UK Government Seeks Evidence on Ownership and Control in Financial Sanctions Regulations

The UK’s Office of Financial Sanctions Implementation (OFSI) has launched a call for evidence concerning the "ownership and control" test within UK financial sanctions. The call for evidence, running until 11:59 p.m. on 13 April 2026, seeks stakeholder views on the challenges and implementation of the "control" limb, with particular focus on its hypothetical element.

1. What Is the Current Position?

UK asset freezing sanctions apply not only to the individuals or entities expressly designated on the UK Sanctions List, but also to any entities owned or controlled, directly or indirectly, by a designated person (DP).^[1]

Under UK sanctions regulations (e.g., regulation 7 of the Russia (Sanctions) (EU Exit) Regulations 2019), the ownership and control test is satisfied if either of the following apply:

1. A DP holds (directly or indirectly) more than 50% of the shares or voting rights, or can appoint/remove a majority of the board of the entity (the "ownership" test).
2. It is reasonable, having regard to all circumstances, to expect that a DP would (if they chose to) be able, in most cases or significant respects, by whatever means and whether directly or indirectly, to achieve the result that the entity’s affairs are conducted in accordance with their wishes (the "control" test).

If either limb is met, the same sanctions applying to the DP apply to the entity as if it were itself designated (e.g., its assets must be frozen, and it is prohibited to make funds or economic resources available to or for the benefit of the entity). Although UK government guidance states that it will look to designate owned/controlled entities directly where possible, direct designation does not always occur.

The EU also maintains a control limb under its sanctions regimes, although this focuses more on evidence of actual and current control (with reference to various factors). The United States does not have a control test under most of its sanctions regimes but instead may designate companies controlled by a designated person.

2. Benefits and Challenges of the Control Test 

The control test is broadly drafted. This is intentional as the UK government’s stated policy intention is to ensure that sanctions cannot be easily circumvented.

One unique element of the UK’s control test is its so-called hypothetical choice element. This refers to how the control test would be satisfied by demonstrating that a DP would, if they chose to, be able to achieve the result that the affairs of an entity are conducted in accordance with their wishes. There does not need to be evidence that the DP is in fact exercising control over the entity, only that they could do so.

In the call for evidence, OFSI outlines the following considerations in support of retaining the hypothetical element of the control test:

• Prevents circumvention when DPs mask control through complex legal or ownership arrangements.
• Captures scenarios where actual control is not formally exercised but could be.
• Serves as a robust deterrent and aligns asset freezing sanctions with policy objectives.
• Protects against evolving evasion typologies, such as proxies and trusts.

OFSI recognises, however, that financial, industry, and legal stakeholders have raised concerns about the practical application of the control test (and the hypothetical element in particular). Concerns include:

• The hypothetical element introduces significant ambiguity and legal uncertainty, making compliance and due diligence burdensome.
• The UK’s strict liability model and broad drafting can lead to over-compliance (the tendency for companies to de-risk from clients, sectors, or industries that present heightened risk rather than engage in close analysis of the legal position), which can have a potential adverse impact on legitimate business.
• May risk inconsistent interpretations or operational unpredictability and increases resource requirements for compliance teams.
• Difficulties in obtaining sufficient evidence to form clear determinations and potential for divergent industry practice.

3. What Evidence Is OFSI Seeking Evidence?

OFSI notes that the evidence it has received to date about the challenges associated with the control test is often illustrative rather than specific. It is therefore seeking further evidence about potential challenges associated with the control test (and the hypothetical element in particular). It equally wishes to gather any positive evidence regarding the utility of the hypothetical element.  

The call for evidence is not a proposal for imminent reform and does not envisage removal of the “control” limb in its entirety. Rather, it is a targeted fact-finding exercise to support OFSI’s future policy development. The call for evidence seeks input on a broad range of questions. Key focuses include:

• Prevalence and Practicality: How often does hypothetical control arise in practice and in what proportion does it materially affect the outcome? In which regimes and sectors is it most frequent?
• Implementation and Compliance: What are the main challenges in assessing or evidencing hypothetical control? How does this affect resource allocation, due diligence, and the risk of inconsistent outcomes or de-risking?
• Utility vs. Burden: Does the hypothetical element reduce or increase legal/operational risk? Does it materially enhance sanctions compliance, and would its removal (or refinement) mitigate burdens?
• Typologies of Control: Is the judicial typology (e.g., as set out in Kevin Hellard & Ors v OJSC Rossiysky Kredit Bank & Ors) helping in the practical assessment of control? Are there examples that do not fit this framework?
• Practical Support: What kind of further guidance, tools, or typologies could the UK government provide to assist industry with their independent judgements (without providing determinations)?

4. What Is Not in Scope (But Flagged for Separate Work)

OFSI specifically signposted that it continues to explore options to align with international (EU, U.S.) partners on matters such as aggregation (combining ownership/control interests of separately designated persons) and amending the “more than 50%” threshold to a “50% or more” standard. These matters are not, however, addressed through the call for evidence.

5. Key Dates and How to Respond

• Call for Evidence Closes: 13 April 2026 (at 11:59 p.m.)
• Responses:
  • Preferred: Via the online form

• • Alternatively, by email: oc-callforevidence@hmtreasury.gov.uk
• Enquiries: oc-callforevidence@hmtreasury.gov.uk

This call for evidence is an opportunity for industry to provide feedback to OFSI about their experiences with navigating the control test under the UK’s financial sanctions. That feedback could bridge the gap between policy intent and practical application, and, if acted upon, could make the control test more effective and less burdensome to comply with.

If you would like to discuss how Crowell & Moring can support making a submission in response to this call for evidence — or with compliance on UK and international sanctions issues more broadly — please contact the authors.