Forex trading, otherwise known as foreign exchange currency trading, is a global market that regularly trades the world’s currencies.
The decentralized exchange is considered the world’s most liquid market. Each day, the market sees an average trading volume of approximately $5 trillion.
However, over the past couple of years, governments have begun to regulate forex markets, placing an increased pressure on companies to boost their authentication measures.
Increased Regulation In Europe
On April 14, 2016, the European Union Parliament approved legislation what ended up having a widespread impact on many industries. The measure, known as the General Data Protection Regulation, drastically changed the steps that companies must take to protect sensitive information. Nearly two years after Parliament approved the measure, it went into effect on May 25, 2018. Companies who do not comply with the standard are subject to harsh penalties.
The GDPR has proved challenging for forex companies. These companies can no longer take information from one location to use it for a particular purpose, which they could do in the past. Essentially, what this means is that forex companies find themselves needing data to do things such as verify someone’s identity, something that is integral in a financial transaction. However, because of GDPR, companies can no longer access this information.
Additionally, GDPR has prompted an increase in sub-regulations. For instance, after Parliament passed the GDPR, they soon then issued a money-laundering directive that required verification from parties on both sides of a transaction. All parties now needed to confirm that they were, in fact, who they said they were. Furthermore, the EU lowered the threshold in which such verification was required. The previous limit was 10,000 pounds, although it is now much lower.
Customers immediately needed to be more diligent with their automation and identification while also requiring to find new ways to obtain the sensitive data necessary to do so. Furthermore, parties not used to conducting verification checks now found that they were required to do so, even though they did not have the tools, resources, or experience to perform such searches.
Working To Find A Solution
Failure to identify someone’s identity could prove crippling, especially when considering that many governments around the world have put regulations in place for KYC remediation. How can European companies meet KYC remediation regulations if they can’t access the data required to do so? Perhaps more importantly, how can companies ensure the integrity of markets when dealing with hundreds of thousands of international transactions?
Forex companies have recently been working with prominent security companies to find a way around this dilemma. One of the ways to avoid GDPR compliance issues is by making sure data remains local. Accordingly, authentication companies have been installing distributed networks that allow forex companies to complete identification checks in real-time. This prevents forex companies from having to store sensitive data, expediting the procedure in the process.
Automating ID Authentication And Identify Verification
The process of confirming an identification used to be extensive and burdensome. In some cases, companies needed to use paper identification forms and third-party security companies to verify such forms. Now, however, recent technological developments make it easier for forex companies and other parties to remain compliant with EU regulations.
For instance, companies can now use a 2D barcode scanner to verify an individual’s data temporarily. No longer do individuals need to provide hard copies of paper identification documents. These scanners utilize algorithms that protect biometric data from malicious tampering. This now helps make the verification process secure and convenient for all parties. This is just one example of the technology that is changing the landscape.
If you have yet to engage with or update your verification processes, now may be the right time to do so. First and foremost, regulation is not just occurring with forex companies in the European Union. It’s happening across the globe in multiple countries across numerous industries. For instance, experts soon expect regulation rollouts for the gaming industry, impacting countries such as:
Furthermore, the European Union also has made clear that they plan to keep rolling out regulations and directives, such as a fifth money laundering directive that is soon on the way. This directive should impact both mutual beneficial ownership and universal beneficial ownership. According to Charles Gaddy, co-founder of the Global Data Consortium, “that is the next level above what has to happen with enhanced customer due diligence.”
As governments continue to increase regulation, there will be more and more pressure on companies to boost and automate their ID authentication and identity verification. When it comes to verification measures, it’s easier to be proactive rather than reactive. The sooner you update your verification system processes with the latest technology, the easier it will be to keep up with shifting regulations.