Many of our clients have heard of the OFAC 50 Percent Rule — but aren’t entirely sure what it really means or how it affects their business. The rule is both significant and far-reaching, with implications that extend well beyond the surface. In this post, we’ll break down what the rule actually is, explain why it requires deeper due diligence, and outline practical steps your organisation can take to identify and mitigate hidden sanctions risks.

What is the OFAC 50 Percent Rule?

The Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury enforces economic and trade sanctions based on U.S. foreign policy and national security goals. Among its most critical and far-reaching regulations is its 50 Percent Rule, introduced in 2014.

Under the rule:

Any entity that is owned 50 percent or more, directly or indirectly, by one or more blocked (i.e. sanctioned) persons is itself considered a blocked person—even if it is not explicitly listed on OFAC’s Specially Designated Nationals (SDN) List.

This rule ensures that sanctioned individuals cannot circumvent restrictions through affiliated businesses or layered corporate structures.

Key Elements of the Rule

• Direct or Indirect Ownership: Ownership through multiple layers of entities still counts.

• Aggregate Ownership: OFAC aggregates ownership by multiple sanctioned parties.

• No Need for Control: Ownership is sufficient; operational control is not required.

• Automatic Blocking: Entities meeting the 50% threshold are automatically subject to sanctions, with or without explicit listing.

Practical Application and Risk Exposure: Real-World Implications for Themis Clients

1. Beyond the SDN List: Many organisations assume that screening names against the SDN list is sufficient. However, the OFAC 50 Percent Rule requires deeper due diligence into beneficial ownership, including complex, multi-tier corporate structures.
2. Business Relationships at Risk: Clients must ensure that suppliers, intermediaries, investment targets, and partners are not inadvertently owned by sanctioned individuals or entities. Failing to detect indirect ownership can result in inadvertent sanctions violations. ‍
3. Monitoring Change Over Time: Ownership structures are dynamic. Mergers, acquisitions, and equity transfers can cause a previously compliant entity to become blocked under OFAC rules.

Ownership Scenarios & Legal Thresholds

Note: While OFAC’s rule does not formally apply to “control,” OFAC may still designate entities under broader sanctions programmes based on influence or other factors.

Indirect Ownership Explained

Indirect ownership is defined as a situation where the blocked person holds ownership through other entities that are themselves 50% or more owned by the blocked person.

This means firms must examine all levels of the ownership chain, which may involve:

• Corporate registries

• Shareholder agreements

• Beneficial ownership data

• Regulatory filings

‍

‍

The Risks of Non-Compliance

Failure to identify a blocked entity—even unintentionally—can lead to:

• Civil penalties (substantial fines ranging from thousands to billions of dollars, depending on the scale and nature of the breach)

• Reputational damage

• Regulatory investigations

• Disruption of business relationships

Now that we’ve covered the basics of the rule, let’s explore how it plays out in practice by walking through a few real-world scenarios.

Cases of Enforcement

‍

‍

‍

‍

‍

Compliance Recommendations for Themis Clients

At Themis, we understand the complexities of complying with the OFAC 50 Percent Rule and the critical importance of getting it right. That’s why we’ve built our platform to help organisations meet these compliance obligations with confidence and efficiency.

A key element of this is the enhancement of Themis Search through the integration of Dow Jones’ specialised OFAC 50 Percent data into Themis’ comprehensive financial crime dataset. This integration further strengthens our ability to support clients in navigating complex regulatory landscapes and in meeting compliance challenges. In today’s increasingly intricate financial environment, standardising due diligence and forging partnerships that unite best-in-class data sources are essential to combating financial crime effectively.

So, What Should Your Organisation be Doing to Meet OFAC50 Obligations?

1. Conduct Full Ownership Screening: Go beyond name-matching. Evaluate shareholding structures across all counterparties.‍
2. Utilise Reputable Data Sources: Our data enhancement with Dow Jones’ Sanctions Ownership Research covers:
   
   1. Over 21,000 OFAC-related profiles
   2. Entities with ≥10% ownership by blocked persons
   3. Board and senior management screening
   4. State-owned enterprises from comprehensively sanctioned regimes‍
3. Assess Aggregated Ownership: Screen for multiple sanctioned persons holding partial stakes—ownership is cumulative.‍
4. Monitor Relationships Over Time: Set up alerts or continuous monitoring for material ownership changes.‍
5. Document and Justify All Decisions: Maintain clear audit trails to demonstrate due diligence and compliance posture.

Why Choose Themis for Your Compliance Needs?

Themis provides clients with action able insights and automated tools to manage sanctions risks effectively:

• ‍Deep Ownership Analysis: Drill down through corporate connections and map out indirect or layered ownership, via Themis’ comprehensive data feed.
• Global Coverage, Local Precision: Sanctions compliance is increasingly jurisdiction-specific. Themis ensures alignment with U.S., EU, UK, and UN standards, among others.
• Audit-Ready Compliance: Build a defensible framework to meet regulator expectations.
• Expert-led Compliance Advisory: Consult our experts to ensure you are meeting your compliance needs and implementing evidence-based strategies.

Conclusion

OFAC’s 50 Percent Rule underscores the evolving complexity of global sanctions regimes. As enforcement intensifies and ownership structures become more opaque, the cost of inadequate due diligence rises. Themis empowers clients with the tools and intelligence to stay compliant, proactive, and protected. Don’t let hidden ownership structures become hidden liabilities.