Sanctions Monitoring for Financial Securities

Many regulators establish economic sanctions lists of countries, persons and entities when they consider business should not be done with them because of their involvement in terrorism, money laundering, criminal activities, frauds, war financing…etc. It is important for economic stakeholders and financial ones in particular to know this information for their AML/KYC* processes. But this information is not enough: financial institutions also need to screen securities to make sure that while investing in these they are not entering in business relation with these sanctioned bodies and individuals. Based on each regulator’s rule, they need to clearly identify tainted financial instruments in order to safely invest in “clean ones”. 
*Anti-Money Laundering/Know Your Customer

Beside the ethical aspect of not being related to terrorism or criminal activities, we have to keep in mind that regulatory bodies have the capacity to impose huge fines on institutions that fail to comply. And these fines usually go with reputational damages.

Historically, Sell-Side stakeholders were the persons to be concerned by sanctions screening. They have the obligation to advise their clients and invest for them in a suitable way, be it in equities, bonds or structured products. But the OFAC’s* Executive Order (EO) 13959 changed the game and placed the Buy-Side in full scope. Indeed, this EO introduced new asset classes for the first time: funds, ETF and indices, which means that, from now on, asset managers have to conduct this sanctions screening too and not consider it will be done by someone else. 
*Office of Foreign Assets Control

SIX has been a trailblazer in the sanctions ecosystem with the launch of the first version of Sanctioned Securities Monitoring Service (SSMS) in 2016. We indeed identified that sanctions lists did not provide enough information and required an important painstaking additional workload to identify sanctions impacts at the security level. Progressively, we have enhanced our offering by covering additional regimes (Japan being our most recent so far) and even extended our scope with optional features to meet suitability assessment needs: Cluster Munitions or MRB Securities (identifying Marijuana-Related Business). Our service provides a human-readable list of entities and securities that are sanctioned with details on the relevant regimes and the rationales behind the sanctions. SSMS has already won a substantial number of industry awards throughout global financial centres.

Linking a sanction to a security can be very easy (the listed stock of a sanctioned company, for instance) as it can be very tricky (a person, proprietary of a holding having shares in another holding being a joint-venture with another company…etc). To sort things out our concept has been to use Moodys Analytic’s beneficial ownership analysis, associated to the identifying capabilities from SIX (LEI, ISIN…) and Cetrel Securities’ computational capabilities to build up our service. Using each regulator’s rules (like OFAC’s 50% ownership rule) all sanctions lists are processed and allow us to provide clear lists of sanctioned entities and instruments with the related rationales. You can see the entire workflow in our SSMS factsheet (available above on this page).

For every security in our lists, a rationale is provided explaining why it is “tainted”. Our service uses official regulators’ rules to ensure the consistency of our lists. The computed information is also reviewed by a dedicated team of analysts. Ultimately, if you disagree with the information we provide, our service offers you a challenge capability: you send us your challenge and our analysts will review the calculations and provide you quick feedback. We are very cautious when considering securities in scope ; for instance, when a company is sanctioned, in many cases, related securities are “tainted” only after the go-live of the executive order and securities issued before stay out of scope. SSMS is one the best service on the market on this respect.

False positives are a tricky issue. In some cases it is very easy to mix up homonyms and associate the wrong ownership to a specific sanction. That’s why we convey thorough analysis of the official lists and use the tremendous identification capabilities from SIX to associate sanctions to the right entities or persons. For this purpose, artificial intelligence and human analysis are a key combination.

SSMS offers a Flash Mail service: as soon as a new sanction is announced (meaning before becoming effective), our teams carry out a thorough analysis to evaluate its impacts. The results and their explanation are then sent immediately to our clients so they can get prepared before the actual go-live. This service is very appreciated as it facilitates due time compliance.

The Sanctions Monitoring Service of SIX helps proactively identify financial instruments affected by international sanctions. With daily updates and clear listings, institutions can respond quickly to legal changes, avoid violations, and demonstrate internal control to regulators—reducing both legal and operational risk.

The service covers sanctions issued by global bodies such as the UN, European Union, OFAC (U.S.), UK, Hong Kong, and others. It includes both issuers and financial instruments, and detects direct and indirect exposures—such as through ETFs, funds, or structured products.

Yes. SIX offers customization options to align with each client’s internal compliance requirements. Data can be delivered in various formats and integrated into existing systems and workflows. It’s also possible to set up specific filters based on jurisdiction, instrument type, or sanction type.

The data is updated daily, ensuring continuous access to the most current information on sanctioned issuers and securities. This frequency supports fast decision-making and minimizes exposure to newly imposed sanctions.