Sanctions rules that extend from a designated person to the entities they own have to draw a line somewhere, and the line is a number. OFAC’s guidance, published in its current form on 13 August 2014, states that any entity owned in the aggregate, directly or indirectly, fifty per cent or more by one or more blocked persons is itself considered a blocked person1 , and that its property is blocked regardless of whether the entity is itself listed2 .
Threshold structuring is the practice of arranging ownership so that the aggregate falls below the number.
How it works
The arithmetic is the whole technique. A designated person holding sixty per cent of a company causes it to be blocked. The same person holding forty-nine per cent does not, as a matter of the automatic rule.
Three routes to that arithmetic appear in the public record.
Dilution. Shares are transferred to parties who are not designated — family members, associates, employees, or entities under separate nominal ownership — until the designated holding falls below the threshold.
Fragmentation. Ownership is split among several parties each holding a small stake. Because the rule aggregates designated holdings, this only works if the other holders are genuinely not designated. It is worth noting that no published advisory frames “several holders each just below a threshold” as a red-flag indicator; that is an inference from the rule, and this site presents it as analysis rather than as attributed guidance.
Formal resignation. The designated person gives up recorded positions entirely, while the practical relationship with the business continues through mandates, guarantees, leases, security interests or simply instruction.
What the rule does not capture
Two limits matter, and they are why this technique is less effective than the arithmetic suggests.
The rule is about ownership, not control. An entity can be run entirely by a designated person and fall outside the fifty per cent rule on ownership alone. That is a real gap in the US formulation — and it is closed differently elsewhere. UK and EU measures catch entities that are owned or controlled by a designated person, and a control test does not care about percentages.
An entity structured to forty-nine per cent US-designated ownership may therefore be outside the automatic US rule and squarely inside the UK and EU asset freeze, which is a fact frequently missed in commentary that treats “the fifty per cent rule” as though it were universal.
The second limit is stated in the guidance itself: US persons are advised to act with caution when considering a transaction with a non-blocked entity in which blocked persons hold a significant ownership interest of less than fifty per cent3 , or which they may control by means other than a majority ownership interest4 . The rule is a floor, not a safe harbour. The guidance also states that a US person may not transact with a blocked person directly or indirectly, including through a third-party intermediary5 . Institutions that treated forty-nine per cent as a green light have featured in enforcement.
How it is caught
Timing. Restructuring that happens shortly before or shortly after a designation is not a coincidence, and the dates are on the public register. This is the single most productive check in the area.
Transferee analysis. Who received the shares. A transfer to a spouse, an adult child or a long-standing associate is a documented pattern: FATF and the Egmont Group list informal nominee shareholders and directors, such as close associates and family6 , among the mechanisms used to conceal beneficial ownership. The Family International Realty settlement is that pattern in an enforcement record.
Consideration. A genuine sale involves payment, and payment leaves a record. A transfer of a substantial stake for nominal or no consideration, or for consideration the transferee could not have funded, indicates that ownership has not really changed.
Persistence of control. The signals are practical: who signs the bank mandate, who holds the power of attorney, who guarantees the debt, whose name is on the lease, who the staff take instructions from.
Jurisdictional arbitrage. Where a structure sits precisely below one authority’s threshold, the question to ask is what a different authority’s control test makes of it.