The 50 Percent Rule blocks the property and interests of entities owned 50 percent or more by parties sanctioned by the U.S. Department of the Treasury even if not sanctioned by name. The European Union has a similar rule.
In recent years, the Treasury Department has increased regulatory enforcement of the 50 Percent Rule. As a result, institutions are dedicating more resources to understanding and managing sanctions risks associated with entities that are majority owned by sanctioned firms but are not specifically named on sanctions lists.
The 50 Percent Rule introduces a unique compliance challenge, as entities majority owned by sanctioned actors are often owned through dynamic, indirect ownership structures. Ownership chains frequently cross jurisdictions, introducing additional complexity for determining ownership.
The Treasury Department also urges caution in dealing with entities in which ownership interests by sanctioned actors fall below 50 percent — in cases of significant minority interests, control by means other than majority ownership, and divestment — and warns that such non-blocked entities may be subject to future designation or enforcement actions.
This paper provides a regulatory overview of the 50 Percent Rule, past related enforcement actions, and techniques for navigating complex ownership dynamics. In addition, this paper explores cases falling below 50 percent ownership in which Treasury urges caution.