Refinitiv Corporate Treasury Data Insights | June 2021

06-07-2021 | treasuryXL | Refinitiv |

Andrew Hollins, Director of Corporate Treasury Proposition at Refinitiv, brings you the June 2021 round-up of the latest Corporate Treasury Data Insights.

  1. Issuance of non-U.S corporate USD denominated debt has increased, and is most pronounced in Japan and driven by M&A.
  2. Sign-up to learn more about the rise of digital treasury in India and watch a video to observe how crypto trends are evolving.
  3. Are we witnessing the start of a commodities supercycle? And watch a webinar to learn more about the impact of LIBOR on the need for USD cash market to have fallback rates.

Corporate Treasury Chart of the Month

M&A drives demand for the dollar

We are seeing a continued rise in non-U.S. corporates issuing US$ denominated debt this year, with Japanese companies in particular taking advantage of strong investor demand, favourable interest rates and healthy US$ liquidity (see chart below) to deliver an M&A-driven issuance boom.

For example, we recently saw 7-Eleven raising $10.9 billion to fund its $21 billion acquisition of Speedway, the U.S. convenience store operator.

Being a safe haven currency, 2020 was a period of JPY strength against the USD. However optimism of a strong post-pandemic recovery has seen the JPY give back most of these gains since Q1 2021. Corporates with USD liabilities can monitor market expectations of further JPY weakness using apps like FX Polls and the FX probability feature in Refinitiv Eikon.

USDJPY currency basis spreads narrowed during COVID-19 in response to decisive Federal Reserve monetary support and liquidity provision. You can view these spreads using the Refinitiv Eikon Chart app (CHT).

Get these issuance insights in Refinitiv Eikon

  1. Search for the ‘deals screener’ app ‘DSCREEN’
  2. Select ‘USD’ under the ‘currency’ dropdown
  3. Select ‘bonds’ under the ‘asset class’ dropdown
  4. Add ‘date’, ‘target market’, ‘principal amount’ and ‘industry’ filters

Secure your spot: the rise of digital treasury in India

As treasury evolves into a strategic centre for companies, the adoption of technology becomes pivotal to strengthen resilience and insight. Secure your spot at an event we are co-hosting on 24 June 2021 with our partner, leading TMS company IBSFINtech, and hear from a leading panel of experts, including the Country Head of SoftBank and the Head of Global Corporate Treasury at Wipro Enterprises.

Crypto trends

The world of crypto and decentralised finance is starting to broaden in terms of products and coin offerings. And many of the biggest crypto moves have been preceded by shifts in sentiment that can be picked up from social media sources. Watch this seven-minute video to see evolving cryptocurrency trends and how they can be tracked by analysing social media.

Watch the video: Tracking the Biggest Trends in Crypto – Data on the Data

The start of a commodities supercycle?

You can see the rebound of the Refinitiv/CoreCommodities CRB Index is gaining steam in a directional move comparable with the beginning of the last commodities supercycle in the 2000s.

However, the overlay of several cyclical upswings of different raw materials and the transition towards a low-carbon economy suggests something more complex is happening.

Access FX liquidity in Russia

Discover how Refinitiv is helping local and offshore traders maximise access to a broad range of FX liquidity providers in Russia.

LIBOR transition webinar: why does USD cash market need fallback rates?

Join us on Wednesday 14 July to discuss the USD cash market and the need for fallback rates with the Loan Syndications and Trading Association (LSTA), Wells Fargo and The U.S. Federal Reserve. Sign-up today.

On-demand event: COVID-19 recovery in U.S. power and gas markets

As more countries and markets open up after COVID-19 lockdowns, how will U.S. power and natural gas markets be impacted? Hear what our panel of experts from Refinitiv, IIR Energy and Yes Energy think.

 

Refinitiv Corporate Treasury Data Insights | May 2021

31-5-2021 | treasuryXL | Refinitiv |

Andrew Hollins, Director of Corporate Treasury Proposition at Refinitiv, brings you the May 2021 round-up of the latest Corporate Treasury Data Insights.

  1. The latest Refinitiv Deal Makers Survey analysed market sentiment to gauge which M&A sectors will thrive during 2021, while global banking investment fees hit new heights.
  2. A look at the markets statistics from President Joe Biden’s first 100 days in office, and why USD cash fallbacks form a crucial element of the LIBOR transition.
  3. Plus, news on U.S. identity theft, crude oil prices and FX market innovation, as well as a round-up in Refinitiv Corporate Treasury Newsbeat.

Corporate Treasury Chart of the Month

Our latest Deal Makers Sentiment Survey reveals two clear M&A winners emerging from the turmoil of 2020: Technology and Healthcare. Beyond these sectors, M&A optimism tails off quickly, with notable falls including Consumer Retail. On average, deal makers predict a 6 percent increase in M&A activity this year, which bodes well for corporates with access to capital.

Corporate Treasury Data Insights: Subscribe to our newsletter

Global investment banking fees set all-time record

Refinitiv’s leading fee model revealed investment banking fees reached US$39.4 billion during the first quarter of 2021, posting a 45 percent increase compared with the first quarter of 2020 and the strongest opening period since records began in 2000.

Imputed fees in the EMEA region increased 27 percent to US$8.1 billion during first quarter of 2021.

You can access these exclusive modelled fees in Eikon to benchmark against peers, or to support mandate allocation purposes. Navigate to Company Overview -> Event -> Company Deals -> [Asset Type] Equity to compare the latest deals and access detailed tear sheets.

Join our upcoming Refinitiv Academy session for deeper insight on building peer comparison models in Eikon.

Screenshot of Refinitiv Eikon – Capital Market Transactions. Corporate Treasury Data Insights May 2021
Click the image to request a free trial of Refinitiv Eikon

Biden’s first 100 days in 10 charts

U.S. President Joe Biden’s first 100 days in office saw records in both M&A and capital markets, with the S&P 500 recording a stronger performance than any other president in recent history. Here are 10 charts that tell the story.

USD cash fallbacks: a key component of the LIBOR transition

With the most widely used tenors of USD LIBOR subject to cessation immediately following publication on 30 June 2023, how can fallback rates support a smooth transition in the cash markets?  We’ve also put together a guide to help you navigate the LIBOR transition.

Image promoting Refinitiv's Navigating the LIBOR transition guide. Corporate Treasury Data Insights | May 2021

New Report – U.S. Identity Theft: the Stark Reality

With an estimated 42 percent increase in identity-related losses from 2019 to 2020, coinciding with a shift towards digital payment methods during the pandemic, identity crime remains a steadfast challenge.

A new report commissioned by GIACT, a Refinitiv company, uncovers the striking pervasiveness of identity fraud perpetrated against U.S. consumers. GIACT is also hosting a free webinar this Thursday (20 May) on how you can Safeguard Faster Payments: KYC, Account Validation Compliance and Best Practices. Secure your spot!

Have crude oil prices peaked?

The market has recovered following the Coronavirus-induced collapse in prices. With the price now stable at around $60/bbl, Market Voice analyses if this is a pause for breath or a natural ceiling.

Accelerating innovation in FX markets

Refinitiv’s FX platforms reported an average daily volume of $490bn in January 2021, the second highest monthly average since reporting began. Find out how FXall gives traders greater flexibility and control over the staging and execution of their FX orders.

REPLAY: Sustainability and ESG webinar

In April, we hosted a webinar with the ACT, discussing the role treasurers should play in sustainable strategy and operations, green financing and benchmarking. You can also check-out a recent interview between Refinitiv’s Leon Saunders Calvert and Treasury Today, discussing treasury’s role in integrating financially material ESG data.

Refinitiv Corporate Treasury Newsbeat

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Partner Interview | Manipulating market-leading data to navigate volatility

11-05-2021 | treasuryXL | Refinitiv |

As a leading financial markets data provider, Refinitiv is an essential partner for corporate treasurers. Refinitiv’s global, multi-asset and multi-jurisdiction view of risk, credit and economic data enable treasury teams to drive stability by managing the global and interconnected nature of risk today.

⬇️ ⬇️ ⬇️

In this interview, we take a look at how Refinitiv’s corporate treasury customers used Refinitiv data and apps to remain agile and proactive in one of the most volatile years ever. We also consider what data is likely to be needed as we recover from the pandemic and companies seek growth.

An introduction to:

 

Andrew Hollins

Director of Corporate Treasury Proposition, Refinitiv, an LSEG business

 

 

 

 

Rasyid Kwee

Proposition Sales Specialist for Enterprise Solutions, Refinitiv, an LSEG business.

 

 

INTERVIEW

1. From your data, what can be identified about the behaviors and activities of corporate treasurers during the onset of the pandemic?

Using the data we have available, we’ve been able to discern three broad phases of corporate treasury response and action throughout the pandemic. The period March through to May 2020 represents Phase 1, which for many Corporates could be termed the ‘Survival Phase’. During this first phase, we witnessed pronounced patterns of activity amongst our Corporate Treasury clients.

Firstly there was a strong focus on analysing and reviewing the Credit Risk of suppliers, clients and also corporate’s own credit risk. Treasurers wanted to know if their customers would be able to pay for the goods and/or services they are supplying, and if their suppliers were still going to deliver supplies, raw materials, component parts, goods, etc.

We also saw a spike in usage of Company Fundamental Data (app for company financial analysis, for financial statements and valuation metrics for over 90,000 companies listed on 169 exchanges in 150 countries), especially so for balance sheets, income statements, key ratios and Cashflow data. Furthermore, there was an increased appetite for Private Company data, which almost certainly reflected a desire to review the health of the extended supply chain, a trend which has continued.

Finally, there was an increase in usage of Sector-specific Economic Indicator data, up 30% globally from Feb – Mar 2020 (this app allows users to search for any Economic Indicator, chart the history, export to Excel and view associated press releases). An increase was also seen in the use of Peer Analysis data (allows for the comparison of a company against its peers across a multitude of measures and variables), reflecting a demand for wider sectoral intelligence, as well as insight into how related companies were performing in such a stressed environment. Conversely, we also saw a decline in demand for ESG related apps and data, as well as data and apps relating to Libor transition. Libor transition in particular had been a high priority area for most corporate treasurers, but the economic shock brought on by Covid-19 pushed these onto the back burner during the ‘Survival Phase’.

2. What are the Data and App usage highlights from Phase 1?

  • Globally, Credit Default Swap (CDS) data usage grew 115% in EMEA and Americas between February and March 2020. Asia showed a 155% rise in usage of this data during the same period. (The CDS Dashboard app provides comprehensive Streaming price coverage on major global Index and single name CDS from major market maker).
  • In the Netherlands (February to March 2020), there was an 83% rise in usage by Corporate Treasurer’s use of credit and credit risk data, specifically;
    • 68% rise in use of Debt Structure data (both for oneself and for one’s peers)
    • 67% rise in Starmine Credit Risk data (Starmine Credit Risk models utilize industry-specific accounting ratios, equity market valuations and text mining models to produce a 1-100 score of an company’s credit risk).
  • During the same period we also saw significant increases in usage of company fundamental and private company data. At the same time there was a clear drop in consumption of ESG data.
      • 81% rise in Company Fundamental data
      • 33% rise in Private Company data
      • 45% drop in use of ESG data

  • Looking at year on year data for the Netherlands for March 2020 and March 2021, we saw a 50% rise in CDS data; 50% rise in Debt Structure Data; 66% rise in Industry sector data; 113% rise in use of peer analysis apps.
  • Furthermore;
    • Private Company Data and Analytics grew by 31% between February to March 2020, receding during the summer months but then grew >100% from October 2020 into Q1 2021.

3. As the pandemic progressed, how did the behaviors and activities of corporate treasurer’s change?

Moving on from ‘Phase 1’ (above) and heading into ‘Phase 2’, which we can place from mid Q2 through to Q3 and call the ‘Cash Phase’, many companies focused on cash preservation and extending their cashflow runway as far as possible. Companies focused on maximising all sources of liquidity, in some cases working with suppliers to extend payment schedules and expedite receivables as far as possible. Companies also drew down reserves and utilised credit facilities. We also saw Bond Issuance accelerate significantly especially in Q3.

4. What are the Data and App usage highlights from Phase 2?

In the Netherlands, from June to October 2020, we saw a notable pick-up in usage of Issuance and Credit-related data and analytics:

  • A 40% rise in usage of the New Issues Monitor – (app providing a comprehensive library of new issues covered by Thomson Reuters and supporting IFR).
  • A more than 250% jump in usage of Starmine Credit Risk analytics and data
  • A 25% rise in usage of the Fixed Income All Quotes app

At the same time, there were also further significant changes in usage of apps and data related to the financial health of the supply chain and the corporate ecosystem in general:

  • Income Statement: Up 116%
  • Balance Sheet: Up 72%%
  • Key Ratios: Up 160%
  • Cashflow: Up 175%

5. How do you see the behaviors and activities of corporate treasurers changing as we move into a recovery mode from the pandemic?

If we identify Phase 3 as the ‘Recovery Phase’, which focuses on positioning and planning for a return to normality, or at least a new normal, our usage data suggests that many companies continue to focus on bond issuance and refinancing in order to take advantage of current lower yields. It’s notable that issuance of US$ denominated debt by non-US companies has been particularly strong in the first quarter of 2021.

There are distinct trends apparent in the usage data for our issuance-related Data and Analytics apps, in particular:

  • DCM Pricer – usage is up 21% from November 2020 to March 2021 (a custom bond calculator designed to build new bond issues and price them for the primary market)
  • Debt Structure app – usage is up 20% between November 2020 and March 2021
  • New Issues Monitor – usage is up 52% from November 2020 to March 2021 (New Issues Monitor provides a comprehensive library of new issues covered by Thomson Reuters and supporting IFR).

As countries navigate out of the pandemic, we can also see that ESG is firmly back on the agenda, with usage of our ESG apps and data rising strongly as we move deeper into 2021. For much of the pandemic period many companies focused on survival, but a rapidly developing global sustainability landscape is contributing to a significant shift towards adopting and ESG standards and behaviours across the corporate sphere.

Globally, ESG Data and Analytics Usage has grown 93% between Dec 2020 and March 2021, higher than the pre-Covid-19 peak.

  • Across EMEA, this was up 78% in the same period.
  • In the Netherlands, although below the global and EMEA percentages, ESG Data and Analytics usage was still up 35% in the same period.

Looking beyond Covid-19, conversations with our corporate treasurer clients have revealed an appetite for greater visibility and predictability when it comes to cash and liquidity management. Aligned to this, is a desire for increasingly accurate forecasts and risk analysis regarding projected future cashflows. Hedge accounting and hedge effectiveness tools also feature strongly in these conversations.

Furthermore, automation to support more robust and frequent analysis and reporting, as well as a comprehensive enterprise-wide view of cashflow, risk and liquidity, are also areas of growing interest which are going to feature more in the post-pandemic landscape.

Finally, ESG data consumption has recovered and is now above pre-Covid-19 peaks. This trend is likely to continue on its upward trajectory, becoming systemically more prevalent than it was pre-pandemic, given the rapidly evolving regulatory and demand led factors which are driving an ever-greater focus on sustainability. We recently hosted an event with the Association of Corporate Treasurers on treasury ESG roles and responsibilities which you can watch on-demand here.

6. How can corporate treasurers gain access to Refinitiv’s market-leading data and navigate current and future volatility?

Serving more than 40,000 institutions in approximately 190 countries, Refinitiv provides advanced data and technology to help corporate treasury teams make critical decisions with confidence. Our corporate treasury solutions help deliver accurate and relevant data, tools and analytics that can be accessed easily and intuitively – advancing your end-to-end workflows and ensuring seamless integration with your entire treasury management eco-system.

To find out more, speak with our experts by completing your details here.

Read more about Refinitiv, an LSEG Business here.

 

Refinitiv Corporate Treasury Data Insights | April 2021

21-04-2021 | treasuryXL | Refinitiv |

Andrew Hollins, Director of Corporate Treasury Proposition at Refinitiv, brings you the April 2021 round-up of the latest Corporate Treasury Data Insights. We will learn about what an increase in inflation will mean for treasurers’ FX hedging plans – and how best to protect your company’s position. Moreover, an update is provided on the Suez Canal traffic jam, and the impact on trade flows, freight movement and prices in the coming months. Plus, some insights on metal prices, ESG, LIBOR and mobile FX trading are shared.

Are inflation fears justified?

While expectations of inflationary pressures have risen significantly over the past six months, reflected in the chart above, the market points to moderating price pressures in the medium-term as revealed by the breakeven yield curve for inflation linked bonds.

Expectations of an inflation spike in the U.S. and elsewhere, perhaps peaking in 18 months to two years, are likely to impact treasurers’ FX hedging plans.

Take the best performing G10 currency so far this year – GBP. While the outlook into H2 2021 and beyond remains uncertain with possible Brexit-linked fallout and a potential separatist supermajority in the Scottish elections on 6 May, continued success on the vaccine front should deliver the dividend of an accelerated economic recovery in the UK.

FX hedging strategy

Corporates with FX exposures may consider a Forward Extra as part of their hedging strategy – an FX option which protects from downside risk but also allows for some upside gains.

Treasurers can use Refinitiv Eikon to manage currency exposure:

  • Price a Forward Extra using the FX Options Calculator (FXOC), employing key events like the Scottish elections in May as reference points.
  • Analyse volatility relative value using Currency Performance (FXPT).
  • Analyse volatility skew and an implied probability distribution chart in FX Volatility Explorer (FXVE).
  • Keep a close eye on inflation forecasts with Reuters Polling (POLLS), which forecasts a rise in U.S. inflation to 2.4 percent for the year until March 2021, and Rates Views Inflation Screen (RVIN) to monitor breakeven rates.

Emerging market currencies and stocks struggle

While vaccine progress is supporting the position of both GBP and USD, emerging market currencies are telling a different story.

Steering the post-pandemic recovery

Reuters newsmaker with Christine Lagarde, President of the European Central Bank. After taking radical steps to combat the recession, global policymakers now face the task of ensuring recovery takes hold. Lagarde joins Reuters for an exclusive Newsmaker to discuss the best policies to prevent COVID-19 from scarring economies, how and when policy support might be withdrawn, whether rate setters might be facing a major shift in the inflation regime and the challenges that are unique to the euro zone.

Join the conversation.

Suez traffic jam clears, but what’s the impact?

Satellite data from Eikon’s Interactive Map, pictured below on 29 March, shows the Suez Canal blockage beginning to ease. However, treasurers should expect more volatility in the coming months.

The freight derivative markets for dry bulk carriers are seeing heavy traded volume in 2021 due to high volatility, potentially exacerbated by the Suez incident.
Data from the Baltic Exchange for the week ending 19 March 2021 show a record of 78,059 lots of Dry FFA (Freight Forward Agreement) traded, a record not set since 2008.

Will gold remain bullish in 2021?

Gold is seen as a hedge against uncertainty and hence we witnessed a drastic increase in pricing during the pandemic. However, will vaccine rollouts and stimulus measures cause this precious metal to bottom out?

Watch – Refinitiv Metals Outlook 2021: Gold

How Mercuria proactively manages commodities exposure

Mercuria is a global energy and commodity group, with business lines covering a diverse range of commodities trading, as well as large scale infrastructure assets. Discover how they manage exposures in FX, FI and commodities markets, as well as credit terms with trading counterparties.

Sustainability and ESG: what role should you play?

Today, no two treasury teams are alike when it comes to sustainable finance roles and responsibilities. However, will upcoming regulatory and political change result in clearer and globalised standards and benchmarks? And what should treasurers be watching out for?

Join us, the ACT and two leading treasurers from Page Group and Optivo next week to discuss these significant developments – and how treasurers can support future growth ambitions, sustainably.

LIBOR: What you need to know about fallback and transition data

To prepare for the oncoming LIBOR transition and IBOR reform, hear from Trang Chu Minh and Fausto Marseglia as they discuss fallback and transition data in relation to your bonds portfolio, and the main aspects of ISDA fallback rates.

Watch – Refinitiv Perspectives LIVE: The LIBOR Transition: Fallback & Transition Data

Refinitiv Corporate Treasury Newsbeat

Refinitiv’s Taking FX Trading Mobile: responding to the shift to remote working – with mobile trading apps predicted to be the most influential technology shaping the future of trading – Refinitiv is working with partners to develop a seamless end-to-end FX workflow, accessible by mobile app.

LSEG Automates $7bn Debt Capital Transaction: last month, London Stock Exchange Group (LSEG) successfully priced a landmark syndicated multi-tranche and multi-currency offering, raising  $7bn equivalent across nine tranches.

Key transaction steps were conducted on Flow, a digital platform driving end-to-end automation in primary debt markets, developed in partnership with Nivaura.

This is the most complex transaction to use a primary debt capital markets digitisation platform, and a milestone for LSEG, as its largest bond and first USD Reg S/ Rule 144A issuance. Find out more about the landmark transaction.

 

 

Invite Refinitiv Newsletter | Corporate Treasury Data

06-04-2021 | treasuryXL | Refinitiv |

Trusted by 15,000+ corporate treasurers, our Partner Refinitiv’s free monthly mail contains the latest Refinitiv data insights, must-read analysis and practical advice for Corporate Treasury teams. We dig into everything from Cash management, Market monitoring, Funding, Investments, Trading, Risk and Sustainable finance: supporting your workflow from start to finish.

Subscribe to their Corporate Treasury newsletter today to:

  • Receive expert analysis on marking-moving events
  • Keep ahead of industry developments and their impact on your team and business
  • Get exclusive access to our data-based insights and interactive charts

       REGISTER HERE

 

ACT Webinar – Sustainability and ESG: what role should you play?

31-03-2021 | treasuryXL | Refinitiv |

Webinar on April 22 at 12:30-13:15 BST

This webinar, in association with our Partner Refinitiv, will take place on Thursday 22 April at 12:30 – 13:15 BST.

Will upcoming sustainable regulatory and political change result in clearer and globalized standards?

Today, no two treasury teams seem to have a consistent view of their roles and responsibilities when it comes to sustainable finance. However, will upcoming sustainable regulatory and political change result in clearer and globalized standards and benchmarks? What should treasurers be watching out for? And what action should they take?

Join us for a practical discussion where we’ll outline the most significant developments coming our way – and how treasurers can respond effectively to protect P&L and balance sheets, supporting future growth ambitions.

Topics to be discussed:

Where we are today
  • When we say ‘Sustainable Finance’ and ‘ESG’ – what do we mean?
  • Various roles we see treasurers play today
  • Overview of the political and regulatory landscape
Opportunities to drive sustainable growth and leadership and solve for potential challenges
  • EU Taxonomy – impact of proposed changes and opportunities to be exported
  • Opportunity – Issuance of Green and Transition Bonds and how to stop brainwashing
  • Global ESG reporting and benchmark landscape
  • Carbon pricing
    – > What is happening and how to compare the performance of peers
    – > How to understand and report on Scope 2 and 3 emissions

       REGISTER HERE

 

[Developer Webinar] Instrument Pricing Analytics for Bond Pricing and LIBOR alternatives

10-03-2021 | treasuryXL | Refinitiv |

Webinar on March 30 at 10 am BTS

LIBOR is widely embedded in operating models and a transition to alternative rates will affect how many contracts are priced and risk managed.

Join this webinar where Refinitiv will showcase and demonstrate examples in Python. Register by entering your details by clicking the banner above.

Refinitiv will be using Instrument Pricing Analytics API to price:

  • Fixed Rate Bonds
  • Floating rate notes on new Risk-Free Rates

From a Quantitative perspective exploring: 

  • Impact of LIBOR transition on Bond Pricing & generating yield curves

 

The future of trading: The rise of data analytics in trading

11-01-2021 | treasuryXL | Refinitiv |

 

Redefining data: What is your strategy?

With more information available than ever, traders must find the right data, make sense of it, and ultimately take action.

 

 

With more information available than ever, traders must find the right data, make sense of it, and ultimately take action. Unstructured information, the explosion of alternative data, and the need for trusted sources makes an already daunting task even more complex.

 

In our second report with Greenwich Associates on the trading desk of the future we explore the data that will keep markets moving over the next 3-5 years. With an overwhelming 85% of those surveyed planning to increase spending on data management, the value of financial data is clearly increasing.

Alternative data tops the list of most important data types, but is only useful if traders trust the source. When it comes to issues of scale and trust, 41% of those surveyed will rely on large financial markets data aggregators. Finally, analytics to interpret existing, new and unstructured data are becoming as critical as finding the data itself.

 

The bottom line? Everyone needs a data strategy.

 

Download & Acces full report

 

 

Pinpointing oil and gas sector Risks

14-12-2020 | treasuryXL | Refinitiv |

The oil and gas sector is under greater regulatory scrutiny, with record fines for financial crime-related violations. How is robust and thorough risk screening helping companies across the industry to pinpoint and protect against a range of potential risks?
  1. Screening and related due diligence tools are essential in the oil and gas sector for pinpointing and exposing potential risks early in the game.
  2. In the highly regulated upstream industry of exploration and drilling, risks include sanctions violations, bribery, corruption, and environmental crime.
  3. Refinitiv’s World-Check Risk Intelligence database comprises over four million structured records, enabling robust and accurate screening of both entities and individuals.

The oil and gas sector has been on the receiving end of some of the largest regulatory fines on record in recent years. Our Expert Talk, Drilling down: Oil and gas supply chain risk, written by Refinitiv’s Renata Galvao, takes a look at the sector and its unique challenges.

One of the highest profile was the US$853.2 million levied in 2018 against Brazilian state oil company, Petróleo Brasileiro SA, under the U.S. Foreign Corrupt Practices Act in the so-called Car Wash bribery scandal. While figures such as these are eye-wateringly high, the reputational fallout of any association with financial or environmental crime can be far more devastating. It is therefore imperative that organizations operating in the oil and gas sector take adequate measures to screen for, and mitigate, the wide range of risks to which they may be exposed within often vast, global supply chains.

Oil and gas sector risks

Organizations in the oil and gas sector — whether they are involved in upstream, midstream or downstream activities — face a range of risks and challenges. The highly regulated upstream industry — incorporating exploration and drilling — paid the largest share of all settlements for breaching Office of Foreign Assets Control sanctions in the period 2011-2019. Many oil-rich territories are situated in jurisdictions characterized by political uncertainty, and consequently organizations must contend with high levels of risk relating to bribery and corruption.  There is also exposure to a number of hidden risks, such as those related to terrorism financing and engagement with armed rebel groups.

The midstream industry — including transportation, storage and wholesale marketing — also faces a range of risks, including the financial, regulatory and reputational fallout associated with accidents such as spills, explosions, and leaks. Environmental regulations governing such issues are stringent, with penalties including both fines and imprisonment where criminal charges are brought against negligent individuals. Moreover, midstream organizations using sea transportation must be able to verify the beneficial ownership of all vessels used, as any links to criminal activity such as smuggling at sea, the illicit transportation of contraband and narcotics, or human trafficking must be identified.

The downstream industry — refining, processing, marketing and distribution — in turn is exposed to significant third-party risk from both the upstream and midstream industries. Oil theft is becoming a growing concern, and therefore understanding the source of crude and the legitimacy of the product are fundamental areas of focus for this sector. Downstream companies are also subject to growing environmental controls, with ever-more stringent national regulations monitoring and restricting the levels of pollution that refineries are allowed to emit.

Mitigating risk in global supply chains

Given this vast range of potential risks, screening and related due diligence are widely regarded as key tools to pinpoint and expose potential risk early in the game.

Refinitiv’s market-leading World-Check Risk Intelligence database can provide invaluable support to compliance teams by enabling them to conduct robust and accurate screening of both entities and individuals. World-Check One, our essential screening platform, further offers a range of specific opt-in tools, including:

  • Media Check to enable targeted searching for negative news and web articles, both current and historical, relating to individuals and entities.
  • UBO Check, which allows users to identify the ultimate beneficial owners of entities and then screen them against World-Check Risk Intelligence on a single platform.
  • Vessel Check, which reveals potential risk related to sanctioned or embargoed vessels and sea ports.

Additionally, where heightened risk is suspected, our Enhanced Due Diligence reports deliver targeted insights into potential business relationships, enabling companies to form a holistic view of potential risk before entering a new market or beginning a new relationship.

By investing in the right screening tools and technology, companies in the oil and gas sector can pinpoint, expose and mitigate risk in global supply chains, and in so doing protect themselves from the ever-growing threat of severe financial, regulatory and reputational fallout that has dogged the sector in the recent past.

 

How does the FATF help fight financial crime?

01-12-2020 | treasuryXL | Refinitiv |

The Financial Action Task Force (FATF) plays a crucial role in the global fight against crime, corruption and terrorism through its Mutual Evaluation assessment. How has the FATF evolved since its birth 31 years ago, and what role does it play in anti-money laundering (AML) and countering the financing of terrorism (CFT)?

  1. The FATF is an intergovernmental body that oversees global efforts to combat money laundering and the financing of terrorism.
  2. To become part of the FATF group, a country must undergo a ‘Mutual Peer Review’ to determine its levels of compliance with FATF’s Recommendations.
  3. The FATF’s methodology change, introducing the Effectiveness Assessment, is yielding more accurate results of a jurisdiction’s levels of compliance with its AML/CFT global standard.

The FATF is an inter-governmental body that was established in 1989 by the G7 nations to combat money laundering. For the first 12 years, of its existence it was a little-known organization. However, it came to prominence after 9/11 when its mandate was expanded to include additional Recommendations to combat the financing of terrorism and the financing of the proliferation of weapons of mass destruction. Since then, the FATF mandate and Recommendations have been endorsed by different UN resolutions, and it has been transformed to adapt to different emerging threats. In 2008, after the global financial crisis, FATF’s role as an international standard policy-making body in AML and CFT was expanded by the G20. It was given the ‘soft power’ to generate the necessary political will to bring about legislative and regulatory reforms in countries.

The FATF Mutual Peer Review

Countries wishing to become members of the FATF group must commit to a ‘Mutual Peer Review’ system. This will determine the country’s levels of deployment and compliance with the FATF Recommendations, which have been set as the international AML/CFT standard. The FATF oversees these reviews in conjunction with different international members and observers such as the IMF, the World Bank, the OECD, and the European Commission.                                                                                       
In addition to the information received from the assessment team performing the review, the FATF Mutual Evaluation’s Effectiveness Assessment also considers information from the FATF team that visits the country being evaluated. The Mutual Evaluation team comprises highly trained experts drawn from FATF member countries and international bodies.

 

Recommendations focus on effectiveness

Until 2013, the results of the FATF review were largely focused on the technical implementation of the Recommendations into the local legislations. However, because of the high levels of money laundering (ML) and financing of terrorism (FT) globally, the FATF decided to enhance its methodology to focus more on effectiveness rather than just technical compliance. This revised methodology helped to produce the expected tangible results in the fight against AML/CFT. It shed light on many countries that had previously been evaluated, but who under the new methodology began to show serious weaknesses in the fight against ML and FT. This resulted in the number of countries and jurisdictions on the FATF Grey List — those who were placed under increased monitoring — to start growing.

The FATF Mutual Evaluation employs peer pressure from other countries, as well as bodies such as the IMF and the World Bank, which impels the assessed countries to act. Negative mutual evaluation outcomes not only seriously damage the reputation of the assessed countries and embarrass its governments, but might also generate replicated systemic risks of coercion by other international institutions such as the European Commission. And the new methodology is working. In recent years, the Effectiveness Assessment is yielding more accurate results of a jurisdiction’s levels of compliance with FATF’s AML/CFT global standard. Many jurisdictions are now finally realizing the coercive power of the Mutual Assessment.

New evaluation methodology

The fourth round of Mutual Evaluations from FATF continued the shift towards concentrating on how effectively regulations are deployed rather than mainly focusing on technical compliance and whether country laws and regulations are in place in accordance with the FATF Recommendations.

This can be very challenging for a number of countries in many sectors, including some that have previously been assessed to be complying with the standards before the introduction of this new evaluation methodology.

The pressure to ensure that legislation was changed and that industry sectors complied with the Recommendations was achieved by targeting the industry sectors that posed the highest AML/CFT risk. At least this was the case in the Middle East and Africa. The early years concentrated on the banking and financial sectors, including the capital markets. This focus was later broadened to non-banking remittances and payments organizations and money exchanges. This was followed by the insurance sector and so on.

Non-financial sectors under the spotlight

The last few years has seen Mutual Evaluation reports focus on the designated non-financial business and professions (DNFBPs) sectors — real estate, lawyers, accountants, gold and precious stone dealers, for example — that had been previously overlooked area by past evaluations. For example, the EU Fifth Anti-Money Laundering Directive, which came into effect in January 2020, further strengthened its AML/CFT legislation to fall in line with the FATF, when it included a number of new sectors.

The non-financial sector often has the misconception that AML/CFT regulations are solely for the banking and financial sectors. A key shortcoming identified by FATF across many jurisdictions in emerging markets is that DNFBPs are falling short of FATF expectations. Recent evaluation reports from several countries show that DNFBPs have less comprehensive, and sometimes limited or no understanding, of AML/CFT regulations and the risks that they are facing.

However, the new approach of measuring effectiveness rather than technical compliance might keep many countries’ institutions and companies to consider: “Are our sanctions and transactions screening just a checklist process, or do they show the real effectiveness of our AML/CFT risk process as defined by FATF?”