The 50 Percent Rule: Why Ownership Screening Is Harder Than It Looks
A counterparty screens clean. The name returns no hits on the Specially Designated Nationals list, the company is registered in a jurisdiction with no sanctions program against it, and the vessel it owns has never appeared on a designation notice.
None of that tells you the company is not sanctioned.
Under the ownership rules applied by the United States, the European Union, and the United Kingdom, an entity can be subject to an asset freeze without ever being named, purely because of who owns it. In shipping, where vessels sit in single-purpose companies stacked beneath holding companies in several jurisdictions, that is not an edge case. It is the ordinary structure of the industry, and it is the structure the shadow fleet was built on.
This article covers how OFAC's 50 Percent Rule works, how the EU and UK tests differ from it, the new export control version due to switch on in November, and what an ownership screen in a maritime transaction actually has to establish.
The Rule Itself
OFAC published the current version of the rule on August 13, 2014, in its Revised Guidance on Entities Owned by Persons Whose Property and Interests in Property Are Blocked.
The principle is short. Any entity owned 50 percent or more, directly or indirectly, individually or in the aggregate, by one or more blocked persons is itself considered blocked. It does not need to appear on the SDN list.
For a U.S. person that means the entity's property must be blocked and dealings with it are prohibited, unless OFAC authorizes them. The prohibition applies by operation of law, from the moment the ownership threshold is met, whether or not anyone has noticed.
Three features make the rule harder to apply than it sounds:
Aggregation: Stakes held by different blocked persons are added together. If one SDN owns 30 percent and another owns 25 percent, the total is 55 percent and the entity is blocked, even though neither owner holds a majority. OFAC aggregates interests even where the owners are blocked under different sanctions programs.
Indirect Ownership: Ownership passes down through entities that are themselves blocked. If a blocked person owns 50 percent of Company A, Company A is blocked. If Company A then owns 50 percent of Company B, Company B is blocked as well, because the blocked person's interest flows through an entity that is itself treated as blocked.
What Does Not Pass Through: The reverse is equally important. If a blocked person owns 40 percent of Company A, Company A is not blocked by the rule, and its holdings in Company B are not attributed back to the blocked person. The chain breaks at the first link below the threshold. OFAC's FAQs work through multi-layer examples, and the analysis should follow OFAC's own methodology rather than a multiplication exercise someone improvises.
Ownership, Not Control
The U.S. rule is strictly an ownership rule. An entity controlled by a blocked person, but not owned 50 percent or more by one, is not automatically blocked.
That is not permission. OFAC urges caution where sanctioned parties exercise significant control, because such entities can still be found to hold an interest in blocked property, or become the subject of a future designation or enforcement action. A company whose shares are held by a nominee but whose decisions are made by an SDN is a company OFAC may treat as exactly what it is.
The enforcement record shows how that plays out. On June 12, 2025, OFAC imposed a penalty of $215,988,868 on GVA Capital Ltd., a venture capital firm that had managed investments for Suleiman Kerimov, designated in April 2018. The firm relied on a legal opinion that a Guernsey entity fell outside the rule because no SDN owned 50 percent of it on paper. OFAC concluded otherwise, on the basis that a U.S. trust in which Kerimov held a beneficial interest owned the entity.
A clean ownership opinion that does not reflect beneficial ownership is not a defense. It is evidence of what you knew.
The EU Test Moved Toward the U.S. in 2024
The EU applies both an ownership test and a control test, and in 2024 it changed the ownership test.
The EU Best Practices guidance now sets the threshold at 50 percent or more of an entity's proprietary rights, where it previously required more than 50 percent. That aligns the EU with OFAC. The guidance also confirmed that ownership stakes held by different designated persons are aggregated, again following the U.S. approach.
The control test is where the EU goes further than the U.S. Control is assessed separately and the 2024 guidance expanded the list of indicators. It now names majority shareholdings by designated persons, buyback options, transfers of shares close to the time of designation, the use of front persons, and the use of trusts and shell companies as red flags. The criterion addressing dominant influence was expanded to cover de facto power explicitly, and acting on behalf of or at the direction of a sanctioned person is treated as a separate and equivalent basis for restriction.
The share transfer indicator deserves attention in shipping. Ownership of vessel companies has changed hands rapidly around designation dates, and the EU guidance treats that timing as a warning sign rather than a cure.
The UK Test Still Differs
The UK now sits apart from both.
OFSI's ownership test requires more than 50 percent, measured across both shares and voting rights. And OFSI generally calculates on an individual basis, meaning stakes held by separate designated persons are not simply added together as they are under the US and EU rules.
That produces a real divergence. An entity owned 30 percent by one designated person and 25 percent by another is blocked under OFAC and EU rules and may not be caught by the UK ownership test at all.
The UK compensates with a separate control test, including what is known as the hypothetical control test, which asks whether it is reasonable to expect that a designated person would be able to achieve that the affairs of the entity are conducted in accordance with their wishes. OFSI ran a call for evidence on that test which closed on April 20, 2026, and has published a summary of responses. Until any change is made, firms are still required to assess ownership and control under the existing guidance.
OFAC and OFSI have also published joint guidance comparing the key features of their regimes. For anyone subject to both, it is the most efficient single document for understanding where the differences sit.
The Export Control Version Arrives in November
A fourth ownership test is scheduled to take effect shortly, and it widens the population of restricted counterparties.
On September 29, 2025, the Commerce Department's Bureau of Industry and Security issued the Affiliates Rule, extending Entity List restrictions to entities owned 50 percent or more, directly or indirectly, individually or in the aggregate, by parties on the Entity List, the Military End-User List, or certain SDN programs. Previously, BIS treated each listed entity as legally distinct, so a wholly owned subsidiary of a listed company was not itself restricted unless separately named.
In November 2025, following the U.S. and China trade arrangement, BIS suspended the rule for one year. The suspension ends on November 9, 2026, and the rule is set to take effect on November 10, 2026 unless BIS acts again.
Two features matter for maritime businesses that handle equipment, spares, or technology. The rule aggregates across the Entity List, the MEU List, and specified SDN programs together, which in some respects goes further than OFAC's rule. And it adds a new red flag requiring a license where an exporter knows a party has an owner on the Entity List or MEU List but cannot determine the percentage of ownership.
That second point converts an incomplete ownership picture from a diligence gap into a licensing question.
Why Shipping Is Especially Exposed
The ownership rules were written for corporate structures generally. Shipping's structures are unusually well suited to defeating them.
Single-Purpose Vessel Companies. Each ship typically sits in its own company, frequently in a registry chosen for confidentiality, owned by an intermediate holding company, owned in turn by a group parent. Three or four layers is ordinary. Each layer is a point where ownership has to be established rather than assumed.
The registered owner is not the beneficial owner. Registry records identify the registered owner. The party that actually benefits may sit two or three steps above it. As the Caroline Bezengi showed, a registered owner can be a shell recorded care of its own manager, at the manager's address, established weeks before the voyage.
Ownership changes quickly. Vessel companies can be transferred with a share sale and no change to the ship's name, flag, or appearance. Sovcomflot transferred dozens of tankers to newly incorporated companies in the UAE, India, and Hong Kong that continued trading on sanctioned routes.
Management and ownership are separate. A ship manager, commercial manager, or ISM manager may be entirely unconnected to the owner, or may be the owner under another name. Screening the manager tells you nothing reliable about the ownership, and the reverse is also true.
The vessel is property. Where a vessel-owning company is blocked by operation of the 50 Percent Rule, the vessel is property of a blocked person. For a charterer, bunker supplier, insurer, agent, or terminal operator dealing with that ship, the question is not only whether the company is named. It is whether the ship is blocked property.
What an Ownership Screen Actually Has to Do
Screen past the first name. A counterparty name screen is the start of the process, not the result. The question is who owns the counterparty, and who owns them.
Trace to beneficial ownership. Follow the chain upward until you reach natural persons or entities you can verify. Where a layer cannot be verified, that is a finding in its own right, and under the incoming BIS rule it may be a licensing trigger.
Apply each regime you are subject to. A structure can be blocked under OFAC and EU rules and not under the UK ownership test, or caught under the UK control test and not under OFAC. There is no single answer, only an answer per regime.
Aggregate where the regime aggregates. Under OFAC and EU rules, add together the stakes of all designated owners, across programs.
Look at control even where ownership falls short. Under EU and UK rules control is a separate test. Under OFAC it is an enforcement risk. Nominee shareholders, trusts, buyback options, and front persons all belong in the analysis.
Check the timing of ownership changes. A transfer made shortly before or after a designation is an indicator under EU guidance and a question under any regime.
Screen the vessel, the owner, and the managers separately. Registered owner, beneficial owner, commercial manager, ISM manager, and the vessel's IMO number each need to be checked on their own.
Record what you did and when. Designations and ownership both change. A screening result is accurate on the date it was produced, and the record showing what was checked is what you rely on if a counterparty turns out badly.
Build the questions into the due diligence questionnaire. Ownership and control information has to come from the counterparty in the first instance. A due diligence questionnaire that asks for the full ownership chain, the identity of ultimate beneficial owners, and any sanctions nexus puts the obligation to disclose where it belongs and produces the record at the same time.
The Penalties
The stakes are worth stating plainly.
Civil violations under the International Emergency Economic Powers Act are strict liability, which means intent is not required. Under OFAC's enforcement guidelines at 31 C.F.R. Part 501, Appendix A, civil penalties can reach the greater of a statutory per-violation amount, adjusted annually for inflation and currently reported at $377,700, or twice the value of the transaction. Willful violations are criminal and carry fines of up to $1,000,000 and imprisonment of up to 20 years under 50 U.S.C. 1705.
OFAC weighs the quality of a compliance program when it sets penalties. A documented, risk-based ownership screening process is one of the factors that moves a case toward the lower end of the range. Reliance on an ownership opinion that ignored beneficial interests moved GVA Capital toward the other end.
The Bottom Line
A clean name screen tells you that a counterparty has not been designated. It does not tell you that the counterparty is not sanctioned.
The ownership rules extend restrictions to entities that are never named, by adding up what designated persons own, tracing it through layers of companies, and in the EU and UK looking at control as well as shares. Each regime draws its lines slightly differently, and from November a fourth test in export controls joins them.
Shipping's ordinary structures, stacked single-purpose companies, separate managers, offshore registries, and ownership that can change with a share transfer, are precisely the structures those rules were written to see through. Screening that stops at the counterparty's name is screening that was designed for a simpler industry.
