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foreign exchange AML compliance

Foreign Exchange: What You Need to Know About Anti-Money Laundering Compliance

foreign exchange AML compliance

Republished: Wednesday, November 30 2016, updated to reflect the latest industry news, trends and insights.

The foreign exchange market (also known as the currency market) is a complex and decentralized market where currencies are traded across the globe. This market also determines the relative values of different currencies. There are no clearing houses in foreign exchange; it is an over the counter market where brokers negotiate directly with one another.

Two key players in foreign exchange are central banks and commercial companies. Central banks frequently trade in substantial amounts and try to control supply, inflation, and interest rates. Commercial companies need foreign exchange to pay for goods and services and have a long term impact on currencies’ exchange rates. Currency conversion and trade allows businesses in one country to import goods from another country and pay in that country’s currency.

Other players in the foreign exchange market include hedge funds, investment management firms, retail foreign exchange traders, foreign exchange brokers, and money transfer companies. Western Union is a well-known provider of foreign exchange and has over 300,000 agents across the globe.  Another famous example of a foreign exchange company is Bureau de Change, a currency transfer company that offers low value foreign exchange for travelers in many international airports and tourist locations.

In foreign exchange, there is no single exchange rate. Instead, different prices are offered depending on the bank, market, and location. London is the biggest geographic trading center, and the London market price of a particular currency is most often the quoted price. According to the BIS Triennial Central Bank Survey, trading in the United Kingdom accounted for 41% of the market in April 2013, followed by trading in the United States at 19%, Singapore (5.7%), and Japan (5.6%). Trade has more than doubled since 2004 due in part to the increased trading activity of high-frequency traders and the emergence of retail investors. Trading in foreign exchange markets averaged $5.3 trillion per day in April 2013, which is up from $4.0 trillion in 2010.

Banks and other financial businesses that engage in global foreign exchange are generally required by international and national regulations to verify the identity of all of their clients. In order to verify identities, they gather the necessary information including name, date of birth, contact information, and applicable identity documents such as a passport, government ID, or driver’s license. Foreign exchange identity verification is required by anti-money laundering acts intended to help stop criminal organizations from profiting from their illegal activities.

GlobalGateway demo verification resultsIn order to ensure foreign exchange identity verification occurs in a timely and efficient manner, banks and financial institutions can use GlobalGateway from Trulioo as their eIDV solution. We offer identity verification in over 60 countries for on-demand cross-border verification, and we only use reliable and secure data sources.

Foreign exchange is an important global market that is growing daily. We understand how important risk-based procedures are and how they vary depending on location and business. We can help answer identity verification questions for any organization involved in foreign exchange.

Electronic identity verification helps your foreign exchange company:

  • Prepare a sound risk-mitigation process
  • Comply with applicable anti-money laundering regulations
  • Implement an eIDV that suits your business
  • Open accounts faster to start trading earlier
  • Save money with fewer manual verifications

IBFX trulioo case studies

Foreign Exchange Case Study: IBFX

Learn how IBFX streamlined their account opening process for China using GlobalGateway.

 

Disclaimer: Trulioo provides no warranty that the information contained in this document is accurate, up to date or complete and in no circumstance does such information constitute legal advice. Any person who intends to rely upon or use the information contained herein in any way is solely responsible for independently verifying the information and obtaining independent expert advice if required.

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