UK OFSI and HMT publish insights from call for evidence on ownership and control

The UK government has published a bulletin confirming initial insights from the earlier call for evidence on the ownership and control test under UK Financial Sanctions Regulations. The call for evidence sought input on the practical operation of the test and any particular challenges in implementing the requirements.

Feedback provided the UK Office of Financial Sanctions Implementation (OFSI) with a clearer picture of how often questions of hypothetical control are raised in practice. The term hypothetical control refers to the aspect of the control test which asks the person applying the test to consider whether or not the potential controller would, if they so desired, be able (directly or indirectly) to direct the controlled entity's business as they wished. There is no requirement to demonstrate actual exercise of such hypothetical control for this aspect of the test, and it is notoriously difficult to apply in practice as it is a particularly broad and subjective area.

Respondent feedback confirmed that they encountered challenges most frequently under the Russian sanctions regime and highlighted the cost and operational burden in making assessments based on limited information, requiring enhanced due diligence, legal advice, and delaying and/or escalating business decisions. Feedback also noted the limitations on the usefulness of existing tools and guidance which are not necessarily reliable in applying the test in practice.

The bulletin confirms that this area of policy remains under ongoing review, and the government will continue to consider options for providing greater clarity.

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