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.

See the sanctions regimes covered by SSMS across jurisdictions in the table below:

Note: "Covered" indicates jurisdiction maintains sanctions against the listed regime

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.

Indirect sanctions exposure often arises through complex ownership structures, fund compositions, or structured issuance models where the sanctioned entity is not the visible issuer.

Identifying this exposure requires linking sanctions lists with underlying ownership data and tracing relationships between entities and their issued instruments. Institutions must go beyond surface-level screening and incorporate deeper data analysis to detect hidden connections that may otherwise remain undetected. SIX is also capturing hidden exposure for example of debt instruments that are issued by a not sanitoned issuer but are funneling money back to a sanctioned entity via the ultimate borrower or guarantor relationships

Ultimate beneficial ownership has become a critical factor in sanctions compliance as regulators increasingly expect institutions to assess whether a sanctioned entity controls or benefits from an instrument, even indirectly. Rather than focusing solely on the issuing entity, firms must evaluate ownership chains and control structures to determine whether an instrument falls within sanctions scope due to underlying economic exposure. SIX is linking the sanctions list with a UbO database with over 400m entities and 150m beneficial owners to its award winning reference database

Multi-layer investment structures, such as funds-of-funds or ETFs holding other funds, can obscure exposure to sanctioned securities several layers below the surface. Without look-through capabilities, asset managers may unknowingly hold restricted instruments within diversified portfolios. This complexity requires systematic tracing of holdings across multiple levels to assess true exposure and ensure compliance. SIX is doing 3 level look throughs in order to capture hidden exposure

Traditional screening methods that rely on matching entity names against sanctions lists fail to capture indirect exposure arising from ownership structures, subsidiaries, and financial instruments. In today’s environment, sanctions risk is often embedded in relationships rather than explicitly visible in issuer names, making more advanced data-driven approaches essential for effective compliance. Name based screening is the beginning to link the sanctioned issuer with its issued securities, but already there sometimes the regulators do not name the issuers e.g. in sectoral or domicile based prigs. But SIX goes further, it also exposis indirect relationships via ultimate borrower, options or structure products, funds and ETF that have exposure into sanctioned securities

Sanctioned entities may use alternative issuance structures, such as shell companies or offshore vehicles, to access capital markets while concealing their involvement. In such cases, the issuing entity may appear compliant, while the ultimate borrower or beneficiary is sanctioned. Detecting these risks requires linking issuance structures to the underlying economic entity and analyzing prospectus-level information and ownership relationships.

Sanctions are increasingly viewed not just as a regulatory obligation but as a source of financial risk. Even where investments remain technically legal, exposure to entities on watchlists or trade restrictions can lead to volatility, liquidity constraints, or potential future designation. This shift is driving institutions to integrate sanctions analysis into broader portfolio risk frameworks.

Asset managers must navigate rapidly changing sanctions regimes, complex ownership structures, and growing volumes of financial instruments across multiple jurisdictions. The increasing use of indirect holdings and subsidiaries to circumvent sanctions makes monitoring more difficult, requiring scalable and automated systems to maintain continuous oversight.

The volume and complexity of sanctions data have exceeded what can be managed through manual processes. Automated monitoring systems enable firms to process large datasets, identify relationships between entities and instruments, and update exposure in real time. This improves both accuracy and efficiency, while reducing the risk of human error in compliance workflows.

Shifts in geopolitical dynamics and trade policies can rapidly expand the scope of sanctions, affecting entire sectors or regions. Companies that are not currently sanctioned may become restricted due to policy changes, creating immediate exposure risks for investors. This unpredictability requires institutions to continuously monitor regulatory developments and assess their impact on existing portfolios.

Regulators are placing increasing emphasis on transparency in investment structures and expect institutions to identify indirect exposure within funds and structured products. Multi-level look-through capabilities allow firms to trace exposure from top-level investments down to individual securities, ensuring a comprehensive understanding of sanctions risk across complex portfolios.

SIX monitors indirect ownership by linking sanctions data with corporate ownership and control structures, allowing financial institutions to identify not only directly sanctioned entities but also those that are implicitly sanctioned through ownership thresholds or control relationships. The SSMS service applies established regulatory logic, such as the 50% ownership rule, and maps sanctioned individuals and entities to their subsidiaries and affiliated companies. This enables the identification of financial instruments issued by entities that may not appear on sanctions lists themselves but are effectively controlled by sanctioned parties, ensuring a more complete view of exposure risk

SIX supports regulatory recordkeeping obligations by providing structured, time-stamped sanctions data through daily full and delta files that can be stored and audited over time. The SSMS dataset includes clear mappings between sanctioned entities, their associated instruments, and the underlying regulatory sources, allowing institutions to maintain historical audit trails of exposure and decision-making.

Sanctioned exposure in complex fund structures is calculated by applying multi-level look-through across investment layers, identifying sanctioned components at the lowest level and aggregating their weight back to the top-level fund. SSMS Funds enables this by tracing holdings across up to three levels, capturing both direct and indirect exposure to sanctioned securities and expressing it as a percentage of the overall fund composition. This approach allows financial institutions to understand how sanctioned instruments

SIX sanctions monitoring data is built on a large-scale aggregation of global regulatory sources combined with proprietary reference data, enabling broad coverage across asset classes, issuers, and ownership relationships. The service integrates data from more than 1500 sources and applies automated processing alongside manual validation controls, including a four-eye review process before publication. Sanctions data is sourced directly from regulators and updated daily, ensuring both timeliness and reliability. This combination of scale, direct sourcing, and validation ensures that institutions receive high-quality, consistent data suitable for compliance and audit purpose

SIX addresses grey zone risks by extending its monitoring capabilities beyond formal sanctions lists to include datasets that capture high-risk or restricted activities, such as Marijuana-Related Businesses. These datasets are delivered alongside core SSMS data using the same structure and integration mechanisms, enabling institutions to identify securities linked to activities that may not be explicitly sanctioned but still present regulatory, reputational, or policy-driven risks. This allows firms to incorporate broader risk considerations into their screening frameworks rather than relying solely on legally binding sanctions regimes

Yes, SIX sanctions monitoring data is designed for direct integration into automated workflows across trading, custody, and compliance systems. The service delivers data in standardized formats such as CSV and XML via secure channels, providing both full datasets and incremental updates that can be consumed by internal systems. This enables institutions to embed sanctions checks into pre-trade controls, post-trade monitoring, and settlement processes, supporting automated decision-making and reducing reliance on manual intervention while maintaining alignment with regulatory requirements