Recent developments in the Middle East have triggered sharp movements in global energy and commodities markets, while governments continue to expand sanctions programmes in response to evolving geopolitical risks.
Periods of geopolitical instability typically create two immediate compliance challenges for financial institutions: increased market volatility and rapidly evolving sanctions regimes. Regulators recognise this overlap but still expect firms to maintain strong oversight of trading activity, even as trading volumes and execution speeds continue to increase.
For compliance teams, this means monitoring trading activity while also identifying potential sanctions exposure, often during periods when market volatility makes unusual behaviour harder to spot.
Why do regulators pay closer attention to financial trading activity during times of market disruption?
Regulators typically increase scrutiny during periods of uncertainty. Rapid price movements and higher trading volumes can create opportunities for suspicious behaviour, including market manipulation or trading activity involving restricted entities. Surveillance frameworks need to identify unusual trading patterns while giving investigators enough context to assess potential risk.
COVID-19 market volatility
During the COVID-19 pandemic, global markets experienced significant volatility as lockdowns and economic uncertainty drove sharp movements across equities, commodities and bond markets. Regulators warned that conditions like these can create more opportunities for misconduct, including insider trading and market manipulation.
Russia’s invasion of Ukraine
Following Russia’s invasion of Ukraine in 2022, volatility in commodity markets, particularly metals and energy, contributed to a short squeeze in the nickel market. The crisis forced the London Metal Exchange (LME) to suspend trading and cancel billions of dollars in trades. Regulators later fined the exchange £9.2 million for failing to maintain adequate market controls during the event.
At the same time, sanctions enforcement increased. In 2026 the UK’s Office of Financial Sanctions Implementation (OFSI) fined Bank of Scotland £160,000 after the bank processed transactions involving a designated Russian individual subject to UK sanctions. In 2025, OFSI also issued a £300,000 penalty on Markom Management Limited for facilitating a payment linked to a sanctioned Russian individual. Herbert Smith Freehills was also fined £465,000 after its Moscow office made payments to Russian banks that were subject to asset-freeze sanctions.
Tensions in the Middle East
Recent volatility linked to developments in the Middle East has again drawn attention to the resilience of trading systems. In response, ASIC issued a Market Integrity Update highlighting the importance of resilient trading infrastructure and effective monitoring of market activity during periods of market stress.
Rising regulatory expectations during volatile markets
These examples reflect a broader regulatory trend. Authorities across the US, UK and Australia continue to strengthen expectations around market surveillance and financial crime monitoring during periods of market disruption.
For financial institutions, this means ensuring they can detect suspicious trading activity quickly and investigate alerts effectively when markets become volatile.
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What capabilities do modern financial surveillance frameworks need during times of market disruption?
Monitoring trading activity becomes significantly more difficult during periods of market volatility. Compliance teams must assess trading behaviour, sanctions exposure and increasingly automated trading activity at scale, often across multiple venues and asset classes.
The table below highlights common surveillance challenges and how SteelEye’s capabilities help firms manage them.
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Issue
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Pain point
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With SteelEye
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Monitoring trading behaviour across markets
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Trading activity takes place across multiple venues, asset classes and jurisdictions. Compliance teams often struggle to monitor large volumes of order and execution data and detect suspicious trading patterns quickly.
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Trade Surveillance enables firms to analyse order and trade data across markets, helping compliance teams detect patterns associated with market manipulation and unusual trading behaviour.
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Oversight of automated and high-volume trading activity
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Automated trading strategies can generate significant order activity in very short timeframes. Without appropriate monitoring tools, potentially problematic trading behaviour can be hard to identify.
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Trade Surveillance allows analyses order-level data and behavioural patterns, allowing firms to monitor high-volume trading activity more effectively.
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Screening activity against sanctions data
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Sanctions lists can change quickly, particularly during periods of geopolitical tension. Compliance teams must continuously screen trading activity, counterparties and holdings against updated global sanctions lists.
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The Trade Surveillance sanctions capability can help identify trading activity involving sanctioned entities after the fact. In addition, FundApps Sanctions enables firms to screen holdings and counterparties against global sanctions lists before transactions take place.
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Connecting data during investigations
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Trade data, communications and sanctions screening results are often stored in separate systems. Investigations can become slow and resource intensive when analysts must manually connect these datasets.
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Integrated Surveillance brings together trade data, communications and contextual information in a single workflow, allowing compliance teams to investigate alerts more efficiently.
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Managing large volumes of false positives
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Traditional surveillance systems can generate large numbers of alerts that require manual review, placing pressure on compliance teams and slowing investigations.
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The platform can bring additional context by analysing trading activity alongside communications and other data sources, helping teams prioritise alerts and reduce false positives.
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Maintaining clear audit trails
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Regulators expect firms to demonstrate how alerts were investigated and how decisions were made. When investigations occur across multiple systems, maintaining consistent documentation can be difficult.
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Surveillance and case management workflows allow compliance teams to track alerts, document investigations and maintain a clear audit trail for regulatory reporting.
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Firms Need to Connect Trade Surveillance, Communications Monitoring & Sanctions Screening
Periods of geopolitical instability make one thing clear: market surveillance and financial crime controls cannot operate in isolation.
Trading behaviour, trader communications and sanctions exposure increasingly intersect, particularly during periods of market volatility. When these signals are reviewed separately, investigations become slower and risks harder to identify.
As markets continue to react to geopolitical developments, firms must ensure their surveillance frameworks can connect these signals effectively. The ability to view trading activity, communications and sanctions exposure together is becoming an increasingly important part of maintaining market oversight.
SteelEye is here to make this increasingly complex process simpler. Find out how today.
