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Forex Regulations – A systematical approach




As of April 2019, the daily trading volume on foreign exchange markets is an average of $6.6 trillion. Given the substantial amount involved and the inherent risk of money laundering, adherence to strict Anti-Money Laundering (AML) procedures is imperative for forex companies. Ensuring compliance in a manner that is cost-effective, efficient, and customer-friendly is a challenge faced by foreign exchange operators.


While specific regulatory requirements vary across jurisdictions and industry segments, there are general best practices that can guide money services businesses (MSBs) in avoiding increased fraud and risk profiles. Key measures include stringent controls on account creation, transaction monitoring, reporting, system management, and security. Additionally, possessing appropriate licenses, reliable financial control systems, and methods to protect funds are crucial elements.


The account creation process is a pivotal point in the customer journey for forex operators. A secure, quick, and seamless experience contributes to efficient onboarding and customer retention. Balancing customer expectations with the need for effective customer due diligence is essential. Proper identity verification through Know Your Customer (KYC) processes, fraud checks, risk checks, and watchlist checks is crucial in preventing illicit activities.


A risk-based approach, considering factors such as jurisdiction, transaction types, volume, value, and beneficial ownership, allows for varying the level of scrutiny based on the risk profile. Automated digital onboarding systems enable customers to onboard conveniently while ensuring the deployment of appropriate identity verification measures.

Once trading begins, monitoring and accounting for transactions are vital. The New York Fed recommends accurate recording of trading transactions, correct execution of payment instructions, timely information provision, and quick reconciliation of accounts. Event-based or pattern-based triggers can be implemented to identify unusual activity, requiring further investigation or the filing of a Suspicious Activity Report (SAR).


Ethical conduct is crucial in forex compliance, and it starts at the organizational level. Hiring practices, clear policies and procedures, ongoing training, and internal audits contribute to a secure and compliant operation. Trustworthy forex companies that prioritize customer experience and demonstrate ethical behavior are better positioned to thrive in the growing market.


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