Managing KYCs | Forex Regulation

Procedures for brokers

Banks, brokerages, and other financial service organizations have an essential role in identifying money laundering and other financial crimes. Know your customer (KYC) and anti-money laundering (AML) regulations require brokerages to verify the identity of all their clients and ensure that they don’t accept money that was obtained illegally.

KYC and AML activities are often time-consuming for brokers and frustrating for new clients. The verification process and related due diligence can be especially slow if you work with international clients. However, the right tools can help speed up the process so you can onboard clients more quickly.

Manual verification

Many tools exist that promise to automate the KYC process. KYC automation tools often have templates that the system compares to your clients’ uploaded documents. The tools can spot the differences between the template and the uploaded documents that might indicate the documents are fake.

These tools can be helpful and speed up parts of the KYC process. However, there are a few problems with them. If the image quality on an uploaded document isn’t good, the system could flag it as a fake even if it’s legitimate. Additionally, templates may not exist for all the documents your clients will upload (this problem typically occurs with documents used as proof of address).

When documents don’t have templates or are flagged as fakes, your firm will still need someone who can conduct a manual review. Depending on how often you must complete a manual review, an automation tool may not be worth the cost.

Regardless of whether or not you choose to use such a tool, a client relationship management (CRM) system can help you manage the required documents and collect the information you need.

How CRMs help with KYCs

CRMs are an essential tool for the sales process. Because CRMs store and track data about leads and clients, they’re also ideal tools for KYC compliance.

CRMs for forex brokers can help you manage your KYCs by making a client’s compliance status clear, storing important information about them, and storing uploaded files related to them.

Clear statuses

Depending on your onboarding process, it may be easy for a new client to slip through the cracks – for a salesperson to believe a client’s documents are ready to review when they aren’t or for a compliance officer to be unaware that a client’s documents are submitted and ready for review. This oversight often happens when information about a lead’s status isn’t readily available to all necessary employees.

A good forex CRM should allow you to assign a status to each lead or client that identifies whether all of their KYC documents have been uploaded, reviewed, and verified. When all employees can see this status, the right employees will know when it’s their job to follow up with a client to upload documents or to review the documents the client has provided.

Client profiles

Depending on your regulatory environment, you may need to ask your client about specific financial experiences, employment, or investments. All of the answers to these questions can be stored in a client profile.

CRMs designed with forex and financial services in mind should make it easy to ask those questions and store the answers to them. It may allow you to upload a completed questionnaire to store as part of a client profile. Or, it may let you create a custom questionnaire within the system itself.

Robust client profiles help meet KYC and other regulatory requirements as well as help you better understand and serve your clients.

File storage

For proof of identity and proof of address, you’ll have to obtain copies of specific documents. Your CRM should make it easy to request those documents and store them with the client’s profile.

Look for a CRM that provides at least some cloud-based storage for files. Ideally, you’ll be able to set up a requirement in your system that prompts clients to upload specific types of files. Then, clients will be continually reminded that they need to upload those files whenever they log in to the client portal or trader’s room.

Complying with KYC and AML regulations is a necessary part of operating a forex brokerage. However, it doesn’t need to be difficult. With the right tools, you can collect and store clients’ documents so that you meet all the legal requirements while still offering a fast onboarding process that keeps your clients happy.

Want to know more about how a CRM can help your brokerage? Read 11 Features in the Best Forex CRMs.