On paper, the 50 percent rule is simple. If sanctioned parties own 50 percent or more of an entity, that entity is treated as sanctioned. It’s a clear line. In breach, or not.
In reality, that line is rarely crossed in a single moment. More often, it’s reached through slow accumulation of ownership over time. The exposure emerges quietly, while missed signals and one-size-fits-all rules logic prevent managers from recognising the crossing as it happens. The 50 percent rule isn’t the problem. It’s the stress test that exposes the limitations of the systems used to monitor sanctions themselves.
Why manual aggregation can’t keep up
Regulators use ownership as a proxy for control because it’s measurable. Ownership percentages provide a practical way to assess when a company may fall within the scope of sanctions or other reporting requirements.
While it would be convenient, ownership doesn’t come neatly packaged as a single reference point to determine obligations. It accumulates gradually, across entities, structures, and transactions. Manual aggregation assumes these changes occur slowly enough to be reviewed and reconciled before thresholds are crossed. But ownership shifts faster than review cycles.
A sanctioned individual acquires a minority stake. Another sanctioned entity appears further up the corporate structure. A joint venture shifts slightly. None of these changes trigger alarms on their own. Risk only becomes visible once ownership is aggregated across layers, entities, and time. This is at the core of the problem.
Manual aggregation relies on periodic reviews, spreadsheets, and point-in-time snapshots, often executed by lean teams across large portfolios. By the time a breach is identified, the exposure has already existed, and ‘the damage has been done’.
Where static data and slow detection create blind spots
Most monitoring programs rely on registries, filings, and third party datasets that update slowly or inconsistently. In some jurisdictions, beneficial ownership disclosures lag by months. In others, they are incomplete or unavailable. Monitoring is therefore built on static snapshots while ownership risk continues to evolve.
This creates a false sense of coverage. An entity appears clean based on its last confirmed snapshot, while incremental changes in the time since render the figure obsolete. Risk feels controlled, but only because it’s not visible.
One size fits all jurisdiction logic fails fast
The ‘50 percent rule’ is not uniform.
Some regimes aggregate ownership across sanctioned parties. Others focus on voting rights. Some assess control even below the 50 percent threshold. When sanctions lists update overnight, those differences become operational pressure. The same ownership structure must be reassessed across multiple regimes, each with its own definition of control. What changes is not the structure itself, but the number of reviews required to understand its exposure.
Without jurisdiction-specific logic embedded into monitoring, teams are pushed into reactive reviews under tight timelines. Under pressure, some teams default to the most conservative interpretation to manage risk, hoping it will cover every regime. Others attempt to tailor rules manually by region or product. Both approaches scale poorly. They concentrate decisions in the hands of fewer individuals, increase reviews to be done, and create an avoidable bottleneck within sanctions monitoring.
The risk isn't the rule
The core issue is latency. Traditional approaches to sanctions monitoring surface ownership risk after it has already materialised, during audits or regulatory inquiries, rather than in real time. By then, exposure has already existed long enough to matter and breaches take place.
Regulators don’t assess intent. They assess whether risk was identified and addressed in time. If sanctions monitoring relies on manual aggregation, weak logic, or periodic reviews, the question is not whether blind spots exist, it’s how much damage it will cause.
The 50 percent rule is doing exactly what it was designed to do, it establishes a line. If ownership risk is only identified after that line has been crossed, sanctions monitoring is no longer preventing breaches. It’s only documenting them.
FundApps' Sanctions Monitoring service is built to surface risk as it emerges, not after it becomes a problem. Jurisdictional-aware logic. Continuous screening. A platform to bring it front and centre. Learn how FundApps’ Sanctions Monitoring helps managers handle the 50 percent rule with confidence.
