Recent enforcement highlights the broad interpretation of the 50% rule.
In a recent enforcement action, OFAC issued a civil money penalty against Chicago-based private equity firm IPI Partners, LLC, for violations of U.S. sanctions on Russia. The violations stemmed from indirect dealings with sanctioned oligarch Suleiman Kerimov, who was added to the OFAC SDN List on April 6, 2018. Under OFAC rules, that designation required the blocking of all related property and interests in property.
What makes this case significant is that Kerimov did not directly own 50% or more of the transacting entity but was determined to be indirectly involved in the dealings. The enforcement highlights OFAC’s broad interpretation of ownership and control under the 50% rule, reinforcing that it looks beyond legal formalities to identify real-world influence and economic benefit.
How do financial institutions apply the OFAC 50% rule?
Unlike the SDN list, OFAC does not publish a formal 50% list of blocked entities. Instead, institutions must understand ownership aggregation and are expected to gather beneficial ownership information on legal entities, cross-reference owners with the SDN list, and aggregate ownership percentages across multiple blocked persons to determine if they meet the 50 percent threshold.
If an entity is determined to be 50 percent or more owned, directly or indirectly, by blocked individuals or entities, it is considered blocked, regardless of whether it appears on any OFAC list. Institutions that rely solely on list-based screening without ownership analysis risk missing sanctioned entities.
