SIX Financial Information adds new OFAC sectoral sanctions on Venezuela to global sanctions data service
SIX Financial Information has updated its global data service in response to new sectoral sanctions against Venezuela announced by US authorities on 25 August. Service users are automatically alerted to securities related to targeted entities, allowing them to avoid toxic trades. The data service update is available worldwide as of 30 August and will help financial institutions to adjust their portfolios in time for 24 September, when the initial grace period ends.
The US announced new sectoral sanctions on Venezuela on 25 August 2017. The sanctions affect entities related to the Government of Venezuela and the national oil company Petroleos de Venezuela S.A.. Around 250 legal entities are associated with these parent companies, with an estimated 600-700 securities in-scope of the OFAC sanctions. Trading in debt and equity issued by entities related to The Government of Venezuela and the state-owned oil company, Petroleos de Venezuela S.A., will be affected, among other transactions.
The Executive Order allows for a wind-down phase until 24 September 2017, subject to reporting conditions. This means financial firms have less than a month to adjust their portfolios to block in-scope securities from being traded, held or serviced from that date onward. Any transaction that takes place during the grace period must be reported in detail to OFAC no later than 10 days after it occurs.
SIX Financial Information’s global sanctions data service is updated automatically in response to the new sanctions and will incorporate Venezuelan parents named in the OFAC list and their associated entities as of 30 August. Subscribers receive a daily scrubbed list of securities related to sanctioned companies, which can be integrated into banking systems ready for pre-trade screening.
Sectoral sanctions are particularly challenging for financial institutions to navigate, because only some industries are targeted. In the case of the recent sanctions against Venezuela, this means that portfolios may contain instruments that will become toxic only if corporate events such as a capital increase take place. To add to the challenge, an annex to the announcement whitelists some securities of given issuers, although other issuances from the same entity may be sanctioned.
The SIX service helps firms with this complexity by alerting users to potentially toxic instruments as well as ones that are already sanctioned, helping firms manage portfolio risk more efficiently. The service also provides a narrative explainer statement to give users in-depth insight into risky holdings in their portfolio, allowing them to make safer trading decisions.