OFAC 50 Percent Rule

The OFAC 50 Percent Rule treats property and interests in property of an entity as blocked when one or more blocked persons directly or indirectly own 50 per cent or more of that entity in aggregate. The entity can be blocked even if it does not appear by name on the Specially Designated Nationals and Blocked Persons List.

Aggregation and indirect ownership

Ownership by multiple blocked persons is aggregated. If blocked person A owns 25 per cent and blocked person B owns 25 per cent, the entity reaches the threshold. Indirect ownership is traced through ownership chains. An entity 50 per cent owned by a blocked person is itself blocked; its qualifying ownership in a lower-tier entity is then considered under the same guidance.

Beneficial-ownership mapping should preserve each intermediate percentage, date and source. Legal title, voting rights and control are not interchangeable. OFAC FAQ 398 states that control without 50 per cent ownership does not automatically block an entity, although dealings may present sanctions risk and OFAC may designate a controlled entity separately.

Blocking and designation

Automatic blocking under the rule is a property consequence, not a separate named designation or criminal verdict. United States persons must treat covered property as blocked under the applicable programme, subject to licences or exemptions. Asset freeze mechanics, reporting and release depend on the governing regulations.

The rule is programme-specific. OFAC FAQ 857 states that it does not apply to entities listed solely under the Non-SDN Chinese Military-Industrial Complex Companies programme. A subsidiary is covered by that programme only if it is itself listed or identified in the relevant annex. The restriction does not extend to a subsidiary solely through ownership. OFAC FAQ 857.

Ownership changes

For a genuine divestment occurring entirely outside United States jurisdiction and without United States persons, a fall in aggregate blocked ownership below 50 per cent ends automatic blocking under this rule for future transactions. Property already blocked in the United States or by a United States person remains blocked despite a subsequent ownership reduction by the blocked owners. Its release requires OFAC authorisation or OFAC's removal of blocked owners from the SDN List sufficient to reduce aggregate blocked ownership below 50 per cent, as described in OFAC FAQ 402. Analysts must distinguish those situations and test whether a purported divestment is genuine. Retained control can still justify caution or separate designation.

Compliance assessment

The rule expands the screening perimeter beyond names and creates a Compliance cascade through corporate hierarchies. Assessment should identify the blocked owners, direct and indirect percentages, aggregation method, programme, effective date and evidence quality. A corporate registry or commercial database is a source, not an adjudication. This explanation was reviewed on 14 October 2026 against OFAC's revised ownership guidance and relevant FAQs. The applicable sanctions regulations and any authorisation govern the transaction.

Operational controls

Screening should use ownership at the transaction date and preserve documents for each tier. Share classes, voting arrangements, trusts and state ownership may require legal analysis beyond a percentage field. If reliable information is unavailable, enhanced diligence or refusal may be prudent, but uncertainty should not be reported as established blocked status.

A general or specific licence can authorise dealings that would otherwise be prohibited, subject to its terms. A licence does not by itself remove an entity's blocked status; any authorised ownership transfer or release of blocked property must be assessed separately. Licence conditions and applicable reporting and recordkeeping requirements continue to apply. OFAC FAQ 74; 31 CFR part 501, subpart C.

Sources

1. United States Department of the Treasury, Office of Foreign Assets Control, Revised Guidance on Entities Owned by Persons Whose Property and Interests in Property Are Blocked, 13 August 2014 (accessed 14 October 2026).
2. Office of Foreign Assets Control, FAQ 401, indirect ownership and worked examples, 13 August 2014 (accessed 14 October 2026).
3. Office of Foreign Assets Control, FAQ 402, divestment and previously blocked property, 13 August 2014 (accessed 14 October 2026).
4. Office of Foreign Assets Control, FAQ 857, subsidiaries under the NS-CMIC programme, 3 June 2021 (accessed 14 October 2026).
5. Office of Foreign Assets Control, FAQ 398, ownership and control, 11 August 2020 (accessed 14 October 2026).
6. Office of Foreign Assets Control, FAQ 400, dealings with a blocked individual representing a non-blocked entity, 13 August 2014 (accessed 14 October 2026).
7. Office of Foreign Assets Control, FAQ 9, blocking and property, updated 21 August 2024 (accessed 14 October 2026).
8. Office of Foreign Assets Control, FAQ 74, general and specific licences, updated 9 September 2026 (accessed 14 October 2026).
9. United States Department of the Treasury, Reporting, Procedures and Penalties Regulations, 31 CFR part 501, subpart C, especially sections 501.601 and 501.603, eCFR text current through 9 October 2026 (accessed 14 October 2026).