Forex | The Use of Identity Verification

In addition to safeguarding clients, forex brokers have legal and regulatory obligations to uphold fraud prevention and verification measures. Furthermore, they must ensure that they can confirm their clients’ identities per Know Your Customer (KYC) requirements. Building consumer trust, safeguarding the brand from harm to its reputation and finances. Adhering to anti-money laundering requirements depends on financial regulations such as KYC and AML. To draw in new customers, profitable forex brokers need to streamline the registration process and improve the overall user experience.

The investing industry is changing due to emerging technologies and digital transitions, which is opening up new prospects. The FX market, which has a $6.6 trillion daily trading volume, is one of the developing industries that has aided in money transfer. The forex market is attracting more and more clients every year, and it is acknowledged as the most active platform for making investments. 

An Insight to Brokerage Firms

Financial organisations that assist individuals in buying and selling stocks are brokerage firms. They serve as an intermediary between the vendor and the customer. Individuals have three options for making investments: online, over the phone call, or using a smartphone, depending on the sort of brokerage business they select. Typically, brokerage houses charge for each purchase or sell order. Online brokerage firms could not even have a physical location. Since they solely use the internet to do business, companies are more vulnerable to cyberattacks. 

ID Verification – A Basic Requirement for Brokerage Firms

Brokers get personal data from their clients to abide by government regulations. Financial and tax identification numbers could be included. Brokers are required by rules enforced by Self-Regulatory Organisations (SROs) to obtain information from both new and existing customers. They must also be aware of who they are interacting with and if they are transferring money between the correct parties to comply with KYC and AML regulations. For brokerage firms, ID verification is essential for the reasons listed below:

Compliance

The FINRA suitability and SRO rule states that a broker must have a good reason to think that a certain security is appropriate for a customer before recommending that they buy or sell it. 

To Fulfil Record-keeping Requirement

Brokerage firms are required by SEC rules to keep a record of every account they have with a specific customer. Name, address, DOB, and information from a government-issued ID should all be covered. Brokerage businesses must first confirm all of this information to be certain about all the records. Here, Identity verification plays a pivotal role. An online address verification solution is necessary for brokerage businesses to ensure that the individual is not misrepresenting where they live. Brokerage companies need to use online ID verification not only to thwart fraud but also to comply with SEC compliance requirements for record-keeping. Brokers are required to make a sincere attempt to gather and confirm client information. 

Combat Terrorist Financing

The primary objective of money laundering is to conceal black money, cash obtained through illicit sources, or the money trail. Criminals frequently use financial institutions to launder black money abroad for a variety of uses, including terrorism financing. Brokerage businesses may also fall prey to this. Therefore, brokerage firms must be aware of who they are working with and where the transaction is happening in order to comply with the Counter Financing of Terrorism (CFT) regulations. 

A Step-by-Step Guide to Forex Trading Verification

The Forex trading process for businesses requires effort and sound industry and compliance knowledge to verify a Forex trading account following steps are taken into the processes:

Step 1: Select Broker and Complete the Registration Process

The selection of a trustworthy forex broker is the first step towards validating a forex trading account. Since there are a lot of forex brokers on the internet, it’s critical to conduct customer due diligence and pick one that is overseen by a respectable financial body.

After selecting a forex broker, individuals must finish the registration procedure. Giving personal information like their name, address, and phone number is typically required for this.

Step 2: Send in Proof of Identity

Once the registration process is over, individuals will need to turn in their identity documents. In the process of verification, this is the most important phase. A government-issued or authorised ID, such as a passport, driver’s licence, or national ID card, will be required.

The identity document must be current and unaltered. It must also be readable and clear. Proof of address verification, such as a utility bill, statement from the bank, or any other document with name and address, will also be required by the forex broker.

Step 3: Wait for Verification

Waiting for the account verification, and once the processes are completed by the IDV service provider and the individual shows no risk, the access is granted and confirmed as soon as possible. If any sign of risk is shown, access to the account is denied, and the individual is further grown through the risk assessment or stronger verification processes.

Step 4: Start Trading and Continuous Monitoring

Individuals can begin trading FX after their account has been validated. The Forex broker will get access to the trading platform along with all of its tools and resources. It’s crucial to keep in mind that there are risks associated with forex trading. Therefore, to safeguard the business’s financial assets and reputation, the individual is continuously monitored for future risk and employs risk management techniques.

Why KYC/AML Compliance is Important for the Forex Industry?

The forex market offers great investment opportunities and is a very profitable and dynamic industry. Since many investors now primarily conduct business through forex businesses, there is a greater need than ever for oversight and regulatory actions. Significant dangers of money laundering and terrorist financing not only lead to financial crimes but also harm the industry’s reputation as a whole. Strong KYC procedures must be put in place right now to ensure a flawless customer experience whilst authenticating people prior to onboarding. The KYC system needs to be effective enough to use facial recognition and document verification to authenticate investors. This is the only way to make forex trading companies safe and transparent for investors.

Moreover, the industry must incorporate strict AML screening procedures into its system. Global regulatory agencies, including the EU, FATF, FCA, and Interpol, have amassed a substantial amount of information about money launderers in the form of Politically Exposed Persons (PEP) lists and sanctions, which need to be taken into account during the onboarding process. By cross-referencing user data with these lists, forex companies can prevent money launderers from accessing their systems.

How Shufti Can Help?

Shufti offers customised KYC services for the currency market, supported by its exclusive identity verification services driven by artificial intelligence. With an industry-best 30–60 second processing time, Shufti’s Digital KYC allows forex merchants to complete each transaction quickly. We utilise API and SDK connectivity to seamlessly integrate with all of the Forex industry’s legacy systems. Simultaneously incorporated into our customer’s transaction platform, we can handle a huge number of verifications simultaneously. Thus the size of our Forex client’s franchise network won’t be a problem. With Shufti’s KYC services, our forex clients will be able to conduct:

• Identity Verification
• Documents Verification
• Risk Assessment 
• AML Screening

Modern KYC and AML procedures from Shufti can assist forex trading firms in implementing improved consumer monitoring checks. KYC systems, which use facial recognition, liveness detection, and document verification to authenticate users, are driven by advanced AI and machine learning algorithms.

To facilitate our Forex clients’ digital identity verification, we offer video KYC verification in addition to basic KYC checks. Customer data records will be readily available for future use. If transactions are completed on someone else’s behalf, this data can be verified again.

Shufti’s AML screening system searches data against 1700+ sanctions lists maintained by international watchdogs to identify fraudsters and criminals. With a 99.97% accuracy rate, the system can produce results in less than a second, securing forex trading companies at its finest.

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