What is the OFAC 50 percent rule?
Two designated people hold 30 percent each of a trading company that appears on no list. Their stakes aggregate, and under OFAC's 50 percent rule the company is blocked as if it had been named: any entity owned 50 percent or more by blocked persons is itself blocked.
OFAC set the position out in its Revised Guidance of 13 August 2014. It exists because a designated person can otherwise park assets in a company nobody has named. The rule adds up the holdings of several blocked persons and follows ownership through intermediate layers, which is why an ownership chart earns its place next to the list. It speaks only to ownership, though OFAC may separately designate an entity that a blocked person controls.
What this workflow covers
SCOPE- Name screening first, ownership second: resolve the shareholders, then their shareholders.
- Aggregate every blocked holding before testing the threshold.
- Indirect chains count. A blocked person owning 50 percent of Company A, which owns 50 percent of Company B, blocks Company B.
- 49 percent is not a free pass. OFAC warns about significant minority stakes and control, and can designate separately.
Compliance glossary
TERMS- Aggregation
- Adding together the stakes held by several blocked persons in the same entity to test the 50 percent threshold.
- Indirect ownership
- Ownership held through one or more intermediate entities rather than directly on the shareholder register.
- Ownership and control
- The EU and UK test for capturing unlisted entities, which treats control as a trigger in its own right alongside majority ownership.
Authoritative references
SOURCES- 01Revised Guidance on Entities Owned by Persons Whose Property and Interests in Property are Blocked (13 August 2014)
U.S. Department of the Treasury — OFAC
- 02Entities Owned by Blocked Persons (50% Rule) — FAQs
U.S. Department of the Treasury — OFAC
Frequently asked questions
Q&A- Does the rule catch control as well as ownership?
- No. OFAC's guidance is explicit that the rule speaks to ownership only. Control without 50 percent ownership does not block an entity automatically, but OFAC advises caution and can designate such an entity in its own right, so treating 49 percent plus board control as outside the rule is a poor bet.
- Do the EU and the UK apply the same test?
- Both look at ownership and control, and both treat more than 50 percent ownership as the ownership limb. Unlike OFAC they also treat control as an independent trigger, so an entity below the ownership threshold can still be caught where a designated person controls it.
- How do we check 50 percent ownership in practice?
- Pull the shareholder register from the relevant company registry, identify each shareholder above a meaningful threshold, screen those shareholders, and repeat one level up until you reach natural persons or an opaque jurisdiction. Record where the chain stopped and why it stopped there.
- The chain runs into a jurisdiction with no public register. What goes in the file?
- Say so, in those words. An unresolved ownership chain is a documented limitation, not a negative result, and firms commonly escalate opaque structures for enhanced due diligence rather than record them as no match.