Short answer: under OFAC's 50 percent rule, any entity that is owned 50 percent or more, directly or indirectly and in the aggregate, by one or more blocked persons is itself blocked. This applies even if the entity does not appear on the SDN List. It is one of the most tested topics on the CGSS exam.
Sourcing note. This summary follows OFAC's published guidance on entities owned by blocked persons (2014 revised guidance). Always check the current OFAC guidance for your case.
The rule
- Look at the ownership of the entity.
- Add together the stakes held by all blocked persons, directly or indirectly.
- If the total is 50 percent or more, the entity is blocked.
The rule is about ownership, not control. OFAC says it may also be risky to deal with entities that are controlled by blocked persons without being 50 percent owned, even though such entities are not automatically blocked. Careful firms treat control as a significant risk factor and often escalate it.
Worked examples
Example 1: direct ownership
A blocked person owns 50 percent of Company A. Company A is blocked.
Example 2: aggregate ownership
Blocked Person X owns 30 percent of Company B and blocked Person Y owns 25 percent. Neither reaches 50 percent alone, but the aggregate is 55 percent, so Company B is blocked.
Example 3: indirect ownership
Blocked Person Z owns 60 percent of Company C. Company C owns 50 percent of Company D. Company C is blocked (60 percent). Company D is owned 50 percent by a blocked entity, so Company D is blocked too.
Example 4: a chain that stops
Blocked Person Z owns 40 percent of Company E. Company E owns 60 percent of Company F. Company E is not blocked (Z holds 40 percent, below 50 percent), so Company F is not blocked through this chain. Still, a careful firm would flag both companies as high risk and look for other blocked owners whose stakes add up. If another blocked person held a further 10 percent of E, E would be blocked, and F, 60 percent owned by a blocked entity, would be blocked too.
Note: these examples are simplified. Real structures include voting rights, options and different share classes. Check OFAC's guidance and seek advice for complex cases.
How the EU and UK differ
| OFAC (US) | EU | UK | |
|---|---|---|---|
| Threshold | 50 percent or more in aggregate | More than 50 percent ownership or control | More than 50 percent ownership or control |
| Aggregation | Yes, across blocked persons | The EU has issued guidance on aggregation; practice and interpretation vary | OFSI guidance covers aggregation; check the current rules |
| Control | Not automatic but a risk factor | Part of the test | Part of the test (right to appoint or remove a majority of the board, etc.) |
Treat this table as a starting point: the EU and UK rules are set out in regulations and guidance that change. Verify the current wording before relying on it, and never assume the EU or UK mirror OFAC.
Why it matters for programmes
- Screening only the named customer is not enough. You need beneficial ownership information and the ability to screen owners.
- Where ownership is unclear or undisclosed, escalate rather than assume clearance.
- Update your information regularly. Ownership changes, and so does the SDN List.
- Keep records of your ownership analysis. Regulators ask for them.
See sanctions screening basics for the broader process.
Common exam traps
- Counting only direct ownership. Always trace the chain.
- Forgetting aggregation. Several blocked owners add up.
- Treating "control" as automatic blocking in the US. Under OFAC it is not automatic, but it is a red flag.
- Assuming a company not on the list is safe. Not if it is 50 percent owned by a blocked person.
- Assuming the EU and UK follow the same arithmetic. They have ownership and control tests.
Checklist for a scenario question
- Who are the blocked persons in the chain?
- What does each hold, directly and indirectly?
- Does the total reach 50 percent?
- Is there control without ownership (risk factor)?
- Which jurisdiction's rules apply?
- What is the correct action: block, reject or escalate?