Ownership Obscurity Clouds Sanctions Compliance

Understanding OFAC's 50% Rule
In 2008, OFAC first addressed its 50% Rule, before updating it in 2014 for further clarity. The revised guidance issued in 2014 states that, "any entity owned in the aggregate, directly or indirectly, 50 percent or more by one or more blocked persons is itself considered to be a blocked person."

That simple sentence within a one-page guidance update actually contains several complicated sanctions messages:

Avoid Majority Ownership

Legal entities within the above definition are blocked from any kind of business transaction with U.S. persons. Furthermore:

• The entities don't have to be specifically mentioned in an executive order.
• They don't have to be named on the SDN list.
• The 50% ownership can be structured through one or more other legal entities.
• The 50% ownership can be reached by combining smaller shares of multiple blocked persons.

This rule applies to all transactions, including when the legal entity is a direct vendor of the financial institution or supplying goods or services through another third-party vendor or intermediary.

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