On July 8, 2025, the Office of Foreign Assets Control (“OFAC”) of the U.S. Treasury Department announced a settlement and civil monetary penalty of USD 1,454,145 with Harman International Industries, Inc. (“Harman”) arising from violations of OFAC sanctions on Iran.
Harman is a Connecticut-based multinational audio electronics company that employs approximately 30,000 people globally and is an independent subsidiary of Samsung Electronics.
The matter emphasizes the importance of providing adequate sanctions-related training to non-U.S.-based employees of U.S.-based companies. It also demonstrates that oversight of third parties is critical, particularly when third parties act on behalf of the company in jurisdictions the United States deems to be high-risk.
Facts
OFAC alleged that 13 British employees of Harman’s U.S. subsidiary, Harman Professional, Inc. (“Harman Pro”), Inc., knew that Harman Pro’s longtime third-party distributor located in the UAE was selling Harman products in Iran.
Despite requiring the distributor to agree contractually to comply with U.S. sanctions, several Harman Pro employees, all British, knew that Harman Pro’s distributor was selling Harman goods in Iran. Some of the employees knew or suspected that this was prohibited or unauthorized and tried to cover up the sales by using deceptive terms such as “the northern region,” “North Dubai,” and “up north” to refer to Iran.
On October 27, 2020, following a series of disputes, Harman Pro terminated its relationship with the distributor. The total value of Harman goods sold to Iran was estimated to be approximately USD 148,261. Harman Pro self-reported the matter to OFAC.
Penalty Calculation and Self Reporting
The statutory maximum civil monetary penalty applicable in this matter was USD 4,154,700. 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 (“Enforcement Guidelines”), 31 C.F.R. part 501, app. A, the base civil monetary penalty applicable in this matter equaled one-half of the statutory maximum, which was USD 2,077,350. OFAC considered the “General Factors” under the Enforcement Guidelines to reach the settlement amount of USD 1,454,145.
Aggravating Factors
OFAC considered the following to be aggravating factors:
- Some of the employees willfully engaged in efforts to sell Harman products to Iran, and to obscure such dealings.
- Some of the employees, including middle level managers, had actual knowledge of the sales to Iran.
- Harman is a large and sophisticated electronic company that operates worldwide and failed to have commensurate compliance controls.
Mitigating Factors
OFAC considered the following to be mitigating factors:
- Harman self-disclosed the conduct.
- Harman undertook a rigorous internal investigation by hiring outside counsel to investigate and an auditor to assess internal controls and compliance functions. Harman made substantial investments in enhanced sanction compliance resources and training.
- Harman, through outside counsel, was highly cooperative and responsive to OFAC’s requests for information.
- As partial satisfaction of the settlement amount, Harman agreed to invest USD 400,000 in additional sanctions compliance controls.
Significance
This case demonstrates that U.S. companies must adequately train employees, including non-U.S.-based employees, to recognize and react to sanctions-related risk. It also evidences the importance of due diligence, training and oversight of third parties, particularly those who act for the U.S. company in high-risk jurisdictions. When faced with OFAC sanctions issues, companies are well-advised to engage experienced outside experts to review and rectify the problems.
The foregoing is for informational purposes only. It is not intended as legal advice and no attorney-client relationship is formed by the provision of this information.
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About LBKM
Lewis Baach Kaufmann Middlemiss PLLC is a boutique law firm focusing on international financial disputes, financial compliance, white collar defense and investigations, insurance and reinsurance, and cross-border commercial litigation and arbitration. The firm has offices in Washington, New York, and London.