Roy Kirby, Head of Core Products at SIX Group, has spent the past four years watching sanctions transform from episodic geopolitical tools into a structural feature of market risk. In sharing insights with RegTech Insight, he sets out how the acceleration and layering of sanctions since 2022 are reshaping compliance obligations for ETF issuers and, by extension, the wider capital markets value chain.
As Kirby explains: “Since Russia’s invasion of Ukraine four years ago, the use of sanctions has surged, creating a volatile and increasingly complex compliance regime. Just this week, we have seen further evidence of how fast-moving sanctions can be. The UK announced nearly 300 new sanctions on companies, individuals and entities supporting Russia’s war effort, in the most substantial package of new restrictions since 2022.”
The pace and scale of new additions to sanctions lists have created a new urgency for compliance teams. Market participants are no longer responding to isolated measures; they are operating within a dynamic regime in which sanctions lists expand and evolve with little notice.A 900% Rise in Sanctioned Securities
Kirby notes that the impact has become systemic: “This has impacted market participants across the financial markets value chain, as new measures affect issuance, trading and post-trade activities. Data from SIX SSMS shows the total number of sanctioned securities has risen by 900% since January 2022, underscoring the scale of change. The number has increased sharply each year since the start of the conflict, meaning market participants have had little breathing space. While the precise compliance burden is difficult to quantify, its impact on firms has been significant – and remains ongoing.”
A 900% increase in sanctioned securities represents more than a statistical shift. It translates into expanded screening obligations, increased data ingestion requirements, and more complex cross-border interpretation. Issuers, brokers, custodians and data providers must maintain synchronised views of exposure as lists change across jurisdictions.
Non-Linear Regimes, Fragmented Responses
Kirby emphasises that the evolution of sanctions has not followed a predictable arc. He explains: “Sanctions since 2022 have not followed a linear path. Different regimes phased measures and layered designations mean firms cannot rely on a one-size-fits-all response. Each new development requires rapid interpretation and operational adjustment. ETF issuers face particular challenges.”Layered designations and divergent national approaches render rigid compliance frameworks inadequate. Screening logic must account for ownership thresholds, control tests, sectoral restrictions and wind-down provisions. For ETFs, the structural characteristics of the product amplify these challenges.
The ETF Contagion Effect
Unlike single-stock strategies, ETFs aggregate risk. A small exposure can carry disproportionate operational consequences. As Kirby notes: “Unlike single-stock exposures, ETFs can be affected if even a small portion of the portfolio becomes sanctioned. A 1% tainted holding can impact the entire fund – from valuation and liquidity to creation/redemption mechanics and disclosure obligations – requiring firms to monitor the entirety of a fund’s holdings.”
A sanctioned portfolio component may disrupt authorised participant activity, impair secondary market liquidity or trigger index rebalancing complications. NAV calculations can be affected where pricing sources become unavailable or trading halts are imposed. Disclosure and investor communications add another layer of pressure.
For ETF issuers, this means that sanctions monitoring cannot be limited to headline constituents. It must operate across all components and at sufficient frequency to detect exposure before it crystallises into operational friction.
Wind-Down Periods and Missed Deadlines
Regulators often provide wind-down periods to allow orderly divestment. However, Kirby notes that “Although wind-down periods are typically provided, recent data suggests issuers are not always acting within them. Following the October 2025 blocking sanctions on Russian oil companies Rosneft and Lukoil, SIX data showed that, as of December 2025, 289 ETFs out of a universe of 12,500 (2.31%) remained exposed to one or both of these companies. This was despite prior investment bans and the availability of General Licence 127, which allowed funds to reduce their exposures by 21 November 2025.”
The persistence of exposure raises questions about internal sanctions screening frequency, escalation and decision-making frameworks. It may also reflect the operational complexity of unwinding positions in stressed or illiquid markets. Either way, delayed divestment increases downstream risk.
Kirby makes the consequences explicit: “These figures suggest some issuers either failed to divest in time or did not fully appreciate the reporting and compliance implications. In either case, delayed action increases the risk of regulatory scrutiny, mandatory reporting, potential penalties, as well as secondary impacts such as deteriorating liquidity, NAV impairment and reputational damage.”
For senior practitioners, liquidity fragmentation, valuation uncertainty and reputational pressure can converge quickly once a fund is associated with sanctioned assets.
Complexity as a Permanent Feature
Looking ahead, Kirby frames sanctions complexity as enduring rather than episodic. He concludes: “The past four years have shown that sanctions regimes can escalate quickly and unpredictably. While the future path remains uncertain, complexity is here to stay. ETF issuers must equip themselves with stronger monitoring and compliance tools to identify exposure early and respond decisively, before regulatory deadlines turn into regulatory problems.”
This call for stronger monitoring is not confined to ETF issuers. It applies to index providers, trading venues, custodians and data vendors whose systems must remain aligned. Screening must be granular, ownership-aware and responsive to cross-jurisdictional nuance.
Conclusion
Sanctions have moved from episodic geopolitical events to structural market constraints impacting product design, portfolio management and post-trade processing. For ETF issuers, marginal exposures can trigger disproportionate operational consequences. For the wider value chain, layered regimes and expanding lists require continuous screening rather than periodic review.
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