A multinational procurement team completes counterparty screening before signing a supply agreement. The direct counterparty is clean. A second pass, prompted by counsel, maps the ownership chain three layers up. A blocked person holds a forty-three percent stake in an intermediate holding company that, in turn, owns sixty-one percent of the supplier. Under OFAC's rules, the supplier is itself blocked. The deal cannot proceed without a licence. The goods, however, are dual-use items also controlled under the Export Administration Regulations administered by the Bureau of Industry and Security. A separate ownership and control analysis is now required – and the tests are not the same.
Ownership and control assessments under OFAC and under BIS / EAR apply different standards to the same underlying question: does a blocked or restricted person control this entity? OFAC applies a mechanical 50 percent rule (the rule treating any entity owned 50 percent or more in the aggregate by blocked persons as itself blocked, regardless of operational control). BIS does not use the same bright line; it looks at whether a restricted party exercises effective control over an entity or transaction, drawing on the Commerce Control List and the Entity List. As of July 2026, both regimes are active enforcement priorities, and the divergence between them regularly creates blind spots for compliance teams that treat the two analyses as interchangeable.
This analysis sets out the tests side by side, traces the points of divergence across OFAC, BIS / EAR, OFSI, and the EU, and identifies the risk flags that most often produce missed assessments in cross-border compliance programmes.
What does OFAC's ownership and control test actually require?
OFAC's ownership analysis rests on a single, aggregated threshold: blocked persons who own 50 percent or more of an entity, individually or combined, render that entity blocked by operation of law, without any separate designation. The test is ownership-first. Management authority, board representation, and operational control are legally irrelevant to the threshold calculation, though they matter separately when assessing whether a transaction is otherwise prohibited by the terms of a programme's directives.
Aggregation is the mechanism that most often surprises compliance teams. Two listed persons each holding twenty-eight percent of the same target reach the threshold together. Three listed persons with minority stakes can cross it in combination. The calculation must be performed across every layer of the ownership structure, not only at the level of the immediate counterparty. Intermediate holding companies do not break the chain; the relevant question is whether blocked-person ownership, traced through every layer, reaches or exceeds the threshold at the entity under review.
Indirect ownership is assessed by multiplying the percentages through the chain. A blocked person holding eighty percent of a parent that holds sixty percent of a subsidiary is treated as holding forty-eight percent of the subsidiary indirectly – just under the threshold. Add a second blocked person holding five percent directly in the subsidiary, and the aggregate crosses fifty. In our experience, this multiplication step is the calculation that proprietary screening tools most often omit, because it requires manual work beyond what an automated name-match provides.
OFAC's guidance, issued under the authority of IEEPA and the relevant programme-specific executive orders, makes clear that the rule applies whether or not the blocked entity is itself listed on the SDN List (OFAC's list of Specially Designated Nationals and blocked persons). An entity can be fully blocked, all its property interests frozen, and none of its transactions permissible – and yet its name will not appear on the SDN List. That gap is the source of significant compliance exposure for businesses that rely solely on list-matching as their ownership analysis.
How does BIS / EAR approach entity-level control?
BIS does not apply a percentage ownership threshold as the primary control test. Under the Export Administration Regulations, the central question is whether a party on the Entity List (BIS's list of persons subject to specific licence requirements for controlled exports, re-exports, or transfers) participates in, benefits from, or controls the transaction or the end use. Ownership is one indicator of that relationship, but it is not determinative on its own.
The EAR's end-use and end-user controls are layered on top of the Entity List. A party not appearing on any restricted list can still trigger EAR licensing requirements if the exporter has reason to know that a restricted end user will receive or use the items. The "reason to know" standard is deliberately broad. BIS expects exporters to look beyond the immediate buyer to the ultimate end user, particularly for items with military, proliferation, or surveillance-related applications. That expectation imports a control-and-benefit analysis that overlaps with but does not replicate the OFAC ownership test.
Where a restricted party holds an equity stake below the OFAC threshold, the EAR may still require a licence if that party exercises effective control over the purchasing decision, the routing of the goods, or the downstream distribution. "Effective control" in this context is assessed on the facts: voting rights disproportionate to the equity stake, contractual rights to direct exports, consent rights over disposal of the controlled items, or management authority over the team that operates the end-use technology. We regularly advise clients that a party with a thirty-five percent stake and a veto right over export decisions is more likely to trigger EAR concerns than a fifty-one percent passive financial investor.
The distinction between the two regimes matters practically. An entity that clears the OFAC threshold – blocked-person ownership below fifty percent – may still require an EAR licence if a restricted party exercises effective control. Conversely, an entity that triggers the OFAC rule because aggregate blocked-person ownership exceeds fifty percent is fully blocked for OFAC purposes, but the EAR analysis is a separate exercise that must still be completed. The two assessments run in parallel; neither substitutes for the other.
Where do OFSI and the EU ownership tests sit in the comparison?
For businesses operating across the Atlantic and into Europe, the analysis extends to OFSI (the UK's Office of Financial Sanctions Implementation) and the EU Council regulations. Neither applies a mechanical fifty percent rule in the same terms as OFAC. Both rely on an ownership and control test (the UK and EU standard for determining whether a non-listed entity is caught through a listed person's ownership or control) that is explicitly broader and more fact-sensitive.
Under UK sanctions law, as administered by OFSI under the authority of the Sanctions and Anti-Money Laundering Act (SAMLA), a listed person is treated as controlling an entity if they are able to ensure that the entity acts in accordance with their wishes. That test captures entities where ownership falls below fifty percent but the listed person holds blocking rights, golden shares, contractual consent rights, or other mechanisms that amount to effective dominance. OFSI's enforcement guidance makes clear that the control limb is assessed on a totality-of-the-evidence basis.
The EU position, drawn from the relevant Council regulations, is substantially similar. A designated person controls an entity when they can determine the entity's decisions, including through rights of use, rights to enjoy income, or the right to appoint management. The EU test has generated considerable litigation before the EU General Court, where designated persons have challenged asset-freeze decisions on the basis that the control test was applied inconsistently or without adequate evidence. Experience before the EU General Court indicates that the control analysis is reviewable and that tribunals will examine whether the evidence of control was specific, contemporaneous, and independent rather than inferential or circular.
The practical implication for cross-border compliance is that a single counterparty may pass the OFAC threshold test (blocked-person ownership below fifty percent), require a separate control analysis under OFSI and the EU rules, and also trigger an independent EAR assessment based on the restricted party's management role. All four analyses must be completed. If any one of them produces a positive result, the stricter prohibition governs – and where the US, UK, and EU reach different conclusions on the same facts, the business must comply with the most restrictive applicable requirement.
What are the most common risk flags in a cross-border ownership and control assessment?
The risk flags that most reliably indicate a deficient assessment are structural, not substantive. They arise not because the underlying law is unclear but because the assessment process was cut short before the relevant facts were assembled.
The first flag is reliance on a single-layer ownership check. Compliance programmes that screen only the immediate counterparty and its direct shareholders, without tracing the chain to ultimate beneficial owners, will miss any blocked or restricted person positioned behind a holding company. This is the pattern most often exploited in commodity trading and in transactions involving jurisdictions with opaque corporate registries.
The second flag is failure to aggregate. A screening system that flags individual blocked-person holdings but does not sum them across multiple listed shareholders will not identify entities that cross the OFAC threshold through aggregation. The system must be capable of identifying all listed persons in the ownership chain and summing their stakes at each level.
The third flag is conflating OFAC and EAR analyses. A business that concludes "OFAC-clean" and proceeds without an EAR review for a dual-use export has completed only half the necessary work. The two regimes are administered by different agencies, use different tests, and produce different consequences for non-compliance.
The fourth flag is a static assessment on a changing ownership structure. Ownership structures change: investors exit, new shareholders acquire stakes, restricted persons acquire control through debt instruments. An assessment that was accurate at the time of signing may be inaccurate at the time of delivery. Contracts involving controlled goods or sanctioned-regime counterparties should include representations about ownership changes and trigger points for re-assessment.
The fifth flag is geographic mismatch. A business applying only the OFAC threshold to a transaction that is primarily governed by EU or UK sanctions – because the goods pass through a UK or EU financial institution – will miss the control limb entirely. The applicable regime is determined by the nature of the connection, not by the law the compliance team is most familiar with.
Do you know which regime actually governs your most exposed transactions? Is your screening programme capable of catching aggregated ownership at multiple layers simultaneously?
How does the 50 percent rule interact with minority ownership and veto rights?
The interaction between percentage ownership and structural control rights is one of the most practically consequential issues in ownership and control assessments, and it is the area where the OFAC and BIS / EAR approaches diverge most sharply.
Under OFAC, a blocked person holding forty-nine percent of an entity does not trigger the 50 percent rule. The entity is not blocked by operation of law, though separate OFAC provisions may still prohibit transactions if the entity operates in a sanctioned sector or if the blocked person exercises actual direction over specific transactions. The ownership calculation is binary at the threshold; minority stakes below fifty percent leave the entity technically unlisted and unblocked, subject to the remainder of the programme's prohibitions.
Under BIS / EAR, the same forty-nine percent stake, if accompanied by consent rights over export decisions or management authority over the export compliance function, may be sufficient to require a licence or to prevent the export entirely. BIS has emphasised, through its enforcement actions and advisory opinions, that form does not override substance. An equity stake structured to fall just below a threshold does not relieve the exporter of the obligation to assess whether the economic benefit and operational authority associated with that stake constitute effective control over the transaction.
In our experience, the transactions that generate the most difficult assessments are those involving joint ventures, where two partners hold equal stakes and one is a restricted party. Equal shareholding with no majority holder does not resolve the OFAC analysis – it requires a fact-specific review of whether the restricted partner's governance rights amount to direction over the entity. Under BIS / EAR, the question is whether the joint-venture structure gives the restricted party effective control over the export or re-export of controlled items. These are distinct questions, and the answers frequently differ.
Veto rights deserve specific attention. A golden share, a consent right over material decisions, or a veto over board appointments can constitute control under OFSI and EU standards even when the holder's equity stake is negligible. A minority investor with a blocking right over a company's strategic direction is not a passive shareholder for the purposes of either the UK or the EU control test. Whether that same investor triggers BIS concern depends on whether the blocking right extends to decisions about controlled exports.
Decision matrix: which route applies and what is the risk profile?
The assessment route depends on the nature of the goods, the structure of the transaction, and the regime connections of the parties involved. A structured approach helps compliance teams prioritise the analysis and identify the most acute exposure.
Situation A: a US-connected transaction involving a counterparty with potential blocked-person ownership. Route: OFAC ownership assessment first, using a full multi-layer beneficial ownership trace with aggregation across all listed persons. If the threshold is met or aggregation is close to it, the analysis stops – no licence, the transaction is blocked. If the threshold is not met, proceed to the programme-specific prohibitions. Timeline to complete the ownership trace: variable, but a well-structured assessment of a complex corporate group can be completed within a matter of days if ownership documentation is available. Risk: incomplete aggregation is the primary failure mode.
Situation B: a dual-use export from a US person or involving US-origin technology, with a counterparty that has a restricted-party stakeholder. Route: OFAC assessment in parallel with an EAR classification and end-user review. The EAR analysis requires confirming the item's ECCN (Export Control Classification Number under the US Commerce Control List), determining whether the counterparty or any controlling person appears on the Entity List, and assessing whether any licence exception applies. If the restricted party exercises effective control, a licence application to BIS may be required. Timeline: classification can be rapid; licence applications take longer. Risk: treating the OFAC clearance as sufficient for EAR purposes.
Situation C: a cross-border transaction connecting US, UK, and EU parties, with a counterparty whose ownership structure includes both blocked and designated persons from different programmes. Route: concurrent OFAC, OFSI, and EU assessment, with the most restrictive applicable outcome governing the transaction. Where the regimes reach different conclusions, apply the stricter prohibition. Risk: regime-shopping – structuring the transaction to optimise for the least restrictive regime while ignoring others that independently prohibit it.
In a recent matter, a trading company in the energy sector faced exactly this third scenario. The target entity had a minority stakeholder who was designated under EU law but whose ownership fell below the OFAC threshold. The OFAC position was clear: the entity was not blocked. The EU position required a separate analysis of the designated person's governance rights. We assessed the ownership chain, reviewed the shareholder agreement for control provisions, and concluded that the EU control test was engaged. The transaction required restructuring before it could proceed. The OFAC clearance was accurate and was not in question; the EU control analysis produced the operative constraint.
When should a compliance team involve external sanctions counsel?
A compliance team should involve external counsel at the point at which the ownership structure is complex enough that a defensible, documented assessment requires legal judgment rather than administrative process. That point arrives sooner than most in-house teams expect.
The clearest trigger is an ownership chain that includes intermediate holding companies in jurisdictions with limited corporate transparency. Where beneficial ownership documentation is incomplete, the assessment cannot be finalised without a judgment about whether the available evidence is sufficient to clear the threshold or whether the gap itself constitutes a red flag requiring escalation. That judgment is a legal one.
A second trigger is an assessment that must be done under more than one regime simultaneously. A team trained on OFAC processes may not be equipped to apply the OFSI control test or to assess the EU standard, which has been interpreted through EU General Court decisions that are not part of a typical US-trained compliance team's working knowledge. In our cross-border practice, we regularly see assessments that are technically correct for one regime and silently wrong for another.
A third trigger is a transaction where the conclusion will be that a restricted party's ownership or control does not prohibit the deal. That conclusion, documented and defensible, is a legal product. If the assessment is subsequently challenged by a regulator – or if the facts later emerge to have been different from what was represented – the quality of the documented analysis and the process used to reach it will determine the firm's exposure. A VSD (voluntary self-disclosure to a regulator) prepared on the basis of a deficient assessment, or an enforcement defence built on an undocumented one, is a weaker position than it needs to be.
There is a common myth that ownership and control assessments are primarily a data exercise that compliance operations can perform without legal input. That view underestimates the legal judgment required to determine whether a given pattern of rights and interests constitutes control under the applicable standard – and overestimates the degree to which automated screening tools can substitute for that judgment. Screening identifies the candidates for further review. The analysis itself is legal work.
If a transaction has already been flagged, or if a previous assessment is now in question because new ownership information has emerged, an early review of the prior analysis can preserve options that narrow with time. Contact Calder & Vance at info@caldervance.com for a confidential assessment of the current position.
Related practices
- Sanctions compliance audit and testing – structured programme review against the five-element compliance standard, including ownership-and-control screening logic
- OFSI ownership and control analysis – detailed analysis of the UK control test, including enforcement posture and the SAMLA framework
- OFSI vs Australian autonomous sanctions: ownership and control compared – cross-regime comparison covering the UK, Australian, and related DFAT approaches
Frequently asked questions on ownership and control assessments
Where do the regimes diverge on ownership and control assessments?
The central divergence is between OFAC's mechanical fifty-percent threshold and the control-based tests applied by BIS / EAR, OFSI, and the EU. OFAC blocks an entity automatically when aggregate blocked-person ownership reaches or exceeds the threshold, with no inquiry into operational control. OFSI and the EU also capture entities where a designated person can determine the entity's actions, regardless of ownership percentage. BIS / EAR focuses on whether a restricted party exercises effective control over the transaction or end use, which is a fact-specific inquiry distinct from both the OFAC threshold and the UK / EU control standard. All three analyses can apply to the same transaction and can produce different outcomes on the same underlying facts.
Which regime is stricter on ownership and control assessments?
No single regime is uniformly stricter; each is more restrictive in a different dimension. OFAC is more categorical at the threshold: the fifty-percent rule is automatic and requires no evidence of operational control. OFSI and the EU are potentially broader in scope because the control limb can catch entities with minority-ownership restricted-person involvement, provided governance rights are sufficient. BIS / EAR can apply to transactions that OFAC does not prohibit, because the EAR's effective-control standard looks at the specific export rather than the entity's ownership structure as a whole. Where multiple regimes apply, the stricter prohibition governs in each dimension, which means that a compliant position requires clearing all applicable tests, not only the most familiar one.
What should a cross-border business do about ownership and control assessments?
A cross-border business should first identify which regimes apply to each transaction – US, UK, EU, or a combination – based on the parties' connections, the currency of payment, the routing of goods, and the identity of any financial intermediaries. It should then complete a full multi-layer ownership trace for each counterparty, aggregating blocked or designated person stakes across all layers and all applicable regimes simultaneously. It should document the assessment in a form that is reviewable and defensible. For complex structures, for transactions close to the threshold, or for deals involving dual-use goods that engage the EAR alongside OFAC, it should involve external sanctions counsel before the transaction closes rather than after a problem surfaces. Verify the current regime requirements before relying on any prior assessment, as designation lists and programme terms change frequently.
About the author
J. M. Aldridge advises multinationals and financial institutions on US sanctions and export controls, with a focus on OFAC licensing, secondary-sanctions risk, and BIS classification. Calder & Vance – International Sanctions & Export Control Counsel.
About Calder & Vance
Calder & Vance is an independent international sanctions and export-control boutique. We advise multinationals, financial institutions, exporters, and individuals on the major regimes – OFAC and BIS in the United States, OFSI and ECJU in the United Kingdom, the EU Council regulations and the EU General Court, the United Nations Consolidated List, and the regimes of Switzerland, Canada, Australia, the UAE, Singapore, and Japan. Our work is limited to lawful compliance, licensing, delisting, enforcement defence, and due diligence. To discuss a matter, contact info@caldervance.com.
Disclaimer: This material is general information, not legal advice, and is not a substitute for advice on your specific facts. Sanctions and export-control rules change frequently and differ by regime; verify the current position before relying on anything stated here. Calder & Vance does not advise on circumventing or evading sanctions. For advice on your situation, contact info@caldervance.com.