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The OFAC 50 percent rule treats any entity owned 50 percent or more by one or more blocked persons as blocked itself. Ownership counts whether it is direct or indirect, individual or aggregate. The entity need not appear on the SDN List. U.S. persons must block its property and refuse deals with it unless OFAC authorizes them.
What the OFAC 50 Percent Rule Says
The Office of Foreign Assets Control (OFAC) published the current version of the rule on August 13, 2014. It appears in the Revised Guidance on Entities Owned by Persons Whose Property and Interests in Property Are Blocked. Under that guidance, OFAC blocks the property and interests in property of a covered entity. The block applies even though OFAC never designated the entity by name on the Specially Designated Nationals and Blocked Persons List.
In practice, the rule extends every OFAC program that freezes assets to unnamed group companies and related firms. For example, a Cayman holding company with a 60 percent SDN owner falls under the block. A U.S. bank must block or reject its payments. Moreover, a U.S. seller may not sell to it without a license. The same analysis applies under the Russia, Iran, Venezuela, and Cuba programs alike.
Blocked payments are the most common way companies first meet the rule. Our guide to blocked wire transfers explains how banks handle those funds.
Ownership, Not Control: Where OFAC Draws the Line
OFAC FAQ 398 makes one point clear. The ownership rule speaks only to ownership, not to control. Therefore, the rule does not automatically block an entity that a blocked person controls but owns at less than 50 percent. However, OFAC warns that such entities may face listing or enforcement later. It urges caution before dealing with them.
FAQ 400 adds a related limit. Suppose a blocked individual runs a company but holds only a 30 percent stake. The rule does not block the company itself. Nevertheless, U.S. persons still may not do business with the blocked individual. That ban applies even when the individual acts on behalf of the company outside the block. In effect, a contract signed by that individual can still create a violation.
Aggregation and Indirect Ownership Under the Fifty Percent Rule
FAQ 399 confirms that OFAC adds up the stakes of all blocked persons. If Blocked Person X owns 25 percent and Blocked Person Y owns 25 percent, the rule blocks the entity. Furthermore, OFAC adds up stakes across programs. A stake held by a Russia-related SDN counts together with a stake held by an Iran-related SDN.
Indirect ownership follows a chain rule. Under FAQ 401, “indirectly” means ownership through one or more entities in which blocked persons themselves hold 50 percent or more. A stake held through an entity outside the block does not pass down the chain. OFAC’s own worked examples illustrate the point.
| Structure (X is a blocked person) | Result | Why |
|---|---|---|
| X owns 50% of A; A owns 50% of B | Blocked | X owns 50% of B through A, and the rule also blocks A |
| X owns 50% of A and 50% of B; A and B each own 25% of C | Blocked | X’s stakes in C through A and B total 50% |
| X owns 50% of A and 10% of B; A owns 40% of B | Blocked | 10% direct plus 40% through A equals 50% |
| X owns 50% of A and 25% of B; A and B each own 25% of C | Not blocked | B falls outside the rule, so its 25% of C does not count |
| X owns 25% of A and 25% of B; A and B each own 50% of C | Not blocked | Neither A nor B falls under the rule, so nothing passes down |
The table shows why ownership charts matter. Consequently, compliance teams must trace each stake back to its ultimate beneficial owner.
Divestment Below 50 Percent: What Changes and What Stays Blocked
FAQ 402 addresses share sales after a listing. If blocked owners divest so that their total stake drops below 50 percent, the rule no longer automatically blocks the entity. However, the sale must occur entirely outside U.S. jurisdiction. No U.S. person may take part in it.
Property already frozen in U.S. hands stays blocked. It remains frozen until OFAC licenses a transaction or removes the owner from the SDN List. In addition, OFAC does not recognize transfers of a blocked interest made without a license. Holders of such property can apply to OFAC’s Licensing Division for a license.
OFAC also warns that a claimed sale may be a sham. Careful checks must confirm that the transfer actually happened. Indeed, this warning became the core of OFAC’s 2026 guidance.
The 2026 Sham-Transaction Guidance: A Floor, Not a Ceiling
On March 31, 2026, OFAC issued its Guidance on Sham Transactions and Sanctions Evasion. The notice states that sham transfers do not end a blocked interest in property. OFAC applies functional definitions of “interest” and “property interest.” Those tests look beyond legal forms to practical and economic facts.
The guidance lists red flags. They include transfers to family members or proxies, kept economic benefit, buy back rights, and transfers made shortly before or after a listing. No single factor decides the outcome. As a result, lawyers now describe the OFAC 50 percent rule as a floor for checks, not a ceiling.
Enforcement history supports that reading. On June 12, 2025, OFAC imposed a $215,988,868 penalty on GVA Capital Ltd., a venture capital firm. The firm had managed investments for Suleiman Kerimov, an SDN since April 2018. It relied on a legal opinion that a Guernsey entity fell outside the rule because no SDN owned 50 percent of it on paper. OFAC did not agree. A U.S. trust in which Kerimov held a beneficial interest owned the entity, so the rule blocked the entity.
How the OFAC 50 Percent Rule Compares with BIS, EU, and UK Tests
Similar ownership tests now exist in other regimes, including the Bureau of Industry and Security (BIS), the European Union, and the UK Office of Financial Sanctions Implementation (OFSI). Nevertheless, the details differ, and the differences create traps for global firms.
| Regime | Threshold | Adds up stakes | Separate control test | Status |
|---|---|---|---|---|
| OFAC 50 Percent Rule | 50% or more | Yes, across programs | No, but sham transaction guidance applies | In force since the 2014 guidance |
| BIS Affiliates Rule | 50% or more held by Entity List or MEU List parties | Yes | No | Suspended through November 9, 2026 |
| EU asset freezes | 50% or more (September 2024 Best Practices) | Yes | Yes | In force |
| UK (OFSI) | More than 50% | Generally no | Yes | In force |
The BIS Affiliates Rule deserves attention now. The Commerce Department published it as an interim final rule effective September 29, 2025. It extends Entity List and Military End-User List limits to related companies owned 50 percent or more by listed parties. BIS then issued a one-year suspension from November 10, 2025 through November 9, 2026. Unless BIS acts again, the rule takes effect on November 10, 2026. Exporters should prepare their ownership screening before then.
Meanwhile, the EU aligned its ownership test with OFAC in September 2024. It adopted a “50 percent or more” threshold and adds up stakes. The UK still applies a “more than 50 percent” test, generally without adding up stakes. Both regimes also apply a separate control test, which OFAC does not.
Penalties for Getting the Ownership Analysis Wrong
IEEPA violations carry strict civil liability. Under 31 C.F.R. Part 501, Appendix A, civil penalties can reach the greater of $377,700 per violation or twice the value of the transaction. Willful violations are crimes. They carry fines of up to $1,000,000 and up to 20 years in prison under 50 U.S.C. § 1705.
OFAC also weighs the quality of a compliance program when it sets penalties. Reliance on a flawed ownership opinion did not help GVA Capital. Therefore, counsel should document, update, and review the ownership analysis where the structure is complex. Our sanctions practice handles these reviews, license applications, and enforcement responses.
Sanctions Screening and OFAC Compliance Program Implications
The ownership rule also shapes sanctions screening. List-based screening alone catches only named parties. It misses group companies that the rule blocks through ownership. Therefore, an effective OFAC compliance program must pair screening with ownership analysis. In its 2019 Framework for OFAC Compliance Commitments, OFAC identified five essential components: management commitment, risk assessment, internal controls, testing and audits, and training.
Sanctions compliance teams should embed the 50 percent rule in each component. For example, risk assessments should flag parties with opaque ownership. Internal controls should require real-owner data before intake. In addition, AML and financial crime teams should share ownership findings with the sanctions compliance function, since the same data supports both programs. In practice, sanctions screening should run at intake and again when ownership changes. A compliance manager should screen the other party, its parent, and its group companies against the OFAC SDN List and the other sanctions lists. Screening tools that flag majority owned group companies reduce the risk of missing an unnamed blocked entity. Moreover, foreign deals call for sanctions screening against the UK and EU lists as well.
A Due Diligence Checklist for the Ownership Rule
Screen every party, its owners, and its directors against the SDN List and OFAC’s other lists.
Obtain a current ownership chart down to the ultimate beneficial owners, with percentages at each layer.
Add up all stakes held by blocked persons, no matter which sanctions program applies.
Trace indirect stakes only through entities in which blocked persons themselves hold 50 percent or more.
Review the sham transaction red flags: recent transfers, family or proxy owners, buy back rights, and kept benefits.
Verify any claimed sale with transaction documents, company records, and independent sources.
Consider whether a blocked individual still controls the entity, and refuse deals with that person.
Where doubt remains, seek an OFAC license or written guidance before you act.
Document the analysis, the sources, and the date, and refresh it when ownership changes.
FAQ
Yes. The rule covers entities owned 50 percent “or more.” An exact 50 percent stake is enough to block the entity. Only a stake below 50 percent falls outside the automatic rule.
No, not automatically. OFAC FAQ 398 limits the rule to ownership. However, U.S. persons may not deal with the blocked individual, and OFAC may list the entity later. Caution is essential.
Sometimes. If the total blocked stake falls below 50 percent through a genuine sale outside U.S. jurisdiction, the rule no longer automatically blocks the entity. Property already blocked in the United States stays blocked, and sham transfers do not count.
The BIS rule applies export controls, not asset freezes. It covers entities owned 50 percent or more by parties on the Entity List or Military End-User List. The suspension runs through November 9, 2026, and the rule returns on November 10, 2026 unless BIS acts.
Conclusion
The OFAC 50 percent rule converts an ownership percentage into a legal status. It reaches unnamed group companies, adds up stakes across programs, and follows chains of majority owned entities. In 2026, OFAC added a functional test for sham transfers, and the BIS Affiliates Rule returns in November. Consequently, ownership checks now have to look past formal charts to economic reality.
Ownership questions rarely have obvious answers, and the penalties for a wrong call are severe. If your company faces a complex ownership structure, a blocked party, or an OFAC inquiry, schedule a meeting with our team to discuss a sanctions review built around your situation.