A treasury team at a trading company screens a prospective buyer before signing a distribution agreement. The buyer's ultimate parent clears every list. But two minority shareholders – each listed separately on OFAC's SDN List (OFAC's list of Specially Designated Nationals and blocked persons) – hold combined equity of 52 percent. The deal is structurally blocked under US rules. Is it also blocked under UK and EU rules? The answer is not the same. That difference can determine whether the transaction proceeds, on what conditions, and under which regime a licence application is worth filing.
As of July 2026, the 50 percent rule (OFAC's rule treating entities owned 50 percent or more by blocked persons as themselves blocked) is a US-specific mechanical threshold. The United Kingdom and the European Union apply a broader ownership and control test (the UK and EU test for whether a non-listed entity is caught through a listed person) that can capture entities below that ownership line. A cross-border business must run each regime's test independently, because clearing one does not clear the others.
This guide walks through each step in sequence: identifying which regimes apply, running the ownership test under each, mapping the points of divergence, and deciding when the analysis requires specialist sanctions counsel.
Step 1: Identify which regimes govern the transaction
The first step in any cross-border ownership analysis is establishing which sanctions regimes have jurisdiction over the transaction before running any ownership or control test. Jurisdiction is not optional and is not determined by where the counterparty is incorporated.
US rules under IEEPA reach any transaction that touches the US financial system, involves a US person, or is denominated in US dollars cleared through a US correspondent bank. A European company making a dollar-denominated payment to a third-market counterparty may fall squarely within OFAC's jurisdiction. UK rules under the Sanctions and Anti-Money Laundering Act ("SAMLA") and the relevant thematic regulations apply to UK persons and businesses operating in the United Kingdom, regardless of the counterparty's location. EU Council regulations bind EU persons and EU-nexus transactions. Secondary-sanctions risk extends the practical reach of OFAC further still, affecting non-US banks and businesses that fear losing access to the US financial system.
In our experience, compliance teams underestimate this jurisdictional overlay. They screen the counterparty once, against a single list, and record a clean result. The correct approach is to map every applicable regime at the outset – US, UK, EU, UN, and any relevant national regime – before moving to the ownership analysis. A transaction with a German exporter, a Swiss bank, and a buyer in a third market may implicate OFAC, OFSI, EU Council regulations, and SECO simultaneously.
Practical check: ask three questions before proceeding. Is any party a US person, or does the transaction touch the US financial system? Is any party a UK or EU person, or do their rules apply on any other basis? Does the UN Consolidated List apply through any national implementing regime? Once you have mapped the applicable regimes, proceed to Step 2 for each one separately.
Step 2: Run the OFAC ownership test – the mechanical 50 percent threshold
Under OFAC's rules, an entity is treated as blocked if one or more blocked persons own it 50 percent or more in the aggregate, whether directly or through intermediate holding structures. The test is mechanical: intention and day-to-day management are irrelevant.
Aggregation is the most common trap. Two listed persons each holding 24 percent of the same target together reach 48 percent – below the threshold. But if a third listed person holds a further 3 percent, the aggregate crosses 50 percent and the entity is blocked, without any of the three individuals controlling it operationally. Firms that screen only for majority shareholders, or that treat minority stakes as immaterial, routinely miss this configuration.
The ownership chain is assessed at every tier, not just the first. A listed person owning 60 percent of a holding company that in turn owns 60 percent of an operating subsidiary is treated as owning 36 percent of the subsidiary through that chain – below the threshold. But if that same person owns an additional 20 percent directly, the aggregate is 56 percent and the subsidiary is blocked. Spreadsheet-based ownership mapping is often inadequate for these multi-tier structures. A dedicated legal-entity analysis is the minimum standard.
OFAC's guidance under IEEPA establishes this position. There is no published licencing pathway that is automatic for entities caught by the 50 percent rule; a specific licence (a case-by-case authorisation to conduct an otherwise prohibited transaction) is required for any dealing that would otherwise be prohibited. The processing window for specific-licence applications is measured in months, not days, and the outcome is not guaranteed.
The position above covers the standard case. Your facts – the counterparty's shareholder register, the precise ownership percentages, the regime in play – change the analysis materially. For a confidential review of a specific ownership structure, contact Calder & Vance at info@caldervance.com.
Step 3: Apply the UK ownership and control test under OFSI
Under SAMLA and the relevant thematic regulations, OFSI's test is broader than OFAC's. A non-listed entity is caught if a designated person owns or controls it – and "control" extends well beyond a 50 percent shareholding.
Control under UK rules can be established through majority ownership, through the right to appoint or remove a majority of the board, through the ability to require the entity to act in accordance with the designated person's instructions, or through any other means by which the designated person exercises dominant influence. An entity that has a listed person as its largest shareholder at 42 percent may still be caught if that person has contractual rights to appoint a majority of directors or holds a blocking right over material decisions.
This means the UK analysis cannot stop at the ownership register. It must review shareholder agreements, articles of association, side letters, and any other instrument by which a listed person may exercise influence. In our cross-border practice, we regularly advise clients who have passed the OFAC 50 percent threshold check but face a materially different result when the OFSI control test is applied to the same structure.
OFSI's enforcement guidance makes clear that UK persons – including UK banks, insurers, and trading companies – must apply this test before dealing. A failure to identify control is not a technical oversight; it is a potential breach of the financial sanctions prohibition, which carries both civil and criminal consequences. The reporting obligation to OFSI is separate: a UK person who knows or suspects a breach, or that it holds funds for a designated person, must report this to OFSI promptly. The time window for doing so is short; verify the current statutory position before relying on it.
See also our detailed analysis at the EU ownership and control guide for an extended treatment of how the EU test compares, and at the second EU ownership guide for sector-specific applications.
Step 4: Apply the EU ownership and control test under the relevant Council regulation
EU Council regulations apply a test materially similar to the UK position: a non-listed entity is caught if a listed person owns or controls it. Control under EU rules is assessed by reference to criteria including majority ownership, the right to appoint management, decisive influence over commercial decisions, and the holding of a majority of voting rights.
The EU test has been developed through practice before the EU General Court, which has reviewed a number of annulment actions in which the question of whether a non-listed entity was properly caught through the control test was central. Experience before the EU General Court indicates that courts scrutinise the substance of control arrangements closely, not merely their formal legal structure. A shareholder agreement that vests veto rights in a listed minority investor may establish control even if the ownership percentage is below 50 percent.
One practical divergence from the UK position: the EU has published guidance on specific thematic programmes that addresses the ownership and control question in some detail. That guidance is programme-specific and must be read alongside the relevant Council regulation. The guidance is not static; it is updated as the Council adopts new measures. Verify the current guidance before relying on any prior-cycle summary.
A further EU-specific consideration is the interaction with the EU Blocking Regulation, which may be relevant where a non-EU entity attempts to apply US secondary-sanctions pressure on an EU operator. The Blocking Regulation does not displace the EU ownership and control analysis, but it affects the legal options available to an EU business caught between conflicting obligations. This intersection is a consistent feature of cross-border mandates we handle for clients with EU and US-facing operations.
Step 5: Map the points of divergence and identify the stricter prohibition
Where two or more regimes apply to the same counterparty and the same transaction, the analysis must identify where they diverge – and the governing rule is that the stricter prohibition governs for each regime independently.
The three main divergence points in practice are these. First, threshold versus control: OFAC requires aggregate ownership of 50 percent or more; OFSI and the EU can catch entities below that line through the control test. A clean OFAC result does not produce a clean UK or EU result where the listed person has governance rights without majority ownership. Second, aggregation rules: OFAC's aggregation rule applies across all listed persons; the UK and EU tests focus on the designated person's individual position but extend to indirect ownership and control. Third, licensing: OFAC's specific-licence process and OFSI's licensing regime are administered independently by separate regulators on separate timelines. An OFAC licence does not authorise an OFSI-prohibited transaction, and vice versa.
In addition, smaller regimes add their own tests. Canada's autonomous sanctions, Switzerland's SECO regime, and Australia's autonomous sanctions regime each have their own rules on when a non-listed entity is caught through a listed person's interest. Singapore and Japan operate their own national-implementing regimes with distinct ownership tests. For transactions with any nexus to those jurisdictions, local advice or coordination with local counsel in the relevant jurisdiction is required.
A practical decision matrix helps here. If a counterparty clears the OFAC 50 percent test but has a designated person holding a governance right: the UK and EU control test must still be run, and the transaction may require a UK or EU licence even if no US licence is needed. If a counterparty fails the OFAC threshold: the entity is blocked under US rules regardless of the UK and EU analysis, and a specific licence is the only US pathway. If a counterparty sits below all thresholds and has no governance rights held by a designated person: it may still carry secondary-sanctions risk through its business relationships with blocked entities, which requires a separate enhanced due-diligence analysis.
Step 6: Identify risk flags that require specialist counsel
Several structural features reliably indicate that the ownership analysis has moved beyond the scope of standard compliance screening and requires specialist sanctions counsel.
Complex layered structures are the first flag. Where the ultimate beneficial owner register shows four or more tiers of intermediate holding companies in different jurisdictions, and listed persons appear at more than one tier, the ownership analysis must trace each path independently. Automated screening tools frequently stop at two tiers or rely on commercial ownership databases that lag behind actual corporate filings.
Governance instruments that vest unusual rights in minority shareholders are the second flag. Shareholder agreements, convertible instruments, side-letter arrangements, and joint-venture charters can all create control relationships that the ownership register does not reveal. The UK and EU control tests are specifically designed to catch these arrangements.
Partial-match alerts and transliteration variants are the third flag. An ownership analysis is only as reliable as the underlying data. Where a shareholder's name appears in a non-Latin script on the primary corporate filing and the transliteration used in a sanctions list differs from the one in the database, the match-quality question requires legal and linguistic judgment, not an automated score.
Involvement of a state or quasi-state entity is the fourth flag. Some regimes designate state-owned enterprises directly; others operate sovereign-immunity carve-outs or sectoral restrictions rather than entity-level designations. The interaction between entity-level and sectoral analysis requires a different methodology entirely.
If a transaction has already been flagged, or a filing has been refused, an early review can preserve options that narrow with time. Contact Calder & Vance at info@caldervance.com for an initial assessment.
Step 7: Address a common myth – clearing one regime clears them all
The most persistent misconception we encounter in our cross-border compliance practice is the belief that a clean OFAC screen is sufficient for transactions that also have UK or EU nexus. It is not.
The regimes are independently administered by separate regulators – OFAC, OFSI, and the Council – under separate legal instruments. A clear result on one list or under one regime's ownership test creates no legal protection under another. Each regime must be assessed on its own terms, applying its own jurisdictional rules and its own ownership or control test.
The converse is equally true. An entity that is not on the OFAC SDN List may be designated by the EU Council without any corresponding US designation. An EU-designated entity does not automatically appear on the OFAC SDN List. Compliance programmes built around a single-list screen – typically the SDN List, because it is the most comprehensive and carries the most severe consequences – systematically under-identify EU and UK exposure for cross-border transactions.
A well-designed ownership and control analysis for a cross-border transaction screens against all applicable lists, runs each regime's ownership and control test in full, and documents the methodology in a manner that would withstand regulatory scrutiny if queried. That is the standard. Anything less is a risk-acceptance decision, and it should be recorded as such.
Our team regularly advises compliance officers and general counsel who are designing or testing cross-border screening programmes. To stress-test your screening and compliance programme, reach our team at info@caldervance.com.
Related practices
- Sanctions compliance audit and testing (Australia service) – testing ownership analysis methodology and screening logic against the applicable regime
- The 50 percent rule and ownership analysis: EU guide – detailed treatment of ownership and control under EU Council regulations
- The 50 percent rule and ownership analysis: EU guide (sector applications) – sector-specific ownership and control analysis under EU rules