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Guide/See also: BIS 50% Rule

The OFAC 50% Rule: Beneficial Ownership and Sanctions Blocking

If an entity is 50% or more owned by SDN-listed persons, it is blocked, even if the entity itself does not appear on any sanctions list. Here is how the rule works, what it means for your compliance program, and how to screen for it.

The rule in plain language

Since August 2014, OFAC has applied the 50% Rule to determine whether an entity is blocked under U.S. sanctions. The rule is straightforward: if one or more persons on the SDN list own, directly or indirectly, 50% or more of an entity in aggregate, that entity is treated as if it were on the SDN list itself.

This means U.S. persons are prohibited from transacting with the entity, even though the entity's name may not appear on any published list. The obligation falls on the screener to identify the ownership relationship.

Strict liability

OFAC violations do not require intent. If you transact with a 50%-owned entity without knowing, the violation still occurred. Having a documented screening program is a mitigating factor; not having one is an aggravating factor.

How aggregate ownership is calculated

OFAC uses two types of ownership for the 50% calculation:

  • Direct ownership: SDN Party A owns 55% of Company X. Company X is blocked.
  • Indirect ownership: SDN Party A owns 80% of Holding Co, so Holding Co is itself blocked. Holding Co owns 65% of Company X. OFAC attributes the full 65%, and Company X is blocked. Multiplying 80% × 65% into 52% is not the rule; FAQ 401 uses threshold-gated attribution.
  • Aggregate ownership: SDN Party A owns 30% and SDN Party B owns 25% of Company X. Aggregate = 55%. Company X is blocked.

All three types can be combined. A company with 20% direct ownership by one SDN entity, plus 35% indirect ownership through a holding structure by another SDN entity, totals 55% and is blocked.

Example: aggregate indirect ownership

SDN ENTITY A
owns 30%
SDN ENTITY B
owns 25%
TARGET COMPANY X
Aggregate: 30% + 25% = 55%, which exceeds 50%. BLOCKED

OFAC vs. BIS: two 50% rules, not one calculation

The OFAC 50% Rule and the BIS 50% / Affiliates Rule both turn on a 50% ownership threshold. They are not the same rule:

  • OFAC 50%: Applies to the SDN list. Enforced by Treasury. Violations carry civil penalties up to $356,579 per violation (2024 cap) or criminal penalties up to $1M and 20 years imprisonment.
  • BIS 50%: Applies to the Entity List and MEU List. Enforced by Commerce. Violations carry civil penalties up to $364,992 per violation or criminal penalties up to $1M and 20 years.

A screening system can evaluate both ownership tests. SecurePoint classifies a hit as either OFAC_50_PERCENT or BIS_AFFILIATE based on which list the owner appears on. OFAC 50% is in force today. The BIS Affiliates Rule is suspended through November 9, 2026.

What your program needs

  1. Ownership data sources: ICIJ OffshoreLeaks, SEC 13D filings, Companies House, Open Ownership BODS, and manual entries.
  2. Multi-hop graph traversal: walk ownership chains and attribute downstream stakes in full once an intermediary is itself 50%+ owned by blocked persons (OFAC FAQ 401).
  3. Aggregate calculation: sum ownership from all SDN/Entity List sources, not just the largest single owner.
  4. Red flag detection: opaque jurisdictions, unknown ownership percentages, shell company indicators.
  5. Documented evidence: the full ownership chain, calculation, and disposition decision in an append-only audit log. This is what you show OFAC in an examination.

How SecurePoint handles OFAC 50%

The SecurePoint Screening API runs ownership traversal automatically on every screening call (when enabled in shadow or enforced mode). The traversal walksentity_ownership_edges and attributes ownership through blocked intermediaries on a threshold basis under OFAC FAQ 401. It does not multiply percentages through the chain.

In shadow mode (the default), the ownership result is included in the API response but does not affect risk level or blocking. In enforced mode, entities with aggregate sanctioned ownership ≥ 50% are automatically blocked with full audit trail.

Frequently Asked Questions

What is the OFAC 50% Rule?

The OFAC 50% Rule states that any entity owned 50% or more, in aggregate, by one or more persons on the Specially Designated Nationals (SDN) list is itself considered blocked. The entity does not need to appear on the SDN list by name; the ownership relationship alone triggers blocking obligations.

How does OFAC calculate aggregate ownership?

OFAC aggregates ownership from all SDN-listed persons with a stake in the entity. If SDN Party A owns 30% and SDN Party B owns 25%, the aggregate is 55%, exceeding the 50% threshold. Indirect ownership is threshold-gated under FAQ 401: an intermediary owned 50% or more by blocked persons is itself blocked, and its full downstream stake is attributed. Sub-threshold intermediaries contribute nothing. Do not multiply percentages through the chain.

How is the OFAC 50% Rule different from the BIS 50% Rule?

The OFAC 50% Rule is enforced by the Treasury Department and applies to blocked persons, including the SDN List. The BIS Affiliates Rule is an EAR end-user rule for Entity List, MEU List, and certain SDN programs. Both use a 50% ownership threshold. OFAC FAQ 401 is the verified arithmetic for OFAC. Do not assume BIS hop math is identical without counsel confirmation. The BIS Affiliates Rule is suspended through November 9, 2026 and is scheduled to take effect November 10, 2026 absent further BIS action (BIS final rule, FR 2025-19846, staying the interim final rule at 90 FR 47201). While the stay holds it is not operative under the EAR. SecurePoint escalates BIS affiliate ownership signals to documented human review on every date, and does not start blocking them automatically when a scheduled date arrives.

What happens if I transact with a 50%-owned entity without knowing?

OFAC operates on a strict liability standard: intent is not required for a violation. However, OFAC considers the adequacy of your compliance program when determining penalties. Demonstrating that you have ownership-aware screening in place is a mitigating factor in enforcement actions.

Does SecurePoint block a transaction when it finds 50% sanctioned ownership?

Not by default. Ownership traversal runs on every screening call, but it ships in shadow mode: the ownership result is returned in the API response and recorded against the case, and it does not change the risk level or block anything. An organization can move it to enforced mode, where aggregate sanctioned ownership of 50% or more blocks with a full audit trail. Whether a given organization runs enforced is a per-organization setting, so confirm the mode for your own tenant rather than assuming it. The screening result informs a human decision; it is not a legal determination and it does not discharge your own diligence obligation.

Screen for OFAC 50% ownership automatically

The Screening API performs recursive ownership traversal, aggregate ownership calculation, and returns audit-ready evidence on every call.

OFAC 50% Rule and Beneficial Ownership | SecurePoint USA