The OFAC 50 Percent Rule: Sanctions Ownership and the 2026 Sham Transactions Guidance

The OFAC 50 Percent Rule is one of the most important sanctions compliance rules for U.S. businesses. If blocked persons own 50 percent or more of an entity — directly or indirectly, in the aggregate — that entity is itself blocked, even if it never appears on the SDN List. In 2026, OFAC also made clear that firms must look beyond formal ownership when the facts suggest a sham transfer or proxy arrangement. Ownership math is still necessary; it is no longer enough.

This guide walks through ownership aggregation and indirect ownership, summarizes the March 2026 Sham Transactions Guidance, and outlines what banks, fintechs, private funds, and other U.S. businesses need to do for effective sanctions due diligence in 2026.

General information only — not legal advice. For specific transactions, consult sanctions counsel.

What is the OFAC 50 Percent Rule?

The Office of Foreign Assets Control (OFAC) is the U.S. Treasury Department office that administers economic sanctions and maintains the Specially Designated Nationals and Blocked Persons List (SDN List). Anyone on the SDN List is a blocked person, and U.S. persons generally cannot transact with them or deal in their property.

The OFAC 50 Percent Rule extends those prohibitions one step further. Per OFAC's revised 2014 guidance, any entity owned 50 percent or more — directly or indirectly, individually or in the aggregate — by one or more blocked persons is itself blocked by operation of law. The entity does not have to be on the SDN List. If the ownership threshold is met, the prohibition applies automatically.

This is what makes the rule so consequential for U.S. sanctions screening: a company can find itself dealing with a blocked entity without ever finding a name match on a sanctions list. Legal status flows through ownership.

OFAC ownership aggregation and indirect ownership

Two features of the 50 Percent Rule cause most of the surprises in practice: aggregation and indirect ownership.

Aggregation means the ownership interests of multiple blocked persons are combined. If Blocked Person X owns 25 percent of an entity and Blocked Person Y owns another 25 percent, the entity is blocked, even though neither individually crosses 50 percent. OFAC aggregates ownership across different sanctions programs too — a person blocked under one program and a person blocked under another count toward the same 50 percent threshold.

Indirect ownership means ownership through intermediate companies. If a blocked person owns 100 percent of a holding company, and that holding company owns 60 percent of an operating company, the blocked person indirectly owns 60 percent of the operating company. OFAC's interpretation: indirect ownership "passes through" any intermediate entity that is itself 50 percent or more blocked-owned. If an intermediate link falls below 50 percent, the chain breaks.

For U.S. beneficial ownership analysis under the rule, this means screening one shareholder at a time is not enough. The math has to be done on the full ownership picture.

OFAC 50 Percent Rule examples

OFAC's FAQ 401 publishes four worked examples that compliance teams reference constantly. The pattern they illustrate:

• Indirect ownership through a chain. Blocked Person X owns 50% of A. A owns 80% of B. X also directly owns 10% of B. B is blocked (40% indirect + 10% direct = 50%).
• Aggregation through multiple chains. X owns 50% of A and 50% of B. A and B each own 25% of C. C is blocked (25% + 25% = 50%, all indirect through X).
• Direct plus indirect by the same blocked person. X owns 50% of A and 10% of B directly. A owns 40% of B. B is blocked (40% indirect + 10% direct = 50%).
• Where the chain breaks. X owns 50% of A and 25% of B. A and B each own 25% of C. C is not blocked. X's stake in B is below the threshold, so B's ownership of C does not count toward aggregation.

The takeaway: only intermediate entities that are themselves 50%-or-more blocked-owned can pass ownership down the chain.

Ownership versus control: the line OFAC has always drawn

OFAC FAQ 398 has long stated that the OFAC 50 Percent Rule "speaks only to ownership and not to control." An entity controlled — but not 50%-or-more owned — by blocked persons is not automatically blocked under the rule. OFAC may designate that entity separately under other sanctions criteria, but it does not become blocked automatically.

For years, this ownership-versus-control distinction made the rule a useful bright-line test for sanctions due diligence. If the ownership math did not hit 50 percent, many firms treated the counterparty as cleared.

The 2026 Sham Transactions Guidance does not formally erase that line. But it has changed what a defensible ownership analysis is expected to look like.

OFAC Sham Transactions Guidance: what changed in March 2026

On March 31, 2026, OFAC issued Guidance on Sham Transactions and Sanctions Evasion. It is the most consequential OFAC sanctions guidance since the 2014 revision of the 50 Percent Rule itself.

The advisory does not replace the OFAC 50 Percent Rule. It explicitly supplements it. What it adds is a framework for evaluating whether a purported divestment or transfer by a blocked person is real, or whether it is a paper exercise designed to evade sanctions while preserving the blocked person's continuing interest in property.

OFAC's instruction: apply a "functional approach" that looks "beyond legal formalities to underlying practical and economic realities," using a "totality of the circumstances" test.

Red flags for sham transactions and sanctions evasion

The OFAC Sham Transactions Guidance identifies seven red flags. None is individually determinative, and the list is not exhaustive.

• Commercially unreasonable transactions — transfers at non-arm's-length terms, lacking adequate consideration.
• Transfers to family members or close associates — where the transferee may be acting as a proxy or agent.
• Unclear purpose of transfer — transfers lacking apparent business rationale or to transferees with no relevant experience.
• Unduly complex corporate structures involving higher-risk jurisdictions — multi-layered LLCs, partnerships, or trusts without a discernible legitimate purpose.
• Continued involvement of the blocked person — facts suggesting the blocked person remains involved in the use, management, or disposition of the property.
• Transfer near the time of designation — transfers shortly before or after an SDN designation.
• Evasive responses regarding the blocked person's involvement — vague or non-answers from counterparties or intermediaries.

The advisory is "explanatory only and does not have the force of law." Its enforcement weight comes from the cases behind it.

OFAC enforcement actions: GVA Capital, IPI Partners, Gracetown

Three 2025 enforcement actions illustrate exactly how OFAC now expects ownership analysis to be conducted.

GVA Capital — $215,988,868 penalty notice (June 12, 2025). OFAC imposed the statutory maximum penalty on GVA Capital Ltd., a San Francisco-based venture capital firm, for managing a U.S. investment for Russian oligarch Suleiman Kerimov from April 2018 through May 2021. The investment vehicle was held through Heritage Trust, a Delaware-based structure OFAC later determined was created to hold Kerimov's U.S. assets. After Kerimov's April 2018 SDN designation, GVA Capital continued to manage and attempt to liquidate the investment through Kerimov's nephew, whom the firm knew acted as Kerimov's proxy. GVA Capital had a legal opinion concluding the vehicle was not itself blocked under the formal 50 percent test — but the same opinion warned that no sale could directly or indirectly involve Kerimov. The penalty: $214 million for sanctions violations, $1.99 million for reporting violations.

IPI Partners — $11,485,352 settlement (December 2, 2025). OFAC settled with IPI Partners, LLC, a Chicago-based private equity firm, for 51 apparent violations involving a $50 million investment ultimately traceable to Kerimov through a British Virgin Islands entity owned by Heritage Trust. IPI personnel had met with Kerimov in France and his representative in San Francisco before the commitment. After Kerimov's designation, IPI received outside legal advice that the investor account need not be blocked under the formal 50 percent test — but OFAC found IPI had not disclosed the in-person meetings or the representative's role to counsel. IPI continued processing capital calls, distributions, and management fees for four years.

Gracetown — $7,139,000 penalty (December 4, 2025). Two days after the IPI settlement, OFAC penalized Gracetown, Inc., a New York property management company, for receiving payments tied to designated Russian oligarch Oleg Deripaska. Gracetown managed three luxury properties Deripaska had purchased through layered entities; ownership was transferred to a relative shortly before his 2018 designation — a textbook illustration of the "transfer near the time of designation" red flag.

The pattern across all three: formal sub-50% ownership analysis can be insufficient — sometimes catastrophically so — when the surrounding facts suggest a blocked person remains the practical source of funds, control, or benefit. OFAC has put particular pressure on "gatekeepers" (investment advisers, attorneys, accountants, trust and corporate formation services), but the principles apply across sectors.

BIS Affiliates Rule: a 50%-style test for U.S. export controls

A related development is moving in parallel on the U.S. export controls side. On September 29, 2025, the Bureau of Industry and Security (BIS) issued an interim final rule — the BIS Affiliates Rule — that imports a 50%-style test into the Export Administration Regulations (EAR). Any non-listed foreign entity owned 50 percent or more, directly or indirectly, in the aggregate, by one or more parties on the BIS Entity List, Military End-User (MEU) List, or certain SDN designations under EAR § 744.8 becomes automatically subject to the same export restrictions as its listed owner.

BIS suspended the rule for one year on November 10, 2025. It is currently scheduled to take effect November 10, 2026. U.S. exporters, freight forwarders, and the banks that finance them should treat the next six months as a runway, not a reprieve. The rule imposes strict liability and an affirmative duty to determine counterparty ownership.

For sanctions and export controls compliance programs, the OFAC Sham Transactions Guidance and the BIS Affiliates Rule together signal the same direction: ownership-based restrictions are widening, and so are the diligence expectations behind them.

What this means for businesses

For most U.S. businesses, the practical takeaway is not panic but process. The OFAC 50 Percent Rule still starts with ownership math — but the 2026 guidance means that math should be paired with deeper diligence whenever red flags appear.

This is especially true for banks, fintechs, private equity and venture capital funds, corporate service providers, real estate businesses, and any organization dealing with layered ownership structures. These are the settings where sham ownership and proxy arrangements are most likely.

A few practical implications that follow from where the rule and the guidance now stand:

• Treat the 50 Percent Rule as the starting point of a counterparty ownership review, not the conclusion.
• Where any of the seven sham-transaction red flags are present, conduct enhanced due diligence before transacting.
• Do not rely on legal opinions written on incomplete facts — both GVA Capital and IPI Partners had opinions that did not protect them.
• Build post-onboarding screening into the compliance program. Counterparties can become blocked after the relationship begins.
• Document the analysis. The bar for what OFAC expects to see in a contemporaneous record has effectively risen.

Key takeaways

• The OFAC 50 Percent Rule blocks any entity 50%-or-more owned, directly or indirectly, in the aggregate, by one or more blocked persons — even if not on the SDN List.
• Ownership across multiple blocked persons aggregates, including across different sanctions programs.
• The rule still speaks to ownership and not control, but the March 2026 Sham Transactions Guidance instructs firms to look beyond formal ownership where red flags suggest a sham transfer.
• Recent enforcement (GVA Capital $215.9M; IPI Partners $11.5M; Gracetown $7.1M — all 2025) targets firms that relied on formal sub-50% analyses while ignoring practical indicia of blocked-person control or benefit.
• The BIS Affiliates Rule, a 50%-style test for U.S. export controls, takes effect November 10, 2026.

Frequently asked questions about the OFAC 50 Percent Rule

What is the OFAC 50 Percent Rule? Any entity owned 50 percent or more — directly or indirectly, in the aggregate — by blocked persons is itself blocked, even if it does not appear on the SDN List.

Does the OFAC 50 Percent Rule apply to control? No. Per OFAC FAQ 398, the rule speaks to ownership, not control. An entity controlled but not 50%-or-more owned by blocked persons is not automatically blocked, though OFAC may designate it separately.

How does OFAC aggregate ownership across blocked persons? OFAC sums the interests of multiple blocked persons toward the 50 percent threshold. The 2014 revised guidance confirmed this includes persons blocked under different sanctions programs.

What is the OFAC Sham Transactions Guidance? A March 31, 2026 sanctions advisory that supplements the 50 Percent Rule. It identifies red flags of sham divestments and instructs firms to apply a totality-of-the-circumstances test rather than relying on ownership math alone.

What is the BIS Affiliates Rule? An interim final rule from the Bureau of Industry and Security, issued September 29, 2025 and scheduled to take effect November 10, 2026. It applies a 50%-style test to the BIS Entity List, MEU List, and certain SDN designations under EAR § 744.8.

Is an entity unblocked if a blocked person divests below 50 percent? Per OFAC FAQ 402, yes — but only if the divestment is genuine, occurs outside U.S. jurisdiction, and does not involve U.S. persons. The 2026 OFAC guidance makes the sham analysis significantly more demanding.

The bottom line

The OFAC 50 Percent Rule still does what it has always done: it blocks any entity owned 50 percent or more by blocked persons, whether or not that entity appears on the SDN List. What 2026 added is the obligation to read the ownership picture critically. After the Sham Transactions Guidance and the GVA Capital, IPI Partners, and Gracetown enforcement actions, a clean-looking ownership structure is no longer a clean compliance answer. Ownership math is the starting line of sanctions due diligence — not the finish. This guide is written for compliance teams, in-house counsel, and non-lawyers who need to operate the rule day-to-day; the specifics of any transaction should be reviewed with sanctions counsel.

Sources and authorities

The article's analysis is grounded in the following primary sources. Practitioners should verify current versions before relying on any specific provision; OFAC and BIS update guidance regularly.

OFAC regulations and guidance

• 31 CFR Chapter V — Office of Foreign Assets Control: eCFR – 31 CFR Chapter V
• OFAC Frequently Asked Questions — sanctions-program guidance, including the 50 Percent Rule: ofac.treasury.gov/faqs
• FAQ 398 — Ownership versus control: OFAC FAQ 398
• FAQ 401 — 50 Percent Rule worked examples: OFAC FAQ 401
• FAQ 402 — Effect of divestment below 50 percent: OFAC FAQ 402
• Revised Guidance on Entities Owned by Persons Whose Property and Interests in Property Are Blocked (August 13, 2014): OFAC sanctions program legal guidance

OFAC 2026 Sham Transactions Guidance

• OFAC, Guidance on Sham Transactions and Sanctions Evasion (March 31, 2026): OFAC Recent Actions

Enforcement actions cited

• GVA Capital, Ltd. — Notice of Penalty (June 12, 2025): OFAC Recent Actions
• IPI Partners, LLC — Enforcement Settlement (December 2, 2025): OFAC Recent Actions
• Gracetown, Inc. — Notice of Penalty (December 4, 2025): OFAC Recent Actions

BIS Affiliates Rule and U.S. export controls

• BIS Affiliates Rule — interim final rule, Restrictions on Affiliates of Listed Entities (September 29, 2025): Federal Register
• 15 CFR Part 744 — Control Policy: End-User and End-Use Based: eCFR – 15 CFR Part 744
• 15 CFR § 744.8 — Restrictions on transactions with certain Specially Designated Nationals: eCFR – § 744.8
• BIS Entity List — 15 CFR Part 744, Supplement No. 4: eCFR – Supplement No. 4 to Part 744 (Entity List)

OFAC operational resources

• Office of Foreign Assets Control — homepage: ofac.treasury.gov
• SDN List Search: Sanctions List Search
• A Framework for OFAC Compliance Commitments: Treasury OFAC Framework (PDF)

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Sanctionfy helps U.S. compliance teams turn ownership analyses into defensible, auditable records aligned with OFAC's 2026 expectations. If your current process leans heavily on a single screening check, we'd be glad to walk you through what a more layered approach looks like. Get in touch.