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OFAC Now to Aggregate Ownership Interests for the "50 Percent" Rule
Practical Law Legal Update 0-578-2167 (Approx. 4 pages)
OFAC Now to Aggregate Ownership Interests for the "50 Percent" Rule
by Practical Law Commercial
| Published on 15 Aug 2014 • USA (National/Federal) |
The Office of Foreign Assets Control (OFAC) has issued revised guidance on the "50% Rule," which derivatively blocks entities and property owned, directly or indirectly, by a blocked person or entity. The revised guidance now blocks all entities owned 50% or more in the aggregate by more than one blocked person or entity.
On August 14, 2014, the Department of the Treasury's Office of Foreign Assets Control (OFAC) issued revised guidance on its rule for Entities Owned by Persons Whose Property and Interest in Property Are Blocked, commonly referred to as the 50% Rule. Under the newly revised guidance, an entity is derivatively blocked if it is owned 50% or more in the aggregate by persons or entities blocked by either:
- An Executive Order issued by the President.
- Otherwise being placed on OFAC's list of Specially Designated Nationals.
This guidance reverses OFAC's previous position, which maintained that entities were not derivatively blocked unless any individual blocked person or entity held a 50% or greater ownership interest.
US persons and entities are prohibited from engaging in transactions with blocked entities, unless authorized by OFAC. After this revised guidance, compliance with the 50% Rule is significantly more complicated. US persons and entities contemplating international transactions with foreign companies are now, at a minimum, required to:
- Identify and screen every ownership interest holder.
- Calculate the total aggregate percentage of ownership interests held by blocked persons or entities.
Previously, the screening process only involved ensuring that no single blocked person or entity held a 50% or more interest.