General Manager approved a discount on products the Distributor planned to ship to the "northern region." On September 29, 2017, the EMEA Regional Director reported that most of the Distributor's business is in "North Dubai." On July 10, 2019, the Senior Director for EMEA Regional Sales Operations told the EMEA Regional Director that a product was for an end-user "up north." On November 5, 2019, Harman Pro sent a formal termination notice to the Distributor and terminated its relationship with the Distributor on October 27, 2020.

Harman had no formal system for monitoring or auditing sanctions-related risks and relied on business units to identify potential issues. Only one employee, the Senior Director of Supply Chain & Global Trade Compliance, was responsible for managing all U.S. economic sanctions and export control risks, without adequate expertise or screening tools. Because of the British Sales Team's obfuscation efforts, the total value of diverted goods could not be definitively determined; OFAC extrapolated it to be approximately $148,261 across the 11 shipments. The British Sales Team's employees were directly employed by Harman Pro, a U.S. person, and their conduct is attributable to Harman. The conduct constituted apparent violations of 31 C.F.R. § 560.204(a) of the ITSR.

The statutory maximum civil monetary penalty applicable in this matter is $4,154,700, reflecting the applicable statutory civil monetary penalty under the International Emergency Economic Powers Act (IEEPA) for the 11 apparent violations. OFAC determined that Harman self-disclosed the apparent violations and that the apparent violations constitute an egregious case. Accordingly, under OFAC's Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, app. A, the base civil monetary penalty applicable in this matter equals one-half of the statutory maximum, which is $2,077,350.

The settlement amount of $1,454,145 reflects OFAC's consideration of the General Factors under the Enforcement Guidelines. As partial satisfaction of the settlement amount, Harman has agreed to invest $400,000 in additional sanctions compliance controls.

Foreign employees of U.S. companies can create risks for their employers in the absence of controls sufficient to prevent noncompliance. Geographic distance of employees from a company's U.S. headquarters or offices should not result in diminished oversight, even if those employees are based in a third country.

Failure to invest in strengthening compliance functions and relying on business units to identify potential sanctions issues may not be prudent, particularly in the absence of robust policies and controls to ensure such units are able to competently undertake those functions. The challenges may be particularly acute in a sales-driven corporate culture that prioritizes revenue generation over compliance. Risks can be reduced for global companies by having strong, independent compliance programs with appropriate resources in place.

Distributors in high-risk jurisdictions may warrant dedicated attention and monitoring to ensure U.S. companies do not deal with sanctioned jurisdictions. This is particularly so when U.S. company employees dealing with such distributors are themselves located in third countries.

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