On August 13, the U.S. Department of the Treasury published revised guidance on the treatment of entities owned by persons whose property and interests in property are blocked under the Executive Orders and regulations administered by the Office of Foreign Assets Control (OFAC). Under its new policy, Treasury will aggregate the ownership interests of all blocked persons in a specific entity to determine whether that entity is also considered to be a blocked person. The revised guidance modifies the 2008 guidance on owned entities and indicates that Treasury will now take an expansive approach in determining whether entities in which one or more blocked persons have an ownership interest are also blocked.

The new guidance reflects a change in OFAC’s 50 Percent Rule, under which an entity in which a blocked person owns, directly or indirectly, a 50% or greater interest is also blocked. In the past, OFAC had not aggregated the ownership interests of different Specially Designated Nationals for purposes of the 50 Percent Rule. Under the new policy announced this week, it does not matter whether a single blocked person or multiple blocked persons collectively own sufficient interests in an entity to meet the 50% test. The interests of all blocked persons with an ownership interest in the entity will be added together.

The operative language of the revised guidance reads as follows: “[A]ny entity owned in the aggregate, directly or indirectly, 50 percent or more by one or more blocked persons is itself considered to be a blocked person.” This change in policy will require parties to review their existing business arrangements to determine whether entities previously not blocked are now covered by Treasury’s new aggregation of interests approach.