Making It Simple: Sanctions Compliance - REFERENCE & MASTER DATA INSTRUMENT & LEGAL ENTITY DATA - Bloomberg LP
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REFERENCE & MASTER DATA Making It Simple: Sanctions Compliance. INSTRUMENT & LEGAL ENTITY DATA
MAKING IT SIMPLE: SANCTIONS Economic sanctions are penalties imposed by a nation or group of
COMPLIANCE – INSTRUMENT nations onto another nation or group of nations, including restrictions
& LEGAL ENTITY DATA
on financial transactions and trade barriers, and are designed to
deprive a target company of the use of its assets and to deny it
2 S
anctions Are Everywhere access to other financial systems, such as the benefits of trade,
2 Not All Sanctions Are Created Equal transactions and services.
4 E
xplicit versus Implicit Sanctions The introduction of new sanctions in PENALTIES FOR VIOLATING
response to the 2014 crisis in Ukraine SANCTION REGULATIONS
4 E
ntity versus Instrument Level has increased the complexity of Fines for violating sanction
Sanctions sanctions data for several reasons: regulations can be substantial.
For example, criminal penalties
•T
arget entities are more active in
for willful violations in the U.S.
the global economy and financial
can include economic fines and
markets than previously sanctioned
imprisonment. Moreover, being
companies.
singled out by the financial authorities
•T
he U.S., the European Union and can result in damage to a firm’s
other governments have imposed reputation, loss of revenue and
overlapping but often different destruction of shareholder value.
sanctions. The list of sanctioned
entities as well as the scope of BLOOMBERG IS HERE TO HELP
the sanctions can vary from one Bloomberg has made significant
jurisdiction to another. investments to deliver high-quality,
comprehensive sanction data that
• Sanction programs are becoming addresses the needs of the industry.
more targeted. Certain jurisdictions Bloomberg Sanction Data covers 10
– such as the U.S., the EU, Canada, different jurisdictions: U.S. Office
Switzerland, Australia and Japan – of Foreign Assets Control (OFAC),
differentiate between comprehensive EU, United Nations, Canada, U.K.,
and sectoral sanctions. Switzerland, Japan, Hong Kong,
•S
anctions programs capture both Singapore and Australia. A team
explicitly defined and implicitly of subject-matter experts monitors
related sanctioned companies. As a the different sanction programs and
result, understanding the ownership provides timely updates. Bloomberg’s
structure of these companies is legal entity data flags entities that
critical to ensuring full compliance. have been sanctioned by any of the
previously mentioned jurisdictions
•T
here is limited guidance on the new and indicates the type of sanction
sanctions, requiring market players that applies in each case. As a
to individually determine the scope response to specific sectoral sanction
of sanction programs on specific programs, which limit the ability of
entities and instruments. entities to access additional capital
In addition to the increasing in the financial markets, Bloomberg
complexity in sanctions, regulatory now offers a pre-trade compliance
scrutiny with regards to compliance solution comprised of instrument level
has become more severe. sanction data.SANCTIONS ARE EVERYWHERE
Many financial companies are global As an example, a Canadian broker-
in nature, and it is imperative for these dealer based in Toronto, with operations How can firms manage multiple
organizations to abide by sanction in New York, London, Frankfurt and sources and multiple pieces
rules in the jurisdictions where they do Tokyo, will need to manage multiple of legislation that can require
business. This is challenging because pieces of legislation that require legal and specialized knowledge
each jurisdiction has its own specific specialized legal knowledge about about sanctions and financial
laws and rules that determine which sanctions and the impact on its instruments?
entities or instruments are sanctioned. business. This is because not only will
The process is complicated by the they need to comply with Canadian Bloomberg provides an industry-wide
fact that while lists of sanctioned sanction regulation but also with the solution by monitoring sanctions in
companies for the various jurisdictions U.S. (OFAC), U.K., EU and Japanese 10 global jurisdictions. Whenever the
often overlap, they are not 100 percent specific rules. U.S. (OFAC), EU, U.N., Canada, U.K.,
the same. Understanding and Switzerland, Japan, Australia, Hong
correctly interpreting legal texts, in Kong or Singapore issues changes or
jurisdictions where sanctions are publishes new legal articles that will
written only in the local language, impact sanction data, our sanction
adds another layer of complexity. experts will ensure, often by working
with local counselors, that the
legislation is interpreted correctly and
consequently updated in our database.
NOT ALL SANCTIONS ARE CREATED EQUAL
Traditionally, sanctions programs have Distinguishing sectoral and
been comprehensive in nature. These comprehensive sanctions is critical to How can an organization know
sanctions generally prohibit all direct understand the type of relationship a with certainty which types of
or indirect imports/exports, trade firm can have with a given entity. sanctions apply to a potential
brokering, financing or facilitating counterparty or client?
For instance, a U.S. financial company
against most goods, technology
engaging in a swap deal with a new Bloomberg has worked with
and services. Transactions require a
Russian counterparty will need to local counselors and its internal
specific license or exemption from the
understand if sanctions apply to the compliance department to
OFAC before they can take place.
entity. If the counterparty appears on understand the various directives
However, the new sanctions a sanction list, further research will in the different sanction programs.
introduced in July 2014, known be required to determine whether the As a result, we are able to provide
as sectoral sanctions, apply only sanction is comprehensive or sectoral. details about the type of sanction
to specific activities with target The Compliance team will reject the that applies to each entity. In
companies, primarily, providing deal if comprehensive sanctions apply addition, for some jurisdictions,
medium- to long-term financing or but may approve it if the Russian we provide the lineage tracing the
engaging in business related to key company is sectoral sanctioned. type of sanction to the specific
sectors, such as energy and defense. applicable directive.
INSTRUMENT & LEGAL ENTITY DATA 2By combining detailed legal entity sanctions information with a legal entity’s corporate structure, the securities
they have issued and a sophisticated rules engine, Bloomberg is able to provide a complete sanctions solution
for the industry.
RUSSIAN FEDERATION
NPO URALVAGONZAVOD AO VTB BANK PJSC DENIZBANK A.S.
Explicitly Sanctioned
OFAC FULL SANCTIONED OFAC SECTORAL SANCTIONED NOT OFAC SANCTIONED
SDN List Directive 1
All securities will No OFAC sanctioned
be sanctioned securities
VTB-LEASING OJSC VTB BANK BELARUS CJSC VTB BANK OJSC
Implicitly Sanctioned Implicitly Sanctioned Implicitly Sanctioned
No Outstanding Issues
VTB-LEASING FINANCE Fixed Income
Implicitly Sanctioned Equities
Securities
RULE
Fixed Income ENGINE
Equities
Securities
RULE
ENGINE ISSUE OFAC
TICKER DATE MATURITY SANCTIONED?
EJ884551 Corp 10/29/2013 10/31/2016 N
ISSUE OFAC EJ301885 Corp 8/6/2012 Perpetual N
TICKER DATE MATURITY SANCTIONED?
EH549957 Corp 6/16/2009 6/7/2016 N
EH864455 Corp 6/16/2009 6/7/2015 N
EI075820 Corp 12/9/2009 11/30/2016 N
EI349860 Corp 8/10/2010 8/1/2017 N
EI351069 Corp 8/11/2010 8/2/2017 N
EK750289 Corp 12/4/2014 11/25/2021 Y
EK750469 Corp 12/30/2014 12/21/2021 Y
EK748599 Corp 8/15/2014 8/5/2022 Y
EK748737 Corp 12/30/2014 12/20/2022 Y
EK750812 Corp 12/30/2014 12/20/2022 Y
INSTRUMENT & LEGAL ENTITY DATA 3EXPLICIT VS. IMPLICIT SANCTIONS
Only a small fraction of all sanctioned As an example, a German large
companies are listed by official bank servicing thousands of How can a firm determine all
sources. These programs state that counterparties in Europe will need to related companies that should
majority-owned subsidiaries are also ensure that none of these companies be considered sanctioned and
in scope for these directives. It is is added to a European sanction list. perform the analysis necessary
essential for global market players to Furthermore, the Compliance team to determine if a security is or not
have in-depth understanding of an will also need to ensure that their impacted by sanctions?
entity’s corporate hierarchy to ensure counterparties are not controlled by
that the both explicitly and implicitly a company that is sanctioned by the Bloomberg flags both explicitly and
sanctioned entities are captured in a EU, since this might require them to implicitly sanctioned entities by going
firm’s compliance program. Mapping terminate the relationship. well beyond simply mapping sanction
the companies on an official sanction lists to entity records. We leverage
list to an entity database is part of the our extensive corporate hierarchy
process, but it is not enough. database to show a complete picture
of sanctioned companies, specific to
each jurisdiction. As a result of this
approach, firms can be confident
that they have the most up-to-date
sanctioned entities, even as corporate
structures continue to evolve.
ENTITY VS. INSTRUMENT LEVEL SANCTIONS
The introduction of sectoral sanctions For example, as part of the pre-trade
in 2014 was designed to restrict a compliance process, Compliance Satisfying the pre-trade
company’s access to new capital in officers need to evaluate trades that compliance requirement.
the financial markets. Compliance pose a risk to the institution. Trading
managers now need to understand a bond of a sectoral sanctioned To satisfy the pre-trade compliance
both the type of sanction program company represents a certain requirement with respect to sanctioned
levied against the company and challenge, since that instrument may securities, Bloomberg combines its
the potential instruments that are or may not be eligible for trading issue-to-issuer linkages, legal entity
restricted from trading or investment. depending on when it was issued sanction data and its market standard
and when it matures. instrument reference data to derive
While none of the governments that a comprehensive list of sanctioned
issue sanctions has published a list of instruments. Our sophisticated
sanctioned securities, it remains the rule engine is able to specify which
responsibility of each market player instruments are in scope with specific
to be compliant by interpreting the directives and scalable to both current
directives to understand whether a and upcoming listings.
security is sanctioned.
INSTRUMENT & LEGAL ENTITY DATA 4TAKE THE NEXT STEP
Bloomberg for Enterprise is ready to help your firm acquire highly accurate legal entity data suitable for use in a wide
variety of risk and compliance workflows. Contact one of our data professionals at eprise@bloomberg.net or visit
bloomberg.com/enterprise now.
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The data included in these materials are for illustrative purposes only. ©2016 Bloomberg L.P. All rights reserved. S655162310 0216 DIGYou can also read
