402. How does OFAC’s 50 Percent Rule apply to situations in which one or more blocked persons owned 50 percent or more of an entity, but subsequent to their designations one or more blocked persons divest their ownership stakes in the entity in a transaction that occurs entirely outside of U.S. jurisdiction such that the resulting combined ownership of the entity by blocked persons is less than 50 percent? How should a person treat property or interests in property of such an entity (1) in future transactions (post-divestment) and (2) that was properly blocked while the entity was owned 50 percent or more by one or more blocked persons?
According to OFAC's 50 Percent Rule, entities are considered blocked if they are owned 50 percent or more (directly or indirectly) in the aggregate by one or more blocked persons. If one or more blocked persons divest their...
1) What OFAC describes here is a special circumstance, as it relates to the unblocking of property, whereby a person is unblocked by "operation of law" but his property remains blocked in the absence of a license from OFAC. This FAQ is particularly important as there is, arguably, nothing in any of the regulations that tends toward the conclusions offered, and there is no other discussion of these issues on OFAC's website. In fact, as discussed below, OFAC’s analysis here is inconsistent with most regulations in at least one respect.
Most notably, there is nothing in the regulations that makes it evident that i) a person "blocked by operation of law" becomes "unblocked by operation of law" through his own unilateral action if none of the actions taken to effect the required divestment involve the U.S. or U.S. persons, and ii) that the property of a...