Sanctions screening technology has never been more important for financial institutions as new geopolitical and economic threats create the riskiest trading environment in recent history.
That is the key finding of a new report, that highlights the need for greater resilience among organisations to the raised threat level faced by the global financial system.
In a white paper entitled Monitoring a High-Risk World: Next-Generation Sanctions Screening, published by A-Team Group, SIX underlines the criticality of understanding and adapting to these changes by using data and technology to navigate the challenges and opportunities they present.
“The sheer speed and complexity of sanctions today mean financial institutions need partners they can rely on,” SIX Product Management Director Oliver Bodmer told Data Management Insight on the publication of the white paper.
You can download your copy of the report by clicking on this link
Sanctions remain a critical tool in international relations, influencing global finance, politics and security. As regulatory frameworks evolve, compliance becomes increasingly complex, requiring robust mechanisms and continuous monitoring, the report states.
In the past five years, global economic and financial sanctions have intensified amid rising geopolitical uncertainty, creating a complex landscape for banks and financial institutions worldwide.
Since Russia’s attempted full-scale invasion of Ukraine in 2022, governments around the world have increased sanctions on nations and entities by 700 per cent, according to the SIX Sanctioned Securities Monitoring Service (SSMS), which assesses the exposure risks of more than 10,000 ETFs. In that period, a barrage of punitive actions under existing anti-money laundering (AML) and anti-terrorism funding frameworks as well as new sanctions have been deployed in heavy measure, the report states.
Individuals, too, have been caught in the net, especially the lieutenants and associates of sanctioned political and business leaders, chief among them oligarchs and associates of Russian President Vladimir Putin. Also, companies and organisations have been placed on watchlists and blacklists for their involvement in, or connection to, proscribed people and states.
Increased Complexity
The risk that banks can inadvertently engage with sanctioned securities has never been higher. This has raised the stakes for compliance teams, the report stresses. Failure to effectively screen can lead to severe financial penalties as well as reputational damage.
The challenges of staying abreast of changing sanctions occupied much of the discussion during the A-Team LIVE webinar, entitled Navigating Complexity: Best Data Practices in Sanctions Screening.
During the webinar, panellists noted that financial institutions are battling to comply with the increasingly complex and intense regulatory response to these new threats, having to contend with “multi-dimensional exposures” across the globe.
Panellists noted that while institutions are embracing sophisticated data-management practices to ensure they can screen new developments in the sanctions ecosystem, this has presented its own set of challenges. A poll of viewers found that the chief hurdles they are seeking to overcome are all data related. Topping the list was managing data quality and entity resolution, followed closely by reducing false positives and alert fatigue. Keeping pace with rapidly changing sanctions regimes also figured high in the list of challenges.
Right Tools
However, with the right tools and proactive monitoring, banks can navigate these challenges confidently, the SIX report stated.
Automation of screening processes is improving organisations’ ability to identify and prevent interactions with proscribed parties. As well, it’s reducing the number of false positives generated in their screening sweeps, meaning professionals can get on with the important job of dealing with real threats.
The report highlights how institutions need the best data, technology and expertise to ensure their sanctions-screening operations are fully provisioned and compliant with the fast-changing regulatory landscape.
It adds that SIX has long been at the forefront of risk-management technology, developing and providing cutting-edge screening monitors for its clients. And with new products always in development, clients rest assured that they will be able to meet their screening obligations on an hourly basis.
“At SIX, our focus has always been to deliver accurate, timely, and comprehensive sanctions data that enables clients to screen with confidence — reducing risk, meeting regulatory expectations, and ultimately safeguarding trust in financial markets,” said Bodmer.
Subscribe to our newsletter
