Why screening sanctioned securities matters

Sanctions compliance is no longer just about screening names. As global regulations evolve, firms must identify risks tied to ownership, control and even securities linked to sanctioned entities. 

• Sanctions screening has evolved beyond basic name matching – firms must now identify risks linked to ownership, control, and associated entities to meet regulatory expectations.
• Automated screening is essential – with frequent regulatory updates and complex ownership structures, technology-driven solutions enable timely, accurate, and scalable compliance.
• From entities to instruments: closing the gap in sanctions screening – join global webinar to learn more.

For many years, the screening against sanctions was straightforward, as the regulatory expectation was that financial institutions only needed to perform checks against set lists of people and entities based on names and, where possible, secondary identifiers. 

That reality started to change with the introduction of implicit sanctions screening requirements, such as the “OFAC 50% rule”. The message behind this type of regulation? Since attempts at circumventing restrictions move faster than the legislation itself, screening against a pre-defined list was no longer good enough. So, expectations were expanded to account for the screening of entities owned or controlled by sanctioned subjects.

The next step of this evolution went beyond the concept of companies, and into another form of ownership: financial instruments. The goal of monetary sanctions is to prevent blacklisted parties from accessing or moving funds. As a result, securities such as bonds and shares became a key screening target. This shift introduced an extra layer of complexity in managing financial portfolios, making it critical for institutions to identify and manage exposure to restricted securities.

One regulation that highlighted this need is Executive Order 13959 (EO 13959), which prohibits U.S. persons from investing in securities of companies originally designated as “Communist Chinese Military Companies” (CCMCs), now known as “Chinese Military-Industrial Complex” (CMIC) companies.

While EO 13959 has evolved through amendments, its intent remains clear: to prevent capital flows to entities deemed a national security risk. For firms, this means that sanctioned securities screening is no longer optional – it is a strategic imperative. Also, this is no longer limited to one or two jurisdictions: United States, European Union, United Kingdom, Singapore, Australia, New Zealand, Canada, Switzerland and Japan all have introduced this type of regulation.

EO 13959 does not stop at listed companies. It extends to:

• Subsidiaries and affiliates of designated entities
• Entities with similar names, creating risk of false positives and missed matches
• Derivatives and funds linked to restricted securities

This complexity makes manual screening impractical. Without robust processes, firms risk regulatory penalties, reputational damage, and operational disruption. The move away from set lists of names to control and ownership networks increased exponentially the difficulty of screening against the expected breadth of up-to-date data.

Effective sanctioned securities screening does more than mitigate risk but also protects reputation, reduces operational complexity by integrating compliance into workflows and builds investor trust through transparency and accountability. 

Sanctions regimes will continue to expand as geopolitical tensions shape global markets. EO 13959 is a case study in how quickly regulations can impact investment strategies. Firms that invest in advanced screening capabilities today will be better positioned to navigate tomorrow’s challenges.

Sanctioned securities screening is not just a regulatory requirement – it is a cornerstone of modern risk management.