A trade compliance team that clears alerts under OFAC's 50% rule is operating within the rule as written. That clearance is becoming a less complete answer.

A counterparty can sit below the 50% threshold and operate under the direction of a sanctioned person through governance rights, contractual influence, or trust structures. Ownership math is done in those cases; the control question remains open. The EU framework addresses the control question directly through a codified test. Recent OFAC and Department of Justice enforcement is moving toward the same destination through enforcement and litigation positions rather than rulemaking. In June 2025, OFAC issued the statutory maximum penalty against a venture capital firm for managing investments tied to a sanctioned person whose nominal share sat below the threshold.

This article describes the two tests, the seven indications of control under EU law, and the recent OFAC and DOJ enforcement that has converged on the same position through enforcement and litigation positions.

Where Does Ownership Math Run Out?

A sanctioned person can direct a counterparty without owning a majority of its shares. That is where ownership math runs out.

A worked example. A designated Russian businessman sells down his stake in a European trading company from 60% to 30% after his designation. Family members and a third-jurisdiction holding vehicle take the remaining 70%. The same person still appoints the chief executive, still votes on capital allocation, and is still the named beneficiary of a trust that owns 25% of the company.

The screening tool runs the entity name against the lists. The entity is not designated. The new majority shareholders are not designated. The math clears the case.

That answer is operationally wrong under the EU framework. The designated person's dominant influence, exercised through governance rights and trust arrangements, brings the entity within scope. Under the American framework, the screening tool's answer is consistent with OFAC's 50% rule on its face, but the same facts have driven OFAC and Department of Justice enforcement positions in 2024 and 2025 that argue the 50% rule is not a safe harbour. The screening tool's clearance reads as correct under the rule as written and incorrect under the rule as enforced.

Ownership math is done. The control question is what the screening tool cannot answer.

For background on how screening tools generate these alerts, the mechanics of name matching, threshold tuning, and list maintenance are covered in how sanctions screening software works.

What Does OFAC's 50% Rule Decide?

OFAC's 50% rule blocks any entity owned in the aggregate, directly or indirectly, 50% or more by one or more persons on the Specially Designated Nationals (SDN) list. The rule is stated in OFAC FAQ 398.

Aggregation matters. Two SDNs each holding 25% means the entity is blocked, regardless of whether the SDNs act together. Indirect ownership matters. If an SDN owns 50% of Entity A and Entity A owns 50% of Entity B, Entity B is blocked through transitivity. 

What the rule does not turn on, on its face, is influence. Control by an SDN below the 50% aggregate threshold does not automatically block the entity under FAQ 398. FAQ 398 urges caution where a significant ownership interest sits below the threshold, but the rule itself remains an ownership test.

A trade compliance team handling 500 alerts per month at an industrial distributor clears alerts against OFAC on this math. The clearance is correct on the face of the rule. It is becoming a less complete answer to the broader compliance question.

How Does the EU Frame Ownership and Control?

Ownership and control under EU sanctions are two parallel criteria for asset-freeze application. The ownership test is set out in Council Regulation (EU) 269/2014 and refined by the EU Council's Best Practices update of 3 July 2024. The control test sits in paragraph 64 of the same Best Practices.

The July 2024 update aligned the EU ownership threshold with OFAC's at "50% or more" of proprietary rights. A screening hit cleared on OFAC ownership math will, in most cases, also clear on EU ownership math.

The control test is the separate criterion. An entity falls within asset-freeze obligations if a designated person exercises control over it, regardless of whether the ownership threshold is met. Control is a question about who actually decides on the entity's economic and operational direction. The test is judgement-based and turns on documentary evidence rather than on a cap table calculation.

The EU Sanctions Helpdesk added further control guidance in August 2025. An entity falls within asset-freezing obligations where a listed person owns or controls it, directly or indirectly. The entity is still subject to the rules even if it is a separate legal person and even if its name does not appear on any sanctions list.

Control Criteria and Red Flags Under EU Best Practices

Paragraph 64 of the Best Practices sets out seven indications a control investigation should examine. Each indication has a direct evidence requirement.

  • Majority of voting rights, below the 50% ownership threshold. Voting rights can diverge from economic rights through dual-class structures, voting agreements, or proxies. Evidence: articles of association, shareholder register, shareholder agreement.
  • Right to appoint or remove the majority of the board. A minority shareholder can hold a contractual right that controls the board. Evidence: shareholder agreements, articles of association, filed company statutes.
  • Buyback or option rights structured to return control to the designated person. A buyback option close to the time of designation is a structural flag for circumvention. Evidence: the share purchase or option agreement, often not publicly disclosed.
  • Transfer of shares close to the designation date. A 25% transfer from a designated person to a family member or holding vehicle in the weeks before or after designation is a structural red flag, not a routine commercial transaction. Evidence: corporate register, share transfer documents, timing relative to designation.
  • Use of front persons. A non-designated individual holding shares on behalf of a designated person under an undisclosed arrangement. Evidence: relationship between named shareholder and designated person, the named shareholder's financial capacity, public record of their role in the business.
  • Use of trusts and shell companies. The indication fires where the structure terminates in a designated person as named beneficiary, settlor, or controller, with elevated weight in jurisdictions with limited beneficial-ownership transparency. Evidence: trust deed where obtainable, beneficial-ownership register entries, public filings on the controlling person.
  • De facto dominant influence. Added explicitly in the July 2024 update. The designated person directs the business through informal channels: operational decisions, key personnel appointments, strategic direction. Evidence: testimonial evidence, public reporting, public statements, documented patterns of operational behaviour.

A control determination at a company processing 3,000 alerts per month examines these seven indications across each ambiguous counterparty. The screening tool that flagged the alert has no view into any of the underlying evidence.

Why Has OFAC Started Arguing Around the 50% Rule?

When OFAC investigates and punishes companies, it is increasingly looking at who actually controls the entity, even when no sanctioned person owns 50% or more. The written rule still asks an ownership question. Recent enforcement shows that OFAC may still pursue cases where a sanctioned person retains a property interest, control, or beneficial influence below the 50% threshold.

On 12 June 2025, OFAC issued a Penalty Notice imposing a $215,988,868 penalty on GVA Capital, an investment management firm, for violating Ukraine/Russia-related sanctions in connection with Suleiman Kerimov, a Russian businessman designated by OFAC in April 2018. King & Spalding's analysis of the case read the action as the opening of a new era of control-based sanctions enforcement. GVA relied on a legal analysis concluding the structure fell outside OFAC’s 50% rule because the entity was not nominally owned 50% or more by an SDN. OFAC nevertheless concluded that Kerimov retained a property interest through the underlying trust structure and that GVA’s management knew this.

OFAC identified two aggravating factors in the GVA matter. The first was willfulness, supported by senior management's knowledge of Kerimov's property interest and by GVA's disregard of legal advice cautioning against any sale or transfer directly or indirectly involving him. The second was harm to United States foreign policy interests, in facilitating Kerimov's continued access to the American financial system. Neither factor turned on the aggregate ownership percentage.

The second case is a criminal prosecution in the District of Columbia. The defendants are charged with helping Viktor Vekselberg, a designated Russian oligarch, keep control of his superyacht, the TANGO, after his sanctions designation. The indictment alleges that they restructured the yacht's holding company to bring his ownership share below 50% while preserving his control of the vessel.

The Department of Justice filed a memorandum in opposition to the motion to dismiss on 14 May 2024, arguing that focusing exclusively on the 50% rule "would defy all common sense" because it would allow any SDN to operate through an intermediary or shell company. The memorandum advances the position that the 50% rule is not a safe harbour and is not the exclusive test for whether property is blocked.

The two cases share a structural feature. In each, a sanctioned person retained decision-making authority over a counterparty where the aggregated ownership of designated persons sat below the 50% threshold. The enforcement outcome turned on those control facts.

The American framework is catching up with the EU framework through enforcement and litigation positions rather than rulemaking. Trade compliance teams now operate in a regulatory environment where the rule as written and the rule as enforced no longer line up. The clearance the screening tool produces differs from the clearance the regulator will accept on the same facts.

Where the Two Frameworks Stand in 2026

The EU and OFAC frameworks now reach similar conclusions through different mechanisms. The EU codifies a control test that operates alongside the ownership test, with seven indications a control investigation should examine. OFAC's 50% rule remains an ownership test on its face, but recent enforcement positions in GVA Capital and Osipov treat control as the operative question on facts where the ownership math would not support a block.

Compliance programs that follow both OFAC and EU rules will find that the two frameworks now give nearly the same answer on ownership. Since July 2024, the EU and OFAC apply the same 50% threshold. The two frameworks differ on control. The EU has written down what a control investigation should examine. OFAC has not changed its rule, but recent enforcement cases show the agency is now treating control as important even though the rule's text only covers ownership.

The seven indications in paragraph 64 of the EU Best Practices give compliance teams a checklist for what a control determination examines. Recent enforcement cases show what happens when those indications are present and not addressed. For a separate discussion of the case-by-case work that runs after screening produces an alert, see what is sanctions resolution.