In an increasingly hostile world, monitoring sanctions lists, politically exposed persons and other watch lists has become complex, but the buck doesn’t stop here with financial institutions needing to monitor and manage not only sanctions lists, but also securities related to sanctioned domiciles and companies.
This is not as easy as it may first appear. As well as identifying sanctioned entities and their issued securities, you need to uncover global holdings of more than 50% and work out whether securities issued by these domestic and foreign subsidiaries are also in scope. Then there is the challenge of verifying beneficial ownership by sanctioned individuals.
As sanctions lists and other watch lists are constantly changed, the problem of adding the right securities to your ‘do not trade’ list is difficult to solve and the penalties of getting it wrong can be high in terms of large fines and reputational damage.
But solutions are emerging that ease the burden and maximise trading opportunities by reducing the need to block trades in non-sanctioned securities.