Understanding the UK’s Ownership and Control Test: Insights from the latest call for evidence

The Ownership and Control Test under the Russia (Sanctions) (EU Exit) Regulations 2019 means that sanctions on a Designated Person also apply to any entity they directly or indirectly own or control. This may include situations where the person holds more than 50% of the shares or voting rights, has the ability to appoint or remove the board, or - most controversially - possesses the hypothetical ability to direct the company’s affairs in line with their own interests. OFSI views this broad test as a key safeguard against sanction circumvention. This places responsibility on firms to act as the first line of defence, requiring them to adopt strong frameworks to identify relevant ownership and control.

OFSI underlines that to assess ownership and control firms must undertake reasonable and good faith due diligence. While firms are expected to implement robust mechanisms to assess ownership and control, OFSI does not prescribe a single methodology. Industry should fully consider the risk by conducting research, seeking further legal advice when obligations are unclear, and requesting further information from relevant entities. This is particularly important given the UK’s strict liability regime, under which firms may be exposed to enforcement action even where breaches occur without intent.

OFSI guidance and case law provides firms with indicators to consider when assessing potential control. Considering these indicators helps firms assess the various patterns and mechanisms through which control may be exercised. Firms should be aware of the following guidance, however, recognise that they will not be able to apply it to every scenario, particularly where real word structures and relationships blur the boundaries between types of control:

• Legal Control (De Jure): This will exist where the designated person has a legal right to exercise control, through majority voting rights, share ownership, and the right to appoint/remove most of a company’s board.
• Present, non-formalised control (De Facto): In this instance the designated person is “calling the shots” even if they lack the legal authority. This could occur where influence is exercised through dominance, reputation or personal authority within an organisation.
• Potential De Facto control: This arises where the Designated Person does not currently exercise control but has the practical means to obtain it in the future – for example, through dormant rights, undisclosed agreements or influence through intermediaries.
• Potential De Jure control: This exist where a Designated Person does not currently exercise legal control, but there are good reasons to believe they could, if they choose, exercise legal powers enabling control.

The main challenge for firms lies in the hypothetical element of the test, where a designated person may be treated as having control simply because they could influence the entity’s affairs, regardless of whether they have done so. This gives rise to several material risks:

• Interpretational ambiguity: Because the test focuses on potential rather than actual control, firms face significant uncertainty when determining whether the threshold is met, particularly where influence is difficult to evidence. This leads to inconsistent assessments across different structures and scenarios, particularly where influence is difficult to evidence.
• Heightened compliance and operational costs: Assessing hypothetical control often requires deeper investigative work, including analysing complex structures and gathering additional information. This increases time, resource commitments, and reliance on specialist advice
• Risk of over de-risking: Some firms respond to this uncertainty by withdrawing from higher risk clients or sectors to avoid sanctions exposure. While this approach may appear risk‑averse, it can be disproportionate, undermine legitimate commercial relationships, and restrict access to lawful business activity.

To manage these risks, firms should prioritise case specific, proportionate decision making, supported by clear internal reasoning and documentation. Adopting a risk based due diligence approach, rather than blanket prohibitions, helps ensure more nuanced and defensible assessments while reducing unnecessary compliance spend.

The call for evidence presents an opportunity to recalibrate the ownership and control test so that it remains effective in preventing circumvention while providing firms with greater legal certainty. In particular, industry may welcome clearer parameters around when hypothetical or potential control is considered sufficient to trigger sanctions consequences, including whether objective evidential thresholds, rebuttable presumptions, or illustrative safe harbours could be introduced. Greater emphasis on the weight afforded to documented, reasonable, and good‑faith assessments would help align enforcement outcomes with the UK’s risk‑based regulatory framework, reduce unnecessary over‑de‑risking, and ensure compliance resources are directed towards genuinely high‑risk scenarios. Any refinement should preserve the test’s deterrent effect while improving predictability, proportionality, and consistency in its application.

Industry concerns are amplified in situations involving complex or opaque corporate structures, where layered ownership chains, trust, proxies and cross-jurisdictional arrangement make it difficult to determine whether a designated person retains any form of influence or control. These structural complications heighten regulatory risk, as firms must still reach a defensible conclusion under the UK’s strict liability model, even when the available information is limited, inconsistent, or intentionally obscured. To mitigate these challenges, firms should strengthen internal governance frameworks and ensure sanctions assessments are supported by clear, well‑structured documentation evidencing their reasoning.