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Summary: Part I examines OFAC’s Advisory and the fundamental shift it signals in sanctions compliance — moving from a mechanical application of 50% ownership rule towards a substance-over-form analysis. It covers the expanded interpretation of “property interest”, the red flags identified by OFAC, and the resulting compliance implications for businesses operating across sectors.

Introduction

For over a decade, the central question in US sanctions compliance was straightforward: does a sanctioned individual or entity hold at least a 50% ownership stake? If the answer was a no, most practitioners treated the transaction as permissible. That approach is no longer valid.

OFAC published new guidance[1], signalling a fundamental shift in how it evaluates sanctions risk. The agency made it clear that it will examine the economic substance behind legal arrangements, not just who appears on a cap table. If ownership structures serve to mask a sanctioned party’s ongoing involvement with properties, OFAC will treat those arrangements as evasive and pursue enforcement (“March 2026 Advisory”).

Who is a Blocked Person?

In practical terms, a blocked person is any individual or entity whose assets are frozen under the US sanctions. Once designated, all properties connected to that person is off-limits, no US person may transact with, transfer, or otherwise deal in it.

OFAC’s 2014 Guidance, which remains in effect, established that blocked persons include not only those directly designated, but also any entity in which designated parties hold, individually or collectively, a 50% or greater ownership interest. This is true even if the entity itself has never been listed on any sanctions list.

The March 2026 Advisory does not change who gets designated. What it does change is how broadly OFAC interprets “property interest”. Under the new guidance, a sanctioned individual who holds no formal ownership stake may still be treated as having a blocked interest if they:

  • continue to use or enjoy the property;
  • receive economic benefit from it, directly or indirectly; or
  • direct or influence decisions about it through a proxy, agent, or intermediary.

What the Advisory Says

At its core, the March 2026 Advisory targets transactions that look like genuine transfers on paper, but leave the sanctioned party’s real-world relationship with the property unchanged. Think of an oligarch who signs over a yacht to a spouse but continues booking it for personal travel, or who moves funds into a family trust while still directing how those funds are invested. In OFAC’s view, these arrangements do not sever the sanctioned party’s interests, they merely disguise them. The agency has made it clear it will assess economic reality rather than relying on the face of legal documents.

Red Flags to Watch For

The March 2026 Advisory sets out several warning signs that a purported transfer may not be genuine. No single indicator is conclusive, but each should prompt closer examination:

  • Suspicious pricing: If a property is sold for far below market value, or on terms no unrelated buyer would accept, the transfer may not reflect a real change in economic ownership;
  • Transfers within the inner circle: Assets moving from a sanctioned person to a spouse, child, or long-standing associate raise immediate questions about whether the recipient is acting independently or simply holding the property on behalf of the blocked party;
  • No discernible business logic: Transfers that lack a clear commercial purpose, or that place assets in the hands of someone with no relevant experience, suggest the arrangement exists to obscure rather than to transact;
  • Layers upon layers in opaque jurisdictions: Multi-tiered holding structures involving shell entities in jurisdictions with weak transparency regimes often serve no purpose other than to make tracing ownership difficult;
  • The sanctioned party remains involved: If the blocked person continues to use the property, gives instructions about it, or makes decisions through intermediaries, the transfer is cosmetic at best;
  • Suspicious timing: Divestments executed immediately preceding or following the imposition of sanctions may suggest that the transaction was prompted by the designation, rather than genuine commercial considerations; or
  • Stonewalling on due diligence: When counterparties give vague, evasive, or non-responsive answers to questions about a sanctioned person’s involvement, that silence itself is a warning sign.

Compliance Implications

The March 2026 Advisory demands meaningful adjustments to how sanctions risk is assessed for businesses operating across borders, particularly those in financial services, private equity, venture capital, and professional advisory roles.

  • Ownership screening is necessary but not sufficient. A clean 50 Percent Rule result does not conclude the inquiry if evidence (where information exists or should reasonably have been sought) suggests a blocked person retains practical or economic involvement. Compliance programmes must detect signs of control, benefit, and decision-making authority beyond equity percentages.
  • The red flags from the March 2026 Advisory should become a part of the standard counterparty review toolkit. Recent changes in ownership, transfers to persons connected to sanctioned individuals, and corporate structures that seem designed to confuse rather than to operate, call for deeper investigation, assessed in context and on the totality of the facts.
  • When information surfaces, suggesting a sanctioned party once held an interest in property, firms should document their analysis and escalate where red flags emerge. If the conclusion is that a blocked person still holds an interest in a property within the US territory or in the hands of a US person, that property must be frozen and reported to OFAC. For property outside the US jurisdiction, US persons should not engage with it unless OFAC has granted authorisation.

This shift is significant but not unpredictable. OFAC has signalled for years, through FAQ 402, its 2014 guidance on control-based blocking, and escalating enforcement, that formal structures would not indefinitely shield those facilitating sanctions evasion. The March 2026 Advisory formalises that position: 50 percent is no longer enough.

[1] Guidance dated March 31, 2026.