Harman Hit with $1.45 Million Penalty Over Iran Sanctions Breaches Tied to Overseas Sales Team

Key Takeaways

• Sanctions Violations Tied to Overseas Staff: Harman's UK-based employees, working for its U.S. subsidiary, knowingly supported sales of audio equipment to Iran through a UAE distributor, violating U.S. sanctions regulations.
• Coded Language Used to Conceal Dealings: Employees referred to Iran as “North Dubai,” “up north,” and “the northern region” in internal emails to hide the true destination of the products.
• Compliance Failures Enabled Misconduct: OFAC found Harman lacked adequate oversight, with only one under-resourced compliance officer and no formal system to monitor sanctions risk.
• Voluntary Disclosure and Remediation: Harman self-reported the violations, launched an internal investigation, revamped its compliance program, and committed $400,000 to additional controls.
• $1.45M Settlement Reflects Both Cooperation and Seriousness: OFAC considered the violations egregious but factored in Harman’s cooperation and remediation efforts when setting the penalty below the statutory maximum.

Deep Dive

Harman International Industries, the U.S.-based electronics company behind well-known audio brands, has agreed to pay $1.45 million to settle apparent violations of U.S. sanctions on Iran—violations that, according to regulators, were knowingly enabled by the company’s overseas staff and overlooked due to a lack of internal controls.

The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced the settlement this week, outlining how employees of Harman’s U.S. subsidiary in the UK helped facilitate product sales to Iran via a long-time distributor based in the United Arab Emirates. The misconduct took place over a two-year period and was described by OFAC as “egregious,” even though Harman voluntarily disclosed the violations after discovering them.

From May 2018 through October 2020, 13 UK-based employees of Harman Professional, Inc. (a U.S. subsidiary) worked with the UAE distributor to supply Harman products to Iranian customers. OFAC noted that these employees, many of whom were in mid-level management roles like sales directors and finance leaders, were fully aware that the distributor was diverting shipments to Iran.

What’s more, they went out of their way to hide it. Internal communications used phrases like “North Dubai,” “the northern region,” and “up north” as coded references to Iran. In one case, a Harman executive approved a discount request for goods explicitly described as intended for “the northern region.” Another manager flatly stated the distributor “is a North Dubai business.”

While Harman shipped its products from Denmark to the distributor on an “ex works” basis, meaning the distributor assumed control and shipping responsibilities once it picked up the goods, employees still had a clear understanding that the final destination was often Iran.

A Breakdown in Compliance

Behind the scenes, OFAC found a troubling lack of oversight. At the time, Harman had no formal system in place for auditing or monitoring sanctions-related risks. Instead, the company’s legal department relied on business units to raise any red flags, a strategy that fell short, especially when employees themselves were actively involved in the misconduct.

Worse, the company’s sole global trade compliance officer lacked the tools and expertise to identify or mitigate export control risks. OFAC also flagged that Harman’s in-house legal team didn’t have sufficient time, training, or resources to keep up with evolving sanctions obligations, let alone enforce them across the company’s international operations.

“The failure to invest in strengthening compliance functions and relying on business units to identify potential sanctions issues, as Harman did, may not be prudent,” OFAC warned in its statement.

Because Harman voluntarily disclosed the misconduct and took steps to investigate and remediate the issue, the $1.45 million settlement is well below the statutory maximum of over $4 million. OFAC did, however, emphasize the seriousness of the violations, citing the employees’ deliberate actions, the extended time frame, and the fact that at least one end user was the Iranian government.

To its credit, Harman responded with what OFAC described as a “rigorous” internal investigation. The company brought in outside counsel and auditors, invested heavily in its sanctions compliance program, rolled out training, and empowered its legal and compliance functions with more authority and resources. Harman also agreed to invest an additional $400,000 in improving its sanctions compliance controls as part of the settlement.

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