Calculating the US, EU, and UK sanction 50% ownership thresholds: Is it time to let AI do the calculation?

An experiment on the power of AI has been posted on LinkedIn, and it is worth sharing and noting.

Three popular LLMs - ChatGPT by OpenAI, Gemini by Google and Copilot by Microsoft have been tested on the following relatively easy sanctions-related problem to solve.

THE STRUCTURE TO TEST

• "𝗖𝗼𝗺𝗽𝗮𝗻𝘆 𝗔 𝗼𝘄𝗻𝘀 𝟱𝟭% 𝗼𝗳 𝗖𝗼𝗺𝗽𝗮𝗻𝘆 𝗕.
• 𝗖𝗼𝗺𝗽𝗮𝗻𝘆 𝗕 𝗼𝘄𝗻𝘀 𝟰𝟯% 𝗼𝗳 𝗖𝗼𝗺𝗽𝗮𝗻𝘆 𝗖.
• 𝗣𝗲𝗿𝘀𝗼𝗻 𝗔 𝗼𝘄𝗻𝘀 𝟳% 𝗼𝗳 𝗖𝗼𝗺𝗽𝗮𝗻𝘆 𝗖.
• 𝗖𝗼𝗺𝗽𝗮𝗻𝘆 𝗖 𝗼𝘄𝗻𝘀 𝟲𝟬% 𝗼𝗳 𝗖𝗼𝗺𝗽𝗮𝗻𝘆 𝗗.
• 𝗖𝗼𝗺𝗽𝗮𝗻𝘆 𝗗 𝗼𝘄𝗻𝘀 𝟮𝟲% 𝗼𝗳 𝗖𝗼𝗺𝗽𝗮𝗻𝘆 𝗘.
• 𝗣𝗲𝗿𝘀𝗼𝗻 𝗔 𝗼𝘄𝗻𝘀 𝟮𝟯% 𝗼𝗳 𝗖𝗼𝗺𝗽𝗮𝗻𝘆 𝗘.
• 𝗣𝗲𝗿𝘀𝗼𝗻 𝗔'𝘀 𝗺𝗶𝗻𝗼𝗿 𝗰𝗵𝗶𝗹𝗱 𝗼𝘄𝗻𝘀 𝟮% 𝗼𝗳 𝗖𝗼𝗺𝗽𝗮𝗻𝘆 𝗘.

ON THE ABOVE, THERE WERE TWO QUESTIONS –

• 𝟭) 𝗜𝗳 𝗖𝗼𝗺𝗽𝗮𝗻𝘆 𝗔 𝗮𝗻𝗱 𝗣𝗲𝗿𝘀𝗼𝗻 𝗔 𝗮𝗿𝗲 𝗼𝗻 𝗢𝗙𝗔𝗖'𝘀 𝗦𝗽𝗲𝗰𝗶𝗮𝗹𝗹𝘆 𝗗𝗲𝘀𝗶𝗴𝗻𝗮𝘁𝗲𝗱 𝗡𝗮𝘁𝗶𝗼𝗻𝗮𝗹𝘀 𝗟𝗶𝘀𝘁,  

• I𝘀 𝗖𝗼𝗺𝗽𝗮𝗻𝘆 𝗘 𝘀𝘂𝗯𝗷𝗲𝗰𝘁 𝘁𝗼 𝗨𝗦 𝘀𝗮𝗻𝗰𝘁𝗶𝗼𝗻𝘀?

• 𝟮) 𝗜𝗳 𝗖𝗼𝗺𝗽𝗮𝗻𝘆 𝗔 𝗮𝗻𝗱 𝗣𝗲𝗿𝘀𝗼𝗻 𝗔 𝗮𝗿𝗲 𝗯𝗼𝘁𝗵 𝘂𝗻𝗱𝗲𝗿 𝗘𝗨 𝗮𝗻𝗱 𝗨𝗞 𝗳𝗶𝗻𝗮𝗻𝗰𝗶𝗮𝗹 𝘀𝗮𝗻𝗰𝘁𝗶𝗼𝗻𝘀,

• I𝘀 𝗖𝗼𝗺𝗽𝗮𝗻𝘆 𝗘 𝗮𝗹𝘀𝗼 𝘀𝘂𝗯𝗷𝗲𝗰𝘁 𝘁𝗼 𝗘𝗨 𝗮𝗻𝗱/𝗼𝗿 𝗨𝗞 𝘀𝗮𝗻𝗰𝘁𝗶𝗼𝗻𝘀?"

HOW WELL DID THEY DO?

• They all failed. Unfortunately, none of the three got it right.

THE CORRECT ANSWERS ARE:

• Neither US nor UK sanctions are immediately applicable,

• Although aggregate (from a US perspective) sanctioned ownership of Company E is 49%, which is too close to the 50% threshold to be ignored.

• EU sanctions apply entirely through a combination of ownership and control.
• Both Gemini and ChatGPT are still unaware that the EU's ownership threshold changed from "more than 50%" to "50% or more" as of July 2024.

• Copilot was correct on this, but the math was still wrong.

WHY THE MISTAKE

• All committed a classic mistake, i.e.,

• Multiplying ownership stakes rather than cascading down from one level of ownership to another, and
• Checking each for sanctions separately.

• For example, Copilot had this to say (while the other two said the same in different words):

• "𝘚𝘰, 𝘊𝘰𝘮𝘱𝘢𝘯𝘺 𝘈’𝘴 𝘪𝘯𝘥𝘪𝘳𝘦𝘤𝘵 𝘰𝘸𝘯𝘦𝘳𝘴𝘩𝘪𝘱 𝘪𝘯 𝘊𝘰𝘮𝘱𝘢𝘯𝘺 𝘌 𝘪𝘴:
• 0.51×0.43×0.60×0.26=3.42%
• 𝘗𝘦𝘳𝘴𝘰𝘯 𝘈 (𝘚𝘋𝘕) 𝘥𝘪𝘳𝘦𝘤𝘵𝘭𝘺 𝘰𝘸𝘯𝘴 23% 𝘰𝘧 𝘊𝘰𝘮𝘱𝘢𝘯𝘺 𝘌, 𝘢𝘯𝘥 𝘵𝘩𝘦𝘪𝘳 𝘮𝘪𝘯𝘰𝘳 𝘤𝘩𝘪𝘭𝘥 𝘰𝘸𝘯𝘴 2% (𝘸𝘩𝘪𝘤𝘩 𝘪𝘴 𝘵𝘺𝘱𝘪𝘤𝘢𝘭𝘭𝘺 𝘢𝘵𝘵𝘳𝘪𝘣𝘶𝘵𝘦𝘥 𝘵𝘰 𝘵𝘩𝘦 𝘱𝘢𝘳𝘦𝘯𝘵 𝘶𝘯𝘥𝘦𝘳 𝘖𝘍𝘈𝘊 𝘨𝘶𝘪𝘥𝘢𝘯𝘤𝘦).
• 𝘚𝘰 𝘗𝘦𝘳𝘴𝘰𝘯 𝘈’𝘴 𝘦𝘧𝘧𝘦𝘤𝘵𝘪𝘷𝘦 𝘰𝘸𝘯𝘦𝘳𝘴𝘩𝘪𝘱 𝘪𝘴:
• 23%+2%=25%
• 𝘛𝘰𝘵𝘢𝘭 𝘢𝘨𝘨𝘳𝘦𝘨𝘢𝘵𝘦 𝘰𝘸𝘯𝘦𝘳𝘴𝘩𝘪𝘱 𝘣𝘺 𝘚𝘋𝘕𝘴 𝘪𝘯 𝘊𝘰𝘮𝘱𝘢𝘯𝘺 𝘌:
• 3.42%+25%=28.42%

• ➡️ 𝘊𝘰𝘯𝘤𝘭𝘶𝘴𝘪𝘰𝘯 (𝘜.𝘚..):

• 𝘚𝘪𝘯𝘤𝘦 𝘵𝘩𝘦 𝘵𝘰𝘵𝘢𝘭 𝘢𝘨𝘨𝘳𝘦𝘨𝘢𝘵𝘦 𝘰𝘸𝘯𝘦𝘳𝘴𝘩𝘪𝘱 𝘣𝘺 𝘚𝘋𝘕𝘴 𝘪𝘴 𝘭𝘦𝘴𝘴 𝘵𝘩𝘢𝘯 50%, 𝘊𝘰𝘮𝘱𝘢𝘯𝘺 𝘌 𝘪𝘴 𝘯𝘰𝘵 𝘢𝘶𝘵𝘰𝘮𝘢𝘵𝘪𝘤𝘢𝘭𝘭𝘺 𝘴𝘶𝘣𝘫𝘦𝘤𝘵 𝘵𝘰 𝘜.𝘚. 𝘴𝘢𝘯𝘤𝘵𝘪𝘰𝘯𝘴 𝘶𝘯𝘥𝘦𝘳 𝘵𝘩𝘦 50 𝘗𝘦𝘳𝘤𝘦𝘯𝘵 𝘙𝘶𝘭𝘦."

• All three have concluded that neither the US nor the EU nor the UK sanctions apply to Company E.

CONCLUSION

• We are not there yet, so do it yourself!

SOURCE

• https://www.linkedin.com/posts/george-voloshin_sanctions-ofac-50percentrule-activity-7336452112312160257-YqML?utm_source=share&utm_medium=member_desktop&rcm=ACoAAAA_6EIB0wPAWyjQcuq_XiD3asUV8xpMeZ0