Sanctions ownership through a holding company, worked three ways: multiplied as for beneficial ownership, by the EU rule and by the OFAC rule.
Under the EU 50 per cent rule an entity is treated as owned by a designated person when that person holds more than 50 per cent of it, and indirect ownership is traced by control, not by multiplying stakes: an intermediate company more than half owned by the designated person counts with its whole holding. On an illustrative structure, multiplying the stakes gives the designated owner 42 per cent of the target and suggests it is clear; following the control chain gives 60 per cent, and 65 per cent once a second designated shareholder is added, so the target's assets have to be frozen.
Worked in full in The EU AML Handbook by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
For customer due diligence, beneficial ownership through a chain is computed by multiplying the stakes along each chain and adding the chains, as worked in indirect beneficial ownership through a chain. That answers "who ultimately benefits from this customer?". Sanctions ask a different question: "is this entity in the hands of a listed person?". Once a listed person owns more than half of a company, that company is itself treated as owned and controlled, and everything it holds is in the listed person's hands, not a fraction of it.
Beneficial ownership: A's share of T = 20% + 55% × 40% = 42%
Sanctions ownership: H is more than 50% owned by A, so H counts in full: 20% + 40% = 60%
Excel: =A_direct+IF(A_in_H>0.5,H_in_T,0) for the EU; >=0.5 for OFAC
| Shareholder | Status | Stake in T |
|---|---|---|
| Person A | Designated | 20% |
| HoldCo H, owned 55% by A and 45% by an unrelated investor | Not listed | 40% |
| Person B | Designated | 5% |
| Free float | Not listed | 35% |
Neither T nor H appears on any list, so name screening returns nothing on either. The answer has to come from the ownership calculation, and the threshold for the EU test is more than 50 per cent.
Step 1, test each intermediate entity. A owns 55 per cent of H. That is more than 50, so H is owned by a designated person and is treated as such.
Step 2, count the target's holders that are designated or treated as designated. A directly, 20 per cent; H in full, 40 per cent. A's ownership of T is 60 per cent: T is owned by A on its own.
Step 3, aggregate across designated persons. Add B's 5 per cent: 65 per cent of T is in designated hands. OFAC's guidance says in terms that holdings of several blocked persons are added together. On the EU side, the Council's Best Practices for the effective implementation of restrictive measures, as updated in 2024, also provide for aggregation: where several designated persons together hold more than 50 per cent, the entity is treated as owned by them. The Best Practices are guidance rather than law, but they are what EU competent authorities apply. Here aggregation does not change the answer; in the second case below it does.
Step 4, conclude. T is owned by a designated person. Funds and economic resources of T are frozen and nothing can be made available to it, directly or indirectly, even though T is on no list.
| A's stake in H | Multiplied, A and B | EU, A alone | EU, aggregated | OFAC |
|---|---|---|---|---|
| 45% | 43% | 20% | 25% | 25% |
| 50% | 45% | 20% | 25% | 65% |
| 55% | 47% | 60% | 65% | 65% |
| 60% | 49% | 60% | 65% | 65% |
Three things stand out. First, the multiplied figure moves smoothly and never reaches 50, so a team using the beneficial ownership method would clear T on every row. Second, the sanctions answer is a step function: it jumps from 25 to 65 when H crosses the line. Third, at exactly 50 per cent the regimes part company. OFAC blocks entities owned 50 per cent or more, so H is blocked and T is 65 per cent owned. The EU requires more than 50, so H is not owned, T is at 25, and the EU answer on ownership is no. A group screening for both regimes has to run both tests.
Change H's shareholders: A holds 30 per cent and another designated person, C, holds 25. No single designated person owns more than half of H. Without aggregation H is clear, and T's designated holding is A's 20 plus B's 5, or 25 per cent: clear. With aggregation, H is 55 per cent in designated hands, counts in full, and T is 65 per cent owned: frozen. The multiplied figure through H would have been 22.0 per cent, which no reading of the rule uses.
Ownership is only one limb of the EU test. Control is the other: a designated person who can appoint the majority of the board, or who controls the entity through an agreement or a nominee, makes it controlled whatever the percentages say. A result under 50 per cent closes the ownership question, not the sanctions one.
Reusing the beneficial ownership engine for sanctions. The KYC system already holds the ownership tree and multiplies through it to apply the AMLR's 25 per cent threshold, so it is tempting to read the same output against 50. On this structure it reports 42 per cent for A, above 25 and so correctly flagged as a beneficial owner, and below 50 and so wrongly cleared for sanctions. The two calculations need two engines, or one engine with two rules: multiplication for beneficial ownership, control-chain attribution for sanctions. The name matching that feeds the tree is covered in Jaro-Winkler scoring in sanctions screening, and the book's working documents are in the free companion files.
For sanctions, test each intermediate company against 50 per cent first; any company over the line passes its whole stake upwards. Then add up what designated persons hold in the target. On the worked structure that is 65 per cent, not the 47 per cent multiplication gives, and at exactly 50 per cent in H the EU and US answers differ by 40 points.
The EU test is ownership of more than 50 per cent, plus a separate control test; OFAC blocks entities owned 50 per cent or more by one or more blocked persons in aggregate. At exactly 50 per cent the answers diverge: in the worked structure the target is 65 per cent attributed to designated persons under OFAC and 25 per cent under the EU ownership test.
No. Multiplying along the chain is the method for beneficial ownership. For sanctions, a company more than 50 per cent owned by a designated person is treated as owned in full, so its entire stake in the target is attributed. A 55 per cent stake in a holding company that owns 40 per cent of the target attributes 40, not 22.0.
Yes. OFAC says so expressly, and the EU Best Practices on restrictive measures, as updated in 2024, also provide for aggregating the holdings of several designated persons against the more than 50 per cent threshold. It can decide the case: a holding company owned 30 per cent and 25 per cent by two designated persons is 55 per cent in designated hands when aggregated, which takes the target from 25 to 65 per cent.
This article is one calculation from The EU AML Handbook. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
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