On December 20, 2022, the Department of Treasury’s Office of Foreign Assets Control (“OFAC”) announced that it was amending its regulations in multiple sanctions programs to reflect that the property and interests in property of an entity are blocked if one or more blocked persons own, whether individually or in the aggregate, directly or indirectly, a 50 percent or greater interest in the entity. This principle is referred to as OFAC’s “50 Percent Rule.”

Previously, OFAC’s regulations provided that any entity must be considered blocked if it is “50 percent or more owned by” a blocked person. The new language will now state that an entity should be deemed blocked if it is “directly or indirectly owned, whether individually or in the aggregate, 50 percent or more by one or more persons” who are blocked. Although the new language does not represent a shift in OFAC policy--as it conforms with long-standing OFAC guidance that an entity should be considered a blocked person if owned 50 percent or more in the aggregate by blocked persons--the revisions formally codify OFAC’s interpretation of the 50 Percent Rule into its regulations.

This development should serve as a reminder that OFAC expects parties to determine the ownership structure of counterparties to identify their aggregate interests while in the due diligence process of transactions and other dealings.