A trading company in London receives a payment instruction from a counterparty in a third market. The beneficial owner of that counterparty was designated under the UK's financial-sanctions regime six months earlier. The counterparty itself does not appear on any list. Is the payment prohibited? Can the business accept the funds at all? These questions – ownership and control assessments under OFSI – sit at the centre of daily compliance decisions for any business operating across borders.
Under the UK financial-sanctions regime administered by the Office of Financial Sanctions Implementation (OFSI – the UK Treasury body responsible for licensing, enforcement, and guidance on financial sanctions), a non-listed entity can itself be caught by a designation if a designated person owns or controls it. The test extends beyond direct share ownership to indirect holdings and a broader control analysis. Unlike the mechanical US threshold test, the UK approach demands a genuinely fact-specific assessment of each ownership structure and control relationship.
This guide sets out how the OFSI ownership and control analysis works, how it compares to the OFAC and EU approaches, what the practical steps of an assessment look like, and when a business should bring in a sanctions lawyer or compliance counsel.
What does the OFSI ownership and control test actually require?
The OFSI ownership and control test asks whether a designated person owns or controls an entity – and both limbs matter independently. Ownership covers direct and indirect shareholding. Control is a separate and broader concept that captures entities a designated person directs or dominates in practice, regardless of how much equity they hold.
Ownership, in OFSI's published guidance, means a holding of more than 50 percent of the shares or voting rights, directly or through intermediary entities. That threshold mirrors the figure used in most major regimes. But OFSI does not stop there. An entity can be caught even when ownership is absent if a designated person has the ability to direct its affairs – appointing or removing the board, vetoing material decisions, or exercising decisive influence over management through a contractual or structural arrangement.
The control limb is the point where many businesses misread their exposure. In our experience, compliance teams often run their counterparty against the UK Consolidated List, find no match, and treat the analysis as complete. That approach misses the second question entirely: whether a listed individual or entity sits behind the counterparty in a role that amounts to control. Does your screening tool even ask that question?
OFSI's guidance makes clear that the analysis is purposive and fact-intensive. There is no mechanical shortcut. A business must map the full ownership chain and then examine every relationship in which a designated person might exercise authority over the entity – board composition, loan covenants with control features, shareholder agreements, and informal influence are all potentially in scope.
How does OFSI's approach compare to OFAC and the EU?
The OFSI approach differs from the US and EU tests in emphasis and method, and understanding the divergence is essential for any business with cross-border exposure to more than one regime.
Under OFAC, the 50 percent rule (OFAC's rule treating entities owned 50 percent or more, in the aggregate, by blocked persons as themselves blocked) is categorical and aggregate. Two blocked persons each holding 30 percent of a target entity collectively satisfy the threshold. OFAC does not separately assess control in the way OFSI does; ownership above the threshold is the test, and it is applied mechanically. This produces clarity. It also produces traps: ownership structures that keep each designated person below 50 percent individually can still trigger the rule if their combined holding reaches or exceeds it.
The EU ownership and control test (the UK and EU test for whether a non-listed entity is caught through a listed person's ownership or control) is materially closer to the OFSI position than to OFAC's. EU Council regulations establish both an ownership prong – more than 50 percent – and a control prong that encompasses similar indicia of decisive influence. The EU General Court has considered what constitutes control in a number of annulment actions, and the trend in that case law favours a broad reading of indirect influence.
For a business caught between regimes, the practical consequence is that a structure assessed as safe under the OFAC threshold may still be caught under OFSI or EU rules if a designated person exercises board-level control without reaching the ownership threshold. Equally, an entity that fails the OFAC aggregate test may fall below the EU 50 percent threshold if the designated persons' holdings are considered separately. Neither regime's clearance provides a safe harbour for the other. We regularly advise clients to run the analysis under each applicable regime independently before concluding that a counterparty is unaffected.
Switzerland (SECO), Canada (GAC), and Australia (DFAT) each implement an ownership and control test in their own national instruments. The thresholds and control indicia are broadly comparable to the UK and EU approaches, but the procedural steps for obtaining clearance or a licence differ. In a multi-jurisdiction transaction, a clean OFSI analysis does not answer the question for SECO or DFAT.
What are the steps to assess ownership and control under OFSI?
An OFSI ownership and control assessment follows a structured sequence. Each step builds on the last, and shortcutting any step creates residual risk that the next transaction – or an OFSI enquiry – will expose.
Step 1 – identify the starting population. Determine which natural persons and legal entities in the counterparty's ownership structure need to be checked. This means identifying all shareholders, beneficial owners, directors, and any person with a contractual right to appoint management or veto decisions. The UK Consolidated List is the primary reference for UK-designated persons, but UN Security Council listings also have direct effect in the UK, so both lists must be checked.
Step 2 – map direct ownership. Establish the precise share and voting-right percentages held by each person identified in step 1. Where shares are held through nominee or trust arrangements, the beneficial owner – not the nominee – is the relevant person. If ownership data is unavailable or opaque, that opacity is itself a risk flag requiring escalation.
Step 3 – trace indirect ownership. Aggregate the interests held through intermediary entities. A designated person holding 60 percent of a holding company that in turn holds 60 percent of the counterparty holds an indirect interest of 36 percent in the counterparty. Aggregation of indirect interests across multiple designated persons can reach the more-than-50-percent threshold even where no single person's direct holding does.
Step 4 – assess control beyond ownership. Once the ownership picture is established, examine each designated person's non-ownership relationship with the counterparty. Review constitutional documents, shareholders' agreements, loan agreements, management agreements, and any other document that confers a right to direct or veto the counterparty's operations. A right to appoint the majority of the board, or a right to block a disposal of assets, can constitute control regardless of the shareholding level.
Step 5 – document and conclude. Produce a written record of the data reviewed, the methodology applied, the conclusions reached, and the date of assessment. OFSI's enforcement approach to firms that have made genuine, documented, good-faith assessments differs from its approach to firms that have not assessed at all. Documentation is not a formality: it is evidence of the firm's state of mind at the time of the transaction.
Step 6 – review the position where material facts change. An ownership and control assessment is not permanent. Designations are added. Corporate structures change. A transaction that cleared step 5 in one quarter may need re-assessment if new designations are published or if the counterparty's ownership structure changes. Build a trigger-based review mechanism into the compliance programme.
The position above covers the standard case. Your facts – the counterparty, the goods, the transaction structure, and the regimes in play – change the analysis. For a review of your specific ownership question, contact Calder & Vance at info@caldervance.com.
What are the risk flags in an ownership structure?
Certain structural features consistently signal elevated risk in an OFSI ownership and control assessment. Identifying them early allows a business to decide whether to proceed, to seek a specific licence, or to decline the transaction before any prohibited dealing occurs.
Bearer shares are a persistent risk factor. A share represented by a physical certificate rather than a registered entry can be transferred without any public record, making the current beneficial owner impossible to verify through a company registry search alone. Where bearer shares form any part of a counterparty's capital structure, the assessment cannot be treated as reliable without an independent verification of current ownership.
Nominee arrangements at multiple levels of a structure introduce the same opacity. A nominee director or nominee shareholder may conceal a designated person. The relevant question is always who ultimately instructs the nominee – and that question requires contractual and documentary evidence, not just a registry check.
Complex holding structures with intermediate entities in multiple jurisdictions are a third common risk flag. Each additional layer reduces the visibility of beneficial ownership and creates a mechanism by which an aggregate interest above the threshold can be obscured across separately presented entities. We have acted for businesses that discovered, only after a detailed multi-tier trace, that a designated person's indirect interest in their counterparty materially exceeded what the first-level registry search suggested.
Loan agreements and shareholders' agreements with governance rights – veto rights over acquisitions, rights to appoint or remove directors, or step-in rights on default – deserve as much attention as the share register. A designated person holding a minority stake but controlling the board through a contractual veto right may well satisfy OFSI's control test even though the ownership threshold is not reached.
If a transaction has already been flagged, or a filing has been refused, an early review can preserve options that narrow with time. Contact us at info@caldervance.com for a confidential assessment.
A common misconception: list clearance is not the same as ownership and control clearance
The single most persistent myth in OFSI sanctions risk & compliance practice is that a clean result from a Consolidated List search means the counterparty is not caught by UK financial sanctions. It does not.
List screening answers one question: does the counterparty's legal name or any of its known aliases appear on the designated list? Ownership and control assessment answers a different and additional question: is the counterparty caught because of its relationship to a person who does appear on that list? These are separate analyses. A business that treats a list clearance as sufficient authorisation to proceed has not completed its obligations under UK sanctions law.
OFSI's published guidance and enforcement statements are consistent on this point. The prohibition on dealing with funds or economic resources of a designated person extends to entities that designated person owns or controls. A business that transfers funds to a non-listed entity that a designated person controls has, in OFSI's analysis, indirectly made funds available to that designated person.
The compliance implications are direct. A sanctions-screening programme that runs names against a list but does not include a structured ownership and control step has a gap. Closing that gap requires either enhanced screening tools that flag indirect ownership indicators or a documented manual assessment process for higher-risk counterparties. Neither approach is universally cost-free; the choice depends on the volume and risk profile of the business's counterparty population.
A second misconception is equally common: that an ownership and control problem cannot be resolved without abandoning the transaction. In some cases, a specific licence (a case-by-case authorisation from OFSI to conduct an otherwise prohibited transaction) may be available. OFSI issues licences under specific licensing grounds set out in the relevant thematic sanctions regulations, including grounds that cover the facilitation of commercial activity where the designated person's ownership or control was unknown at the time of contract.
When should a business involve a sanctions lawyer or compliance counsel?
Not every ownership and control assessment requires external counsel. Routine counterparty assessments at volume, for a business with a properly designed and tested sanctions-compliance programme, can be handled internally. External counsel adds most value in a defined set of circumstances.
Involve a sanctions lawyer when the ownership structure is opaque or multi-tiered and the internal team cannot reach a confident conclusion on the beneficial ownership question. The risk of getting the analysis wrong – dealing with a counterparty that is in fact caught – is not remedied by having tried: OFSI's civil monetary penalty regime does not provide a defence of honest effort absent genuine due diligence.
Involve compliance counsel when there is a potential match on the Consolidated List at any tier of the ownership chain. Even a low-confidence match creates a decision point: proceed and risk a breach, decline and potentially miss a legitimate deal, or seek a specific licence. That analysis benefits from the perspective of a practitioner who works with OFSI regularly.
Involve external counsel when the counterparty's jurisdiction makes verification difficult – where company registries are unreliable, where nominee arrangements are common, or where the governing law of the corporate structure is unfamiliar to the internal team. Local counsel in the relevant jurisdiction can assist with document verification and entity-level confirmation, but the OFSI ownership and control analysis itself requires UK-regime expertise.
Finally, involve counsel if the business is considering a voluntary self-disclosure (VSD – a disclosure to OFSI of an apparent breach, which OFSI's enforcement guidance treats as a mitigating factor in penalty assessments). The decision of whether, when, and how to make a VSD to OFSI is one of the most consequential procedural choices in a sanctions-compliance matter. Making it without advice can forfeit the mitigation that the disclosure was intended to produce.
Related practices
- Sanctions compliance audit and testing – programme gap analysis and testing against the five-element standard
- OFSI ownership and control: advanced scenarios – deeper analysis of complex multi-tier and contractual control structures
- Ownership and control assessment under SECO – the Swiss approach and how it compares to OFSI
How Calder & Vance approaches OFSI ownership and control assessments
Our approach to OFSI ownership and control assessments is structured around the six-step sequence set out above, adapted to the specific risk profile of each client and each transaction.
For businesses carrying out assessments at volume – financial institutions, trading houses, payments firms – we audit the existing screening logic, identify where the ownership and control step is absent or incomplete, and design a proportionate process to close the gap. That includes reviewing the questions asked at counterparty onboarding, the trigger points for enhanced review, and the escalation path when the internal team cannot reach a conclusion.
For businesses facing a specific transaction with a complex ownership question, we carry out the assessment directly: mapping the ownership chain, reviewing constitutional and contractual documents, and producing a written opinion that the business can rely on as evidence of good-faith due diligence.
Where the assessment reveals a potential breach – because funds have already moved to a counterparty that turns out to be caught – we advise on the decision to make a voluntary self-disclosure to OFSI, help scope the apparent violation, and prepare the disclosure and any associated penalty defence.
In a recent matter, a financial-services business identified a partial match between a director of a third-country counterparty and a UK-designated person. We conducted the ownership and control analysis, reviewed the relevant corporate documents, and confirmed that the match related to a different natural person with a similar name. The transaction proceeded with a documented audit trail. That kind of early, structured intervention avoids the delay and cost of dealing with an OFSI query after funds have moved.
We also advise on the cross-border dimension. A business that has cleared an ownership and control question under OFSI must separately address its position under OFAC, the EU regime, and any other applicable country regime. We regularly advise on multi-regime assessments and help clients understand where the legal positions diverge and which prohibition is the operative one for a given transaction.