On August 13, 2014, the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued revised guidance relating to the status of entities owned by individuals or entities whose property and interests in property are blocked under Executive Orders and other regulations administered by OFAC (Blocked Persons).
The revised guidance states that an entity is blocked if one or more Blocked Persons, directly or indirectly, owns a 50% or greater interest in that entity, whether individually or in the aggregate. This guidance is a clear reversal of previous OFAC guidance relating to aggregate ownership. OFAC had previously stated that property owned 50% or more in the aggregate by two or more Blocked Persons was not considered blocked unless a single person held a 50% or greater interest in the property.
Under the revised guidance, if two or more Blocked Persons’ aggregate ownership arises to 50% or greater of an entity, that entity is considered to be blocked by operation of law. US persons are generally prohibited from dealing with Blocked Persons unless authorized by OFAC. The guidance also states that U.S. persons are advised to act with caution when considering a transaction with a non-blocked entity in which one or more Blocked Person has a significant ownership interest that is less than 50% or which one or more Blocked Person may control by means other than a majority ownership interest, as such entities may be the subject of future designation or enforcement action by OFAC.
The OFAC guidance is available here. FAQs relating to the guidance are available here.