Group Co.
In an Age of Sanctions, Keeping Pace Requires Innovation
Traders Magazine Online News, August 28, 2017
Keeping up with the latest popular television shows was once a relatively simple proposition. With only a handful of major channels vying for your attention, all you had to do was set aside an hour or two each week and you’d have everything you needed to participate in Monday’s water cooler conversation with your coworkers. Today, we’re living in a so-called “golden age”, with dozens of critically acclaimed, “must-watch” shows available online and on demand. For “TV” fanatics, it’s a great time to be alive. Those of us with more pressing things to attend to than sitting on our couches and watching “TV”, though, often find ourselves wondering: “How in the world am I supposed to keep up with all of this?”
It’s a question that compliance professionals can relate to, especially when it comes to sanctions. As the global geopolitical landscape continues to grow more complicated, there is a growing array of trade restrictions, the targets of which are in a near-constant state of flux. In just the past few weeks, alterations have been explored or enacted to sanction programs targeting entities in North Korea, China, Russia, Iran aand Venezuela. The changes show no sign of letting up any time soon.
Identifying sanctioned entities and all of their issued securities, as well as detecting domestic or foreign subsidiaries (or other holdings of more than 50%) is a challenging task. Even trickier is deciphering the complex web of beneficial ownership rules and relationships. Corporate actions may influence the sanctioned securities, and an investment into structured products may increase the risk as well. Determining if sanctioned individuals have beneficial ownership is a critical step in putting together firms’ list of ‘do not trade’ securities that adds to the compliance challenge. On top of this, the information must be fed into the enterprise data management system, rules have to be programmed, and all of the data needs to be constantly kept up-to-date.
How can financial institutions keep track of all these tasks while keeping their operation running smoothly? Those charged with protecting their firms against penalties can understandably feel like they’re constantly struggling to keep pace.
Without a well thought-out strategy, though, financial institutions run a daily risk not just of getting fined, but of receiving serious reputational damage as well. According to figures published on its website, the US Treasury Department’s Office of Foreign Assets control has already doled out more than $100,000,000 worth of penalties so far this year. Firms can’t simply cross their fingers and hope not to be next. While some may be able to afford the financial hit, the public relations damage can endure for years.
Compliance departments are going to need to innovate if they want to keep up with the constant stream of new restrictions. Putting together the comprehensive, accurate, and up-to-date lists of sanctioned securities needed to avoid penalties is an undertaking that challenges even the largest and most advanced organizations.
For more information on related topics, visit the following channels:
Comments (0)