EU Sanctions Helpdesk ¦ Why is Ownership and Control important?

Spotting Sanctions Ownership and Control: Practical Guidance for EU Compliance

Understanding why ownership and control matter

Complying with EU restrictive measures means more than screening names against a list. It requires recognising when an entity is owned or controlled by a Listed Person, even if that entity is not itself named on a sanctions list. Listed Persons often structure their interests to obscure control through layers, trusts, nominees, or agreements. If you fail to identify this, you risk breaching sanctions by dealing with an entity whose assets should be frozen or to which funds cannot be made available, even indirectly. This article explains the legal framework, how “ownership” and “control” are assessed in practice, how presumptions can be rebutted, and what steps you can take to manage risk, including when and how to leverage the EU Sanctions Helpdesk.

How EU sanctions apply to owned or controlled entities

EU asset-freeze measures typically require that all funds and economic resources “belonging to, owned, held or controlled by” the Listed Person are frozen, and that no funds or economic resources are made available, directly or indirectly, to or for their benefit. These provisions extend the effect of sanctions to entities that a Listed Person owns or controls. That means an unlisted subsidiary, holding company, SPV, or other structure may be within scope if it meets the ownership or control tests. The law presumes that assets of an owned or controlled entity are controlled by the Listed Person and that any funds provided to that entity could reach or benefit the Listed Person. This presumption can be rebutted, but only with solid evidence showing the funds are not controlled by, and will not benefit, the Listed Person.

Bastian Schwind-Wagner_Follow "Identify who really controls your counterparty, not just who appears on the paperwork. Apply a risk-based approach, verify red flags, and use the Helpdesk and NCAs when in doubt."

Defining ownership: the 50% rule and aggregation

The European Commission’s guidance treats a Listed Person as owning an entity if they possess 50% or more of the proprietary rights or otherwise hold a majority interest. A 50% stake meets the threshold; anything above it clearly does. Where several Listed Persons hold stakes, their shareholdings are combined to test against the 50% threshold. If Listed Persons together reach or exceed 50%, the entity is treated as owned by sanctioned parties, triggering asset freeze obligations for that entity and a prohibition on making funds or economic resources available to it, absent a successful rebuttal.

Defining control: beyond shareholding

Control does not require majority ownership. Influence can be exercised through rights, agreements, or practices that allow a Listed Person to direct an entity’s decisions or access its assets.

The Commission highlights several non-exhaustive indicators of control:

• rights or powers to appoint or remove a majority of board or leadership members;
• control of a majority of voting rights through shareholder agreements;
• rights or powers to exercise a dominant influence;
• rights to use all or part of an entity’s assets;
• unified management and consolidated accounts; or
• joint and several responsibility for liabilities or guarantees.

In practice, even a 40% shareholder may control an entity if a shareholder agreement grants board appointment rights, vetoes, or other decisive levers. If a Listed Person holds such control, the entity’s funds must be frozen and no funds or economic resources may be made available to it, even if the majority owner is not listed.

Rebutting the presumption: firewalls and evidence

The presumption that a Listed Person controls the assets of an owned or controlled entity can be rebutted with credible safeguards. In the EU, this often involves a “firewall” that prevents the Listed Person from exercising control rights or benefiting from the entity’s assets or activities. Properly designed firewalls can allow legitimate business operations to continue without conferring benefit to the Listed Person. Because this is complex, entities typically seek review by their National Competent Authority (NCA). Where an NCA authenticates a firewall, it issues an official written confirmation. If you are told that a counterparty operates under such a firewall, request the official confirmation and verify it with the relevant NCA before proceeding.

Building a risk-based sanctions compliance approach

An effective sanctions compliance programme is your best protection. It should embed risk-based due diligence tailored to your exposure, counterparties, and transactions. Start by collecting information from the counterparty and public sources, including corporate registries, beneficial ownership records, financial statements, and governance documents. Verify claims when you see red flags, inconsistencies, complex structures without clear commercial rationale, sudden ownership changes, unusual voting arrangements, or opaque trusts and nominees. Ask targeted questions to resolve uncertainties, focusing on beneficial ownership, voting rights, board appointment powers, shareholder agreements, financing and guarantees, consolidated accounting, and any rights to use assets. Most counterparties will be legitimate, so you do not need to assume bad faith. Your task is to recognise higher-risk situations and scale your enquiries accordingly. Document your steps, findings, and decisions, as this record is essential for demonstrating reasonable due diligence.

How the EU Sanctions Helpdesk can support you

The EU Sanctions Helpdesk provides free support, particularly valuable for SMEs. It can answer questions on the applicability of EU sanctions, guide you on ownership and control assessments, and even conduct due diligence where you encounter red flags or need additional support. If you are assessing a transaction or complex structure, contact the Helpdesk early to clarify scope and expectations, and to avoid inadvertent breaches.

Other sources of guidance and escalation

For complex or high-stakes cases, seek specialist legal or compliance advice. Engage your National Competent Authority when interpreting control indicators, validating firewalls, or resolving ambiguities. Consult official EU guidance, national FAQs, and attend awareness-raising events to stay current. Sanctions landscapes change, ownership structures evolve, and new vehicles are created — so refresh your assessments and monitoring regularly.

Key takeaways for practice

• Ownership at or above 50% by a Listed Person triggers asset freezes and prohibitions. Aggregate stakes held by multiple Listed Persons.
• Control can exist without majority ownership through rights, agreements, and practical influence; assess case by case.
• The presumption that assets of owned or controlled entities benefit the Listed Person can be rebutted, but only with robust, verifiable safeguards such as NCA-authenticated firewalls.
• Apply a risk-based approach, verify when red flags appear, and keep thorough records.
• Use the EU Sanctions Helpdesk and your NCA as partners in getting to the right answer.

Dive deeper

• EU Sanctions Helpdesk ¦ Why is ownership and control important? ¦ Link