Staying Ahead of Changing Sanctions - Deemed Ownership Rule

When it comes to sanctions compliance, increasing geopolitical uncertainty is pushing governments to tighten regulatory expectations. As a result, firms must do more to stay ahead of risk and go beyond 50% checks and consider potential risk in more holistic ways. In late July, Canada rolled out “deemed ownership” provisions which create new regulatory obligations regarding sanctions compliance.

What does the Deemed Ownership rule include?

The Deemed Ownership rule of Canada adds the following criteria to sanction compliance:

(1) If a person controls an entity other than a foreign state, any property that is owned — or that is held or controlled, directly or indirectly — by the entity is deemed to be owned by that person.

What is meant by control?

(2) For the purposes of subsection (1), a person controls an entity, directly or indirectly, if any of the following criteria are met:

(3) The person holds, directly or indirectly, 50% or more of the shares or ownership interests in the entity or 50% or more of the voting rights in the entity;

(4) The person is able, directly or indirectly, to change the composition or powers of the entity’s board of directors; or

(5) It is reasonable to conclude, having regard to all the circumstances, that the person is able, directly or indirectly and through any means, to direct the entity’s activities.

Only one of these criteria needs to be satisfied to deem a person has control. This is a very broad test and goes above and beyond the 50% rule required in other countries.It is also likely that others will adopt this approach, including beyond sanctions compliance.Establishing control and related parties is critical to fighting illicit finance and requires a multi factor approach to determining risk.

How to comply with the Deemed Ownership Rule?

Sigma’s AI-enabled software platform, Sigma360, helps firms optimize data to drive smarter decisions across risk and compliance. With respect to the Deemed Ownership rule, the following risk insights provided by Sigma’s platform can be up and running in your firm the same day in many instances. Sigma360 is a flexible platform that can deploy out-of-the box, alongside your internal data or as an addition to existing systems to bolster tech-enabled approaches to risk management.

Persistent Updates to Sigma’s Core Risk Data 

• > 60 always on global sanctions list
• Global political exposed person coverage 
• Global enforcement action coverage

Global Corporate Coverage 

• Global corporate registry and related corporate intelligence data
• Identification of ownership and control where available 
• Where percentage ownership is not available, Sigma360 will also highlight high-risk associations including:
  
  • Direct and indirect entity ownership 
  • Entity linkages to news and other sources of information 
  • Related board members and related entities, including service providers 
  • Relevant directors

Associated Risk Screening & Monitoring

• Screen and monitor for association with sanctioned individuals and entities 
• Configure to screen and monitor against others Sigma risk indicators 

Real-Time Unstructured Data Coverage

• Exhaustive coverage investigative sources, including ICIJ, OCCRP and others 
• > 220,000 global sources covered for adverse media across > 50 languages

Proprietary Data Attributes

• Global high risk addresses linking companies to sanctioned entities and individuals
• Global high risk corporate service providers and associated directors 
• Graphable unstructured data extraction from key reporting agencies 

Global Country Risk Coverage

• 200+ countries and territories covered for financial crime risk 
• Dynamically updated annually as covered risks change 

Configurable Risk Taxonomies

• Fully configurable platform including scalable scoring, addresses, countries, entities, individuals or vessels

To see Sigma360 in action, book a demo.