The OFAC 50 Percent Rule, explained

Screen a counterparty's name against the SDN List, get no hit, and move on — that workflow misses an entire category of blocked property. OFAC's 50 Percent Rule means an entity can be prohibited to deal with even though it was never designated, never published on any list, and returns a clean result against every name-matching tool you own. The rule is not new — OFAC formalized it in guidance issued August 13, 2014 — but it remains one of the most consistently misunderstood parts of US sanctions compliance, and OFAC just narrowed one of the workarounds people used against it.

What the rule actually says

OFAC's guidance states it plainly: the property and interests in property of entities that are directly or indirectly owned 50 percent or more in the aggregate by one or more blocked persons are themselves blocked — regardless of whether that entity appears on OFAC's SDN List or any other list (OFAC FAQ 398; 50 Percent Rule FAQ topic).

Three words carry the weight of the rule:

• Aggregate. Ownership by multiple blocked persons stacks. If Blocked Person X owns 25 percent of Entity A and Blocked Person Y owns another 25 percent, Entity A is blocked — neither owner individually crosses 50 percent, but together they do.
• Indirect. Ownership through a chain of intermediate entities counts, as long as each link in the chain is itself 50-percent-or-more owned by the blocked person(s) above it. A blocked person doesn't need to hold shares in Entity A directly; owning 60 percent of Holdco, which owns 80 percent of Entity A, is enough.
• Or more. There's no materiality floor above 50. A single share past the threshold blocks the whole entity, in full — the rule doesn't block a proportional stake.

Ownership, not control

The rule's most-litigated boundary is what it deliberately doesn't cover: control without majority ownership. An entity that a blocked person directs, chairs, or effectively runs — but owns less than 50 percent of — is not automatically blocked under the 50 Percent Rule (OFAC FAQ 402). That distinction has real teeth: a blocked oligarch who holds a 40 percent stake and appoints the board is a serious red flag, but the 50 Percent Rule alone does not block that company. Screening programs that treat "ownership" and "control" as interchangeable either over-block (freezing counterparties the rule doesn't reach, with no legal basis) or, more dangerously, assume a name check plus a majority-ownership check is the whole analysis.

The rule just got narrower — sham divestitures

On March 31, 2026, OFAC issued a sanctions advisory on "Sham Transactions and Sanctions Evasion" that directly targets the most common evasion pattern built around this exact ownership/control line: a blocked person divests just enough equity to drop below 50 percent on paper, while retaining functional control of the entity. The advisory sets out a "totality of the circumstances" test and, per legal commentary on the guidance, points to an enforcement case where OFAC blocked a US-based trust based on a blocked person's ability to direct it — without a 50-percent-or-greater ownership stake — because the divestiture was assessed as a sham (Davis Polk client update; WilmerHale alert).

The practical read: dropping below 50 percent is no longer a reliable safe harbor if the surrounding facts — timing relative to a designation, retained decision-making authority, unchanged beneficiaries — look like restructuring for the purpose of evading blocking. A recent, convenient divestiture below the threshold is now a fact pattern to investigate, not a clean pass.

What this means for a screening program

Three concrete implications follow from the rule as it stands today:

1. Name-matching the SDN List is necessary but not sufficient. An entity 50-percent-or-more owned by a blocked person is blocked by operation of law the moment the ownership condition is met — OFAC does not need to publish it first, and in practice often doesn't, especially for closely held or opaque ownership structures. A screening program that only checks names against published lists will pass counterparties that are legally blocked.
2. You need ownership data, not just entity data. Resolving aggregate and indirect ownership requires knowing who owns what, and how much — beneficial-ownership and corporate-structure data, not a flat list of designated names. This is the single strongest argument for treating ownership resolution as a first-class part of a screening program rather than a manual, ad hoc investigation triggered after a near-miss.
3. Recent ownership changes near a designation deserve scrutiny, not automatic clearance. Post-March-2026, a divestiture that conveniently drops a blocked person's stake to 49 percent right after — or in anticipation of — a designation is exactly the pattern the sham-transactions advisory now flags for a closer look, even though it clears the bright-line ownership test.

Not a uniquely American problem

OFAC didn't invent aggregate-ownership blocking, and it isn't the only regime a global screening program has to account for. The UK applies its own ownership-and-control test alongside its strict-liability sanctions regime; Canada's Special Economic Measures Act framework applies a "deemed ownership" standard with a comparable effect. The mechanics differ by jurisdiction — this is not a single global rule — but the underlying logic is the same across all of them: a sanctions list is a floor, not the whole scope of what's prohibited, once ownership chains are in play.

Check your own book

The OFAC SDN List and OFAC Consolidated List are both in our source catalog, with the issuing authority, update cadence, and license terms stated for each. Recent Russia-program activity — where layered ownership structures around blocked persons and entities are especially common — is browsable under Executive Order 14024. For the full picture, browse every listed entity, track the newest designations as they land, and see our US AML/CFT compliance reference for how the 50 Percent Rule sits inside the broader BSA/OFAC framework.