With the complexities of determining ownership levels vexing many international companies as they comply with ever-expanding sanctions laws, new guidance was issued this week by the Treasury Department's Office of Foreign Assets Control regarding entities owned 50 percent or more in the aggregate by more than one blocked person.
Entities blocked by either an Executive order or regulations administered by OFAC are broadly defined to include any property or interest in property, tangible or intangible, including present, future or contingent interests. Since 2008, officials have operated under what is called the “50 percent rule,” a determination that any property or entity that is at least half-owned by an individual subject to U.S. sanctions is also flagged.
The amended guidance goes a step further, and also uses the 50 percent threshold in situations where there is indirect ownership and when multiple sanctioned individuals combine to hold a 50 percent interest, or more, in an enterprise. “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,” the new guidance says, “regardless of whether the entity itself is listed in the annex to an Executive order or otherwise placed on OFAC's list of Specially Designated Nationals (SDN)." A person, or company, falling under U.S. law cannot engage in any transactions with such an entity, unless authorized by OFAC.
“U.S. persons are advised to act with caution when considering a transaction with a non-blocked entity in which one or more blocked persons has a significant ownership interest that is less than 50 percent, or which one or more blocked persons may control by means other than a majority, ownership interest,” OFAC adds. “Such entities may be the subject of future designation or enforcement action by OFAC.”
OFAC will incorporate this guidance as it issues regulations implementing new sanctions programs. It also expects to amend regulations implementing existing sanctions programs to reflect the new guidance.