When managing U.S. export controls and sanctions compliance, businesses often come across two key ownership-based rules: the Bureau of Industry and Security (BIS) 50% Rule and the Office of Foreign Assets Control (OFAC) 50% Rule.
While both use the same ownership threshold, they are applied in different contexts and serve distinct regulatory purposes, claims Moody’s.
Both Rules are designed to stop sanctioned or restricted individuals and entities from evading U.S. regulations by acting through subsidiaries or affiliates. In simple terms, if one or more sanctioned or listed parties own 50% or more—directly or indirectly, or in total—of another entity, that entity is treated as if it were also sanctioned or listed.
Under OFAC, a “blocked” person refers to individuals or entities whose assets have been frozen and with whom U.S. persons cannot engage in transactions. Under BIS, an entity that is “listed” appears on one of the agency’s controlled lists—such as the Entity List or the Military End-User (MEU) List—which can trigger licensing requirements for exports or technology transfers.
By setting a consistent threshold, these Rules allow regulators to extend restrictions without having to name every related entity individually. For compliance teams, this approach brings greater clarity and allows policies and screening processes to align more easily with regulatory standards. Although determining ownership structures can be complex, the presence of defined benchmarks helps reduce ambiguity across global operations.
The OFAC 50% Rule is rooted in U.S. sanctions law and focuses on restricting access to the financial system. If an entity is 50% or more owned by blocked persons, its assets and transactions are also blocked. Even if the entity isn’t named on the Specially Designated Nationals (SDN) List, it is treated as though it were.
By contrast, the BIS 50% Rule falls under U.S. export control regulations. It requires an export licence for sending controlled goods, software, or technology to entities owned 50% or more by those listed on the BIS Entity List, the MEU List, or specific SDN identifiers. For instance, exporting a controlled semiconductor to such an entity would first require official authorisation from the Bureau of Industry and Security.
Although both Rules share a similar ownership test, they differ in purpose and scope. OFAC’s focus lies in financial and property-based sanctions, while BIS regulates the flow of goods, software, and technology. OFAC may extend sanctions even where ownership is below 50% if it determines that a sanctioned person exercises control, while BIS can impose restrictions at lower thresholds if national security risks are evident.
These differences reflect the separate missions of the two agencies. OFAC aims to block assets and disrupt financial dealings that threaten U.S. national security or foreign policy, whereas BIS focuses on preventing the transfer of sensitive technologies to parties that could misuse them.
For global firms engaged in trade, finance, or technology, understanding both the BIS Affiliates Rule and OFAC 50% Rule is vital. While they share a common goal—to prevent circumvention of U.S. restrictions—their areas of enforcement are distinct. Businesses must maintain vigilant ownership tracking and compliance screening to avoid inadvertent violations and ensure their operations remain fully compliant with both sets of regulations.
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