A Swiss-headquartered commodity trader is processing a payment to a long-standing supplier. The supplier's parent company was listed under a SECO ordinance three weeks earlier. The trader's screening tool flagged the parent – but not the subsidiary. Is the subsidiary caught? Can the payment proceed? Under Switzerland's autonomous sanctions regime, that question turns on a structured ownership and control assessment, and the answer determines whether the firm has a legal obligation to freeze, report, and halt the transaction.
An ownership and control assessment (the structured analysis of whether a non-listed entity is effectively controlled by, or beneficially owned by, a listed person, such that the entity is treated as subject to the same prohibitions) is a mandatory step in Swiss sanctions compliance under the ordinances administered by SECO (the State Secretariat for Economic Affairs, Switzerland's competent sanctions authority). As of August 2026, SECO's ordinances apply both an ownership prong and a control prong, meaning that a shareholding below fifty percent does not automatically exclude an entity from the analysis. The test is broader than the mechanical US threshold rule and closer in structure to the EU and UK approaches – which matters acutely for any business subject to multiple regimes simultaneously.
This guide sets out the step-by-step process for conducting an ownership and control assessment under SECO, maps the points where Switzerland diverges from OFAC, the EU, and OFSI, and identifies the risk flags that warrant involving external counsel.
Step 1: Understand what the SECO regime catches and why it matters for non-Swiss businesses
SECO administers Switzerland's autonomous sanctions under the Embargo Act (Embargogesetz) and the associated thematic ordinances, which give legal effect to the measures that Switzerland adopts – sometimes aligning with EU measures, sometimes diverging. For a non-Swiss business, the question of whether SECO rules apply may be less obvious than it appears.
Switzerland's sanctions ordinances bind Swiss persons and entities, persons and entities present in Switzerland, transactions processed through Swiss financial infrastructure, and goods and services of Swiss origin or transiting Swiss territory. In our cross-border practice, we regularly advise multinationals whose Swiss treasury or procurement function unexpectedly brings a transaction within SECO's reach, even when the main contracting parties are not Swiss. A group that centrally routes payments through a Swiss bank, or whose commodity trades clear through a Swiss trading entity, has a SECO compliance obligation for that leg of the transaction.
The practical consequence is that a group's compliance programme cannot treat SECO as a secondary regime. Where Swiss nexus exists, SECO operates in parallel with OFAC, with the EU Council regulations, and with OFSI – and in each of those regimes the ownership and control question is resolved by a different test. Getting the analysis right under all applicable regimes simultaneously is precisely where the risk concentrates.
Does your compliance programme identify which entities in your group create a Swiss nexus? If not, the ownership and control step has not yet begun.
Step 2: Identify the designated person and map the ownership chain
The starting point is precise identification of the listed person. SECO publishes its lists of designated persons and entities on its website, updated in line with amendments to the relevant ordinances. Any ownership and control analysis that begins with an incomplete or outdated understanding of who is actually designated is structurally flawed from the outset.
Once the designated person is correctly identified, the next task is to map the full ownership chain – upward, downward, and laterally – from that person to the counterparty under review. This is not a task that can be confined to a single database search. It requires examining:
- direct shareholdings in the counterparty;
- indirect shareholdings through intermediate holding vehicles;
- voting rights attached to shares or other instruments;
- economic interests structured through trusts, foundations, or nominee arrangements;
- rights capable of conferring control, such as board appointment rights, veto rights, or contractual dominance.
In our experience, the intermediate holding layer – typically a third-country special-purpose vehicle – is the point most frequently missed by compliance teams working quickly under transaction pressure. A chain that passes through a jurisdiction with limited corporate-registry disclosure does not break the analysis; it extends it. Where registry data is unavailable, the assessment must document the gap, apply conservative assumptions, and seek additional representations from the counterparty.
The position above covers the standard case. Your facts – the depth of the ownership chain, the jurisdiction of intermediate entities, the nature of the instruments in play – change the analysis materially. If your team has reached the edge of available public data and the picture is still unclear, that is the moment to bring in external sanctions counsel.
Contact Calder & Vance at info@caldervance.com if your ownership mapping has surfaced an incomplete chain or an ambiguous intermediate layer.
Step 3: Apply the SECO ownership and control test
Switzerland's sanctions ordinances treat an entity as subject to the same measures as a designated person where that person owns or controls the entity, whether directly or indirectly. The test captures both a formal ownership prong and a broader control prong, and these can operate independently of one another.
The ownership prong looks at aggregate beneficial ownership. Under Swiss practice, the threshold concern arises where a designated person holds a majority or otherwise dominant ownership stake, but Swiss law does not operate a mechanical fixed-percentage rule in the same way that OFAC's 50 percent rule does. Where the aggregate holding of one or more designated persons approaches or exceeds a majority position, the entity is treated as owned by a designated person for sanctions purposes. However, Swiss practitioners and SECO's guidance direct firms not to stop at the ownership arithmetic: the control analysis must follow regardless.
The control prong is the more demanding and – in our practice – the more frequently decisive element of the Swiss test. Control is assessed by reference to whether the designated person has the practical ability to determine the conduct of the entity, influence its key decisions, or extract its assets or revenues. Indicators of control include: the ability to appoint or remove the board or management; veto rights over significant transactions; contractual arrangements that create economic dependence; and the extent to which the entity's operations are directed by the designated person rather than by independent management.
This structure aligns Switzerland more closely with the EU and UK approaches than with OFAC's mechanical ownership rule. Under the EU Council regulations and under OFSI's guidance, the control test similarly looks beyond the shareholding register to the reality of how decisions are made. The practical divergence from OFAC is significant: a counterparty that clears OFAC's 50 percent rule because the designated person holds only 45 percent of the shares may still be caught under SECO, EU, and OFSI tests if that person exercises effective control by other means.
Step 4: Assess control indicators in practice
Running the control analysis requires a structured review of documentary evidence, not a judgment made on first impressions. The following categories of document are the primary evidential sources for a SECO ownership and control assessment.
Governance documents – the constitutional documents of the entity (articles of association, partnership agreement, trust deed) are the first reference point. They record voting structures, reserved matters, and appointment rights. An entity whose articles give a designated person the right to appoint a majority of the board is, as a matter of governance, controlled by that person regardless of shareholding percentage.
Shareholder and investor agreements – side agreements between shareholders frequently contain veto rights or drag-along provisions that concentrate effective control in a single holder. These documents are often not publicly available; they must be requested from the counterparty or surfaced through structured due diligence questionnaires.
Financial and operational data – where the entity is economically dependent on a designated person for its revenues, its supply of goods, or its financing, this economic dominance can constitute control even in the absence of formal governance rights. In a recent matter involving a trading intermediary, we identified that a single designated counterparty accounted for substantially all of the entity's purchase orders – a degree of economic dependence that, combined with a significant minority shareholding, produced a control finding under the applicable regime's test.
Management representations and certifications – counterparty representations are a necessary, though not sufficient, evidential element. They should be supported by underlying documentation wherever possible, and their reliability should be weighted against the overall risk profile of the counterparty and the transaction.
The assessment should be recorded in a written memorandum that sets out the evidence reviewed, the analysis applied, and the conclusion reached. That record demonstrates good-faith compliance effort and is the baseline document if SECO or another authority ever inquires into the transaction.
Step 5: Understand how SECO's approach compares with OFAC, EU, and OFSI
A business that operates under multiple sanctions regimes must apply each regime's test separately – and the tests are not the same. The cross-regime comparison is not academic; it directly determines the due-diligence depth required and the risk exposure if any test produces a different answer.
Under OFAC, the ownership test is mechanical: an entity owned 50 percent or more in aggregate by one or more Specially Designated Nationals is itself treated as blocked, regardless of control. An entity owned below that threshold is not automatically blocked by OFAC's ownership rule – though OFAC retains the authority to designate the entity separately, and secondary-sanctions risk may still arise.
Under OFSI (the UK's Office of Financial Sanctions Implementation), the test covers both ownership and control. A non-listed entity is subject to UK financial-sanctions prohibitions where a designated person owns or controls it, with "control" assessed by reference to a person's practical ability to direct the entity's affairs.
Under the EU Council regulations, the approach similarly combines an ownership threshold with a control test, and experience before the EU General Court confirms that factual disputes about control can be litigated through annulment proceedings. Where a business has received divergent guidance from different national competent authorities within the EU, the EU General Court route is one mechanism for clarification.
SECO sits in the ownership-plus-control camp alongside OFSI and the EU. The implication for a multinational compliance function is clear: the most conservative standard governs. Where OFAC's threshold is met, all other regime tests are likely also met. Where OFAC's threshold is not met, the Swiss, EU, and UK control tests must still run – and they may produce a positive finding that the OFAC analysis did not.
What happens when the OFAC analysis clears a counterparty but the SECO analysis does not? The answer is that the business has a legal obligation under the SECO ordinance – and any Swiss-nexus transaction with that counterparty is prohibited, regardless of OFAC clearance. The two assessments must be documented and maintained separately.
If a transaction has already been processed in reliance on an OFAC clearance, without a separate SECO analysis, an early review can preserve options that narrow with time. Contact Calder & Vance at info@caldervance.com for a confidential assessment.
Step 6: Identify risk flags that escalate the assessment
Not every ownership and control question presents the same degree of risk. Certain patterns, in our experience, reliably indicate that the standard compliance-team assessment is insufficient and that external counsel should be involved before the transaction proceeds.
The following risk flags warrant escalation:
- The designated person holds a significant minority stake (often in the range of 20–49 percent) combined with contractual or governance rights that give practical control.
- The ownership chain passes through one or more jurisdictions with limited corporate-registry disclosure, making it impossible to complete the chain with publicly available data.
- The counterparty is newly incorporated or has recently undergone a material restructuring that could reflect a response to a designation event.
- The beneficial-ownership registers available to the assessing firm are inconsistent with representations received from the counterparty.
- The transaction involves a sector – such as energy, commodities, financial services, or defence-adjacent goods – where the designated person has a documented commercial interest.
- The assessor has identified the probability of control but cannot conclude definitively either way on the available evidence.
The last of these is, in practice, the most common trigger for seeking a formal opinion. The SECO framework does not resolve factual ambiguity automatically: a firm that completes a documented assessment, identifies the residual uncertainty, takes legal advice, and proceeds on a reasoned basis is in a materially better position than one that proceeds without analysis. Switzerland's enforcement posture, like that of OFSI and EU national competent authorities, gives weight to documented good-faith compliance effort in assessing whether a breach is wilful or negligent.
Step 7: Document the assessment and maintain records
The written record of the ownership and control assessment is both a compliance deliverable and a risk-management asset. Where SECO or another authority later queries a transaction, the assessment memorandum is the primary evidence that the firm identified the question, applied a proper standard, and reached a reasoned conclusion.
A complete assessment record should contain:
- The date of the assessment and the name of the person who conducted it.
- The identity of the designated person and the instrument designating them, with the date of the designation.
- A description of the counterparty, including its jurisdiction of incorporation and the transaction under review.
- A summary of the ownership chain mapped, the sources used, and any gaps in registry data.
- Analysis of the ownership prong and the control prong, separately.
- The conclusion, with the reasoning stated.
- Any external opinions or legal advice received.
- The date on which the assessment was last reviewed and whether circumstances have changed.
Records should be retained for a period consistent with the applicable ordinance and with good practice under the Swiss Anti-Money Laundering Act. Where a transaction also falls within OFSI's or OFAC's scope, those regimes' record-keeping periods apply in parallel – and the stricter requirement governs. As currently in force, verify the current position before relying on it.
We regularly advise compliance teams on the appropriate structure and retention period for assessment records. A well-structured record that reflects the step-by-step analysis above demonstrates that the firm's compliance function is operating to a defensible standard.
Common misconceptions about SECO ownership and control assessments
A widely held misconception is that Switzerland's sanctions regime mirrors OFAC's 50 percent rule and that a counterparty below the OFAC threshold is automatically safe under SECO. That assumption is incorrect. As this guide has set out, SECO's control prong can catch an entity even where ownership is below any mechanical threshold, provided the designated person exercises effective control by other means. The risk of relying on an OFAC clearance alone – without a separate SECO analysis – is real and, in our practice, more common than firms tend to assume.
A second misconception is that SECO compliance is primarily a concern for Swiss-domiciled businesses. In fact, any business with a Swiss nexus – a Swiss bank account, a Swiss trading subsidiary, a commodity trade clearing through Geneva – has a SECO compliance obligation for the relevant leg of the transaction. The jurisdictional reach of the ordinances does not depend on the nationality of the principal parties.
Related practices
- Sanctions compliance audit and testing – reviewing and testing your screening programme against live sanctions lists.
- Ownership and control assessments under the UN Consolidated List – the UN framework and how it interacts with national regimes.
- Payment processing controls and sanctions obligations – structuring payment controls to meet the obligations of multiple regimes.