Owned or controlled: when to freeze a company linked to a designated person in the UAE

Freezing and the ban on providing funds or services apply to:

• designated individuals, entities and groups on the UAE Local Terrorist List or the UN Consolidated List;
• any entity owned or controlled, directly or indirectly, by them; and
• any individual or entity acting on their behalf or at their direction.

The EOCN guidance gives a separate test for each: majority ownership, control, and acting on behalf.

An entity is treated as owned by a designated person when that person holds more than 50% of its proprietary rights, or has a controlling interest in it. If so, the entity's funds and other assets must be frozen without delay.

Example: a designated person owns 51% of a company. Two other shareholders, who are not designated, own 25% and 24%. There is no evidence they act for the designated person. The company's assets must be frozen. The other two shareholders' own assets are not frozen, because they are not designated and nothing shows they act on the designated person's behalf.

A designated person holding 50% or less has a minority interest, and the entity itself is not frozen on that basis alone. Two duties remain:

• freeze what is due to the designated person, such as their share of profits or sale proceeds, and never make it available; and
• watch the ownership structure, because if their stake rises above 50%, or they gain a controlling interest, the entity becomes subject to freezing.

Example: a designated person owns 30% of a company and two others own 35% each, with no evidence of control. The company is not frozen, but any dividends due on the 30% stake are, and the business must stay alert to any change in the shareholding.

A company must be frozen even where the designated person holds a minority stake, if there is evidence they control it, alone or through an agreement with others. The EOCN lists indicators of control, including:

• the right to appoint or remove a majority of the board or management;
• having appointed a majority of the board through their voting rights in the current and previous financial year;
• controlling a majority of voting rights through an agreement with other shareholders;
• a right, or the practical power, to exercise dominant influence under an agreement or the articles of association;
• the right to use all or part of the entity's assets;
• managing the business on a unified basis while publishing consolidated accounts;
• sharing or guaranteeing the entity's financial liabilities; and
• holding a power of attorney or authorised signatory role over the entity.

Example: a designated person owns 30% of a company, but a signed agreement with the other shareholders gives them the majority of voting rights. The company's assets must be frozen, because the agreement proves control despite the minority stake.

Sanctions also apply to people and entities acting for a designated person. The relationship has to be shown by legal documents, such as a power of attorney, an authorised signatory arrangement or contracts.

Example: a person who is not designated holds a power of attorney for a designated person and runs an asset management company the designated person owns. That person's funds and assets must be frozen, because the power of attorney shows they act on the designated person's behalf.

The EOCN is explicit: when freezing on the basis of control or acting on behalf, you must rely on documentary evidence, such as legal agreements, guarantees, articles of association, powers of attorney or signatory mandates. Freezing must not be applied on suspicion alone.

Suspicion that falls short of that evidence is still important. It may call for enhanced due diligence and, where the grounds exist, a suspicious transaction report under Federal Decree Law No. 10 of 2025.

• Capture full ownership chains at onboarding, with percentages, not just the top shareholder.
• Screen every shareholder, beneficial owner, director and power of attorney holder, not only the customer.
• Record voting agreements, guarantees and signatory mandates, since they decide the control test.
• Rescreen when ownership changes, as well as when the sanctions lists change.
• Document the evidence behind every freeze or decision not to freeze.

RiskLens360 captures UBOs and shareholders with link analysis, screens each of them, and keeps an audit log of every decision. For company formation and administration firms, see sanctions screening for company and trust service providers, and for reporting a match, see CNMR and PNMR in goAML.