OFAC Issues New Guidance on Entities Owned by Blocked Persons

On August 13, 2014, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) revised and clarified its prior guidance regarding entities owned by persons whose property and interests in property are blocked under the Executive Orders and regulations administered by OFAC. The below memo provides further detail on these developments, and a brief summary is below:

• Unlike prior guidance, which did not aggregate ownership interests of more than one blocked person, OFAC now considers entities owned 50% or more by more than one blocked person to be blocked by operation of law.
• Parallel principles apply to the new Ukraine-related sectoral sanctions, and subsidiaries of entities named on the Sectoral Sanctions Identifications List are subject to the same restrictions as the named parent entities.
• OFAC confirmed that shares held through majority-owned intermediary companies should be considered in making the 50% ownership calculation.
• OFAC confirmed that entities that were once 50% or more owned by one or more blocked persons, but are no longer 50% or more owned as a result of a divestment that occurred outside U.S. jurisdiction, are no longer blocked.
• OFAC reiterated and slightly clarified its prior guidance that U.S. persons may not deal with blocked individuals when they are acting on behalf of a non-blocked company (for example, a company for which the CEO is sanctioned but the company is not).