Mr. Sanctions

Category: Ownership and Control

  • February 16, 2026: OFSI asks for your input on ownership and control

    Office of Financial Sanctions Implementation HM Treasury

    Call for evidence on ownership and control in financial sanctions regulations

    OFSI has launched a call for evidence to seek industry’s views on how UK financial sanctions regulations on ownership and control are applied in practice, including how firms implement the regulations and where they face challenges.   

    The ownership and control test is designed to stop sanctioned individuals and entities from sidestepping UK sanctions by hiding behind complex company structures, trusts or proxies. However, industry representatives report to OFSI that assessing the ability of a designated person to control an entity – even if they are not actively doing so – can be difficult in practice and may create additional costs and legal risk. 

    We are therefore asking firms, representative bodies and other interested stakeholders to share evidence and practical examples of: 

    • How often ‘hypothetical control’ is present in real financial sanctions cases; 
    • The impact it has on compliance costs, legal risk and business decisions (including derisking); 
    • Whether existing legal concepts and typologies of control are helpful in applying ownership and control regulations.  

    This information will help us understand whether the current approach is as clear, effective and proportionate as it should be, so that sanctions remain tough on those they target while being workable for legitimate businesses. 

    The Call for Evidence is open until 13th April 2026. 

    The Call for Evidence page:

    Open call for evidence

    Ownership and Control Test in UK Financial Sanctions Regulations

    From: Office of Financial Sanctions Implementation

    Published 16 February 2026

    Summary

    Ownership and Control Test in UK Financial Sanctions Regulations

    This call for evidence is being held on another website.

    This call for evidence closes at

    Call for evidence description

    HMG is launching a call for evidence to seek industry’s views on how UK financial sanctions regulations on ownership and control are applied in practice, including how firms implement the regulations and where they face challenges.   

    We are asking firms, representative bodies and other interested stakeholders to share evidence and practical examples of: 

    • How often ‘hypothetical control’ is present in real financial sanctions cases; 
    • The impact it has on compliance costs, legal risk and business decisions (including de-risking); 
    • Whether existing legal concepts and typologies of control are helpful in applying ownership and control regulations.  

    This information will help us understand whether the current approach is as clear, effective and proportionate as it should be, so that sanctions remain tough on those they target while being workable for legitimate businesses. 

    How to respond

    OFSI is keen to hear from a wide range of stakeholders in response to the consultation, including businesses, financial institutions, legal and compliance professionals, civil society and other interested parties.  

    This Call for Evidence goes live on Monday 16th February 2026 and will be open for eight weeks. Responses will be accepted until 11:59pm on Monday 13th April 2026. 

    Responses are encouraged via the online form.

    If you cannot respond via the online form, you may send your response by email to oc-callforevidence@hmtreasury.gov.uk 

    Please state whether you are responding as an individual or representing the views of an organisation, business, or representative body.

    Privacy notice

    Click here to view the privacy notice for the call for evidence, which sets out how HM Treasury will use your personal data and explains your rights under the General Data Protection Regulation (GDPR) and the Data Protection Act 2018 (DPA).

    The Call for Evidence PDF:

    Call_for_EvidenceDownload

    There’s an HTML page, too.

    Finally, OFSI wrote a blog post:

    Call for evidence on ownership and control in financial sanctions regulations

    OFSI, 16 February 2026 – OFSI Blog

    OFSI has launched a call for evidence to seek industry’s views on how UK financial sanctions regulations on ownership and control are applied in practice, including how firms implement the regulations and where they face challenges.   

    The ownership and control test is designed to stop sanctioned individuals and entities from sidestepping UK sanctions by hiding behind complex company structures, trusts or proxies. However, industry representatives report to OFSI that assessing the ability of a designated person (DP) to control an entity – even if they are not actively doing so – can be difficult in practice and may create additional costs and legal risk. 

    This information will help us understand whether the current approach is as clear, effective and proportionate as it should be, so that sanctions remain tough on those they target while being workable for legitimate businesses. 

    Background  

    The policy intention of the UK government’s approach to ownership and control (O&C) in UK sanctions regulations is to ensure that sanctions cannot be easily circumvented. The two-condition O&C test set out in legislation (e.g. Regulation 7(4) of The Russia (Sanctions) (EU Exit) Regulations 2019) serves as a critical safeguard against sanctions circumvention, by ensuring that entities owned or controlled by a DP are subject to financial sanctions, even if not explicitly named on the UK Sanctions List. In particular, the second condition of that test (also referred to as ‘the control test’) is broadly drafted to capture as much activity as possible. 

     We have repeatedly heard from financial and legal representatives that they face challenges when implementing O&C provisions, with particular emphasis on the degree of uncertainty of the control test and the potential for multiple and sometimes conflicting interpretations. Firms have told OFSI that determining when these situations constitute control for sanctions purposes can be challenging and that it is not always clear what evidence should be reasonably sought to support these assessments. 

    In response to industry feedback, HM Government committed to delivering measures to provide further clarity on ownership and control as part of the Review of Sanctions Implementation and Enforcement, published in May 2025. We are therefore launching a call for evidence on how the UK’s O&C test is applied during financial sanctions compliance. We want to hear from those who apply the test about where it works well, where challenges arise and the practical impacts of these assessments. Formal evidence across these areas, in addition to anecdotal evidence already held by OFSI, will help form a comprehensive picture of how implementation works in practice.  

    The call for evidence focuses on control as a direct response to industry feedback, which has highlighted greater implementation challenges associated with the control element of the O&C test rather than the ownership element. On ownership, HMG continues to actively explore options to respond to calls for greater alignment with international partners, including adopting an aggregation model and amending the 50% ownership rule to “50% or more,” in line with the EU and US sanctions frameworks.   

    Why we are calling for evidence 

    Under UK financial sanctions, a DP is subject to an asset freeze. The regulations also apply to entities that designated persons own or control.  

    An entity is owned or controlled directly or indirectly by another person in any of the following circumstances:  

    • The person holds more than 50% of the shares or voting rights in an entity.  
    • The person has the right to appoint or remove a majority of the board of directors of the entity.  
    • It is reasonable, having regard to all the circumstances, to expect that a DP would (if  they chose to) be able, in most cases or significant respects, by whatever means and whether directly or indirectly, to achieve the result that affairs of an entity are conducted in accordance with that DP’s wishes.   

    Evidence presented that the DP has not exercised control does not mean they do not have the ability to do so and therefore does not necessarily refute a DP’s control over an entity. This may be referred to as a DP’s hypothetical ability to exercise control, or simply ‘hypothetical control.’  If a DP can continue to move money or operate through others, the impact of sanctions is weakened. The O&C test helps ensure that sanctions bite on the real economic interests of DP. 

    At the same time, firms need regulations they can apply in a clear and proportionate way. Uncertainty can mean operational delays while investigations are conducted, higher costs to ensure compliance and de-risking behaviour, where firms may exit contracts or avoid new business relationships to avoid breaching sanctions. 

    This call for evidence will help us understand those pressures by gathering evidence on these issues in a structured way. It will build a picture of how firms and practitioners are currently interpreting and applying the test, which aspects of the ownership and control test cause the most difficulty and the practical impacts – including on costs, timing and business decisions. Our aim is to build a concrete, evidence-based picture of practice, rather than relying on anecdote.  

    Scope of the call for evidence 

    It is important to be clear about scope. The call for evidence does not invite comment on whether ownership and control rules are desirable as a matter of policy. Instead, we are asking for evidence across the following areas: 

    • Chapter 2 examines the prevalence and nature of hypothetical control in financial sanctions, including how frequently this form of control is encountered and in what contexts.  
      We are seeking evidence on its significance in the application of financial sanctions. 
       
    • Chapter 3 explores the practical challenges and ease of implementation associated with the control test.  
      This chapter has a particular focus on the assessment of the hypothetical element of the test and the financial impact of compliance and implementation. 
       
    • Chapter 4 considers the practical utility of control typologies as a tool to assist with assessing the hypothetical element of the control test for financial sanctions.  
      This includes, in particular, the typology of control set out by Deputy Judge Nicholas Thompsell in his ruling on Kevin Hellard & Ors v OJSC Rossiysky Kredit Bank & Ors. 

    We are particularly interested in concrete examples (anonymised where necessary) that show the realities of sanctions compliance and welcome evidence from any organisation or individual involved in sanctions implementation.  

    How to respond 

    The call for evidence is open until 13th April 2026.  

    Read the full call for evidence and how to respond here: https://www.gov.uk/government/calls-for-evidence/ownership-and-control-test-in-uk-financial-sanctions-regulations  

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  • Burning Questions: Ownership and Control, around the World

    I asked Gemini to compare and contrast “ownership and control” guidance and regulation across the world. Based on the responses I got, I ended up adding FATF, Wolfsberg, Switzerland and Japan to the bodies offering guidance:

    This comprehensive analysis compares the “Ownership and Control” guidance across major national and international bodies.

    Executive Summary: The “Control” vs. “Ownership” Divide

    The central divergence in global sanctions regulation lies in how “Control” is treated:

    • The “Mathematical” Approach (US): Ownership (50% or more) automatically triggers sanctions. Control without ownership does not automatically trigger sanctions—it is merely grounds for future designation.
    • The “Status-Based” Approach (EU, UK, Canada): If a sanctioned person controls an entity (even with 1% ownership), that entity is automatically treated as sanctioned by operation of law. This shifts the burden of identifying “shadow control” onto the private sector.

    1. Comparative Matrix: Global Ownership & Control Rules

    JurisdictionOwnership ThresholdAggregation RuleDoes “Control” Automatically Sanction?Key Differentiator
    USA (OFAC)50% or more (≥ 50%)YESNO (See FAQ 398)Strict mathematical application; Control is a designation criteria, not an automatic trigger.
    EU (Council)50% or more (≥ 50%)*YESYESRecent 2024 update aligned EU with US. Burden is on operators to detect “dominant influence.”
    UK (OFSI)More than 50% (> 50%)NO (Unless acting in concert)YESHigher threshold (>50%); Aggregation is rare; “Control” test is extremely broad.
    Canada (GAC)50% or more (≥ 50%)ImpliedYES (“Deemed Ownership”)“Deemed ownership” legally conflates control and ownership into one trigger.
    Australia (ASO)“Owned or Controlled”Silent(Principles-based)YESLess prescriptive; relies on “due diligence” to determine if assets are “indirectly” controlled.
    Japan (MOF)“Substantial Control”Case-by-CaseYES (Permission required)Uses a “Permission System” for payments rather than “Blocking” assets.
    Switzerland50% or moreDe Facto YesYES (Indirect Prohibition)Subsidiaries aren’t “blocked” per se, but paying them is “making funds indirectly available.”
    UN (Security Council)Varies by RegimeN/AVariesNo global standard; relies on Member State implementation.

    2. Detailed Jurisdictional Analysis

    United States: The Office of Foreign Assets Control (OFAC)

    The US provides the most “bright-line” guidance, prioritizing clarity over catch-all nuance.

    • The “50% Rule”: If Blocked Persons own 50% or more, individually or in the aggregate, the entity is blocked.
    • Aggregation: Explicitly required. If SDN A owns 25% and SDN B owns 25%, the entity is blocked.
    • The “Control” Gap: OFAC explicitly states (FAQ 398) that an entity controlled by an SDN (but owned <50%) is not automatically blocked.
      • Why? OFAC prefers to name and shame. If they want a controlled entity sanctioned, they will list it.
    • Applicability: Applies to all OFAC regimes unless specified otherwise (e.g., Sectoral Sanctions).

    European Union: Council & Commission

    The EU has moved aggressively to close loopholes, resulting in complex “control” tests.

    • Ownership Update (July 2024): The EU updated its “Best Practices” to align with the US, changing its test from “more than 50%” to “50% or more.”
    • The “Control” Trigger: If a Designated Person (DP) has “dominant influence” (e.g., right to appoint board majority, use of assets), the entity is sanctioned.
    • Burden of Proof: Unlike the US, EU operators must assess control themselves. If you trade with a subsidiary of a Russian oligarch, and the EU later decides the oligarch “controlled” it, you are liable for a breach, even if the subsidiary was never listed.

    United Kingdom: Office of Financial Sanctions Implementation (OFSI)

    The UK is unique for its rejection of automatic aggregation and its slightly higher ownership threshold.

    • Threshold: Strictly “more than 50%.” A 50/50 Joint Venture is not automatically sanctioned in the UK (unlike US/EU).
    • Aggregation: OFSI does not aggregate ownership of different DPs unless there is evidence they are parties to a “joint arrangement” (acting in concert).
    • Broad “Control” Definition: The UK test asks if it is “reasonable to expect” that the DP can achieve their desires regarding the entity’s affairs. This is a functional, outcome-based test.

    Canada: Global Affairs Canada (GAC)

    Canada uses a unique legal mechanism called “Deemed Ownership.”

    • Concept: Property is “deemed” to be owned by a DP if the DP “controls” it directly or indirectly.
    • Ambiguity: The definition includes any situation where the DP can “direct the entity’s activities.” This creates significant gray areas for compliance teams, as “influence” is often conflated with “control.”

    Australia: Australian Sanctions Office (ASO)

    Australia utilizes a “principles-based” approach rather than strict mathematical formulas.

    • Guidance: “Control” is defined as a question of fact—whether someone has “command or direction” over an asset.
    • Differentiation: Australia does not publish a “50% Rule” document comparable to OFAC. Instead, it relies on the prohibition against “making assets available to” a DP. If a DP owns a company, paying that company is effectively paying the DP.

    Japan: Ministry of Finance (MOF) & METI

    Japan operates a “Permission System” under the Foreign Exchange and Foreign Trade Act (FEFTA).

    • Mechanism: Rather than “blocking” an entity, Japan prohibits payments to DPs without “permission” (which is never granted).
    • Substantial Control: Restrictions apply if a DP holds a majority of shares OR exercises “substantial control” (e.g., dispatching executives).
    • End-User Lists: Japan places heavy reliance on METI’s “End User List.” If a subsidiary is not on the list, Japanese firms often presume trade is permitted unless “control” is glaringly obvious.

    Switzerland: SECO

    Switzerland aligns autonomously with the EU but maintains legal distinctiveness.

    • “Making Available”: Swiss law does not always “block” the subsidiary of a DP. Instead, it prohibits “making funds available” to the DP.
    • Interpretation: Paying a subsidiary is viewed as “indirectly” making funds available to the parent.
    • Differentiation: In the Popov case, Swiss courts demanded high evidence of control. However, 2024 guidance has aligned Switzerland closer to the EU’s broad “control” presumption to prevent circumvention.

    United Nations (UNSC)

    • No Global Standard: The UN designates individuals/entities but leaves “ownership/control” interpretation to Member States.
    • Regime Specific: Some resolutions (e.g., DPRK) include specific language on “entities owned or controlled by” designated persons, but the implementation of what “controlled” means (e.g., 50% vs 25%) is decided by national authorities (OFAC, OFSI, etc.).

    3. International Standard Setters

    FATF (Financial Action Task Force)

    • Focus: Anti-Money Laundering (AML) & Beneficial Ownership (BO).
    • The “25% Gap”: FATF recommends a 25% threshold for identifying beneficial owners for AML screening.
    • Conflict: This creates a disconnect. Compliance teams screen at 25% (for FATF/AML) but block at 50% (for Sanctions). FATF guidance on “Proliferation Financing” urges countries to look beyond legal ownership to “ultimate effective control” to prevent evasion.

    The Wolfsberg Group

    • Guidance: Represents global banking best practices.
    • Recommendation: Wolfsberg explicitly notes that the “50% Rule” is a legal baseline, not a risk management ceiling.
    • Control Risk: They advise that relying solely on lists is insufficient in “Control-based” jurisdictions (UK/EU). They recommend screening for Beneficial Owners (at 10-25%) to identify “aggregation” risks that might sum up to >50%.

    Summary of Practical Implications

    1. The “Joint Venture” Trap: A 50-50 JV with a sanctioned party is Blocked in the US/EU, but Allowed in the UK (statutorily, though high risk).
    2. The “Minority Owner” Risk: A company 25% owned by a sanctioned oligarch who appoints the CEO is Safe in the US (unless listed), but Radioactive in the EU/UK (due to “Control”).
    3. The “Aggregation” Headache: Three sanctioned individuals each owning 20% of a company results in a Block in the US/EU (60% total), but No Block in the UK (unless they are proven to be working together).

    Source List for “Ownership and Control” Analysis

    The following is a curated list of the primary government and regulatory source documents used in the comparative analysis.

    1. United States (OFAC)

    2. European Union (Council of the EU)

    • Document: Update of the EU Best Practices for the Effective Implementation of Restrictive Measures (July 3, 2024)
    • Description: The critical update that aligned the EU ownership threshold (“50% or more”) with the US and clarified the “Dominant Influence” control tests.
    • URL: EU Best Practices (Council Document ST 11377 2024 INIT)
    • Additional Source: Commission Consolidated FAQs on the Implementation of Council Regulation No 833/2014
    • URL: European Commission Sanctions FAQs

    3. United Kingdom (OFSI)

    • Document: OFSI General Guidance – UK Financial Sanctions
    • Description: See specifically Chapter 4 (Ownership and Control), which details the “reasonable to expect” test and the rejection of automatic aggregation.
    • URL: OFSI General Guidance (GOV.UK)

    4. Canada (Global Affairs Canada)

    • Document: Special Economic Measures Act (SEMA) – Amendments regarding Deemed Ownership
    • Description: The legislative text (Section 2.1) establishing that property controlled by a designated person is “deemed” to be owned by them.
    • URL: Consolidated SEMA Legislation (Justice Laws Website)
    • Guidance Page: Canadian Sanctions: Essential Information
    • URL: GAC Sanctions Guidance

    5. Australia (Australian Sanctions Office)

    • Document: ASO Guidance Note: Dealing with Assets Owned or Controlled by Designated Persons
    • Description: A thematic guidance note explaining the “control” test as a question of fact rather than a mathematical formula.
    • URL: DFAT/ASO Sanctions Guidance Notes

    6. Japan (MOF & METI)

    7. Switzerland (SECO)

    • Document: Ordinance on Measures Connected with the Situation in Ukraine (FAQs)
    • Description: The primary source for the “making funds available” interpretation and the alignment with EU “control” standards.
    • URL: SECO Sanctions Measures & FAQs

    8. The Wolfsberg Group

    • Document: Wolfsberg Guidance on Sanctions Screening (2019)
    • Description: Industry best practices recommending beneficial ownership screening (10-25%) to mitigate “Control” risks.
    • URL: Wolfsberg Group Guidance on Sanctions Screening

    9. Financial Action Task Force (FATF)

    • Document: Guidance on Beneficial Ownership of Legal Persons
    • Description: The global standard setting the 25% threshold for beneficial ownership, which conflicts with the 50% sanctions standard.
    • URL: FATF Guidance on Beneficial Ownership

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