Trending: The Future of Foreign Exchange

 In Anti-Money Laundering, Global RADAR, Trending

The Foreign Exchange market, also known as ForEx, is the over-the-counter global currency trading market that entails the sale, purchase, and exchange of all forms of international currency. These exchanges can occur in a variety of locations, from airport kiosks, to large-scale corporations in virtually ever country across the globe. The ForEX industry has grown exponentially of late, as online currency and commodity trading has become quite popular over the past several years. The ForEX market is now the largest financial market in the world in terms of trading volume, with average daily volumes falling in the trillion-dollar range, assisting international trade and investment activity immensely by enabling non-complex currency conversion. With figures skyrocketing, ForEx brokers and investors have invaded the space, altering the market’s structure due to this increased participation.

Along with the modifications seen in this regard has come a change in the role compliance plays on the industry. International bodies have recently implemented multiple regulatory changes aimed at enforcing severe fines and penalties for regulatory failures surrounding the market. Brokers operating in the ForEx market must now follow stern anti-money laundering (AML) policies and procedures in order to ensure the safety of their clients’ assets. These developments have led to an increase in transparency within the market, increasing financial security for all parties involved significantly. Additional changes are expected to take place as the market continues its growth, with more strict oversight from international jurisdictions being anticipated in the years to come. While initial opinions on the subject had differed, the current consensus of maintains that these regulatory changes are a positive development for this industry, due in part to the credibility created for regulated brokerages that actively follow these procedures. Clients will also see the benefits of this regulation, as their funds will continue to be better protected with each piece of legislation that is passed.

Many in the financial sector foresee new products and platforms emerging that will draw even greater appeal to the ForEx market. The number of platforms and services seen today has risen in response to the success of the market, and vice versa. It is now easier than ever before to gain entry into this market, and this ease will likely only increase as financial technology continues to expand in the near future. The World Finance article “How to prepare for the future of forex”, cited in BSA News Now on Thursday, August 17th, 2017, notes that “technological advancements have reduced trading costs, increased the speed with which transactions take place, and improved transparency” overall (Lambouris, 2017). In addition, the article’s writer Stavros Lambouris, CEO of one of the global leaders in online capital markets trading, HYCM Europe, reports on the impact of technology on electronic trading activity within the ForEx market. Lambouris states that electronic trading now represents as much as 70% of daily turnover within the market, an increase of over 40% from just ten years ago. Much the same as what it has been seen in the realm of regulatory compliance, algorithms and advanced software have already hit the ForEX scene, aiding and advising potential traders on trades to pursue, and trades to shy away from. The writer also notes that this software “can also be programmed to automatically execute trades on a live account, making the whole process more efficient” (Lambouris, 2017).

The greater reliance being placed on automation in 2017, specifically of the mobile nature, has seen organizations operating within the industry catering their services directly to the perceived needs of tech-centered clients. Mobile trading apps are now available and becoming more prevalent as each day passes, coupled with developments seen in online payments for facilitating trading activity. Lambouris also cites another positive of increased technology within the market – the continual introduction of new products. He writes that novel products can place “brokers in an advantageous position as they are able to frequently increase their client offerings and therefore stay ahead of the competition” (Lambouris, 2017). By adopting the latest technologies and all that they have to offer, brokers and their clients alike will be offered the most efficient trading experience imaginable.

As in most evolving ventures, there are some potential downsides to incorporating modern technologies and the subsequent competition created by them. These effects can include the steering away of potential participants who may lack the resources needed to succeed in the market, and the possible changes that extensive growth can pose to the market’s liquidity. Nevertheless, the opportunities presented through investment in the Foreign Exchange market are undeniable, and as financial transparency and technology continue to create a positive impact in their own rights, the growth of the market will undoubtedly continue to rise in the years to come.   

 

Weekly Roundup

 

Global RADAR Launches Potent AML Tool

Yahoo Finance published a press release on August 16th acknowledging the launch of Global RADAR’s latest innovative solution that will “add much needed relief to the rigors of regulatory compliance related to Know Your Customer (KYC) while improving the customer experience” (Yahoo, 2017). The groundbreaking release of Global RADAR Sanctions Search, as the product has been coined, has been highly anticipated by financial institutions (FI’s) searching for a more efficient way to manage their compliance requirements and identify individuals that represent elevated risks to their organizations. The high-performance solution offers unparalleled matching capabilities, coupled with the ability to perform Google searches to hone in on relevant matches and information while reducing the amount of unrelated data encountered.

Global RADAR Sanctions Search, also known as “Global RADAR Lite”, is supported on all devices – including mobile phones – and requires no download or system integration. The cloud-based solution utilizes the top published global Watch, Sanctions, and PEP lists to guarantee premium screening results for FI’s. In a statement on the release of the solution, Global RADAR founder and CEO Dominic Suszek noted that his product was created with the intent to address two of the more problematic areas of regulatory compliance – Watch List Screening and KYC. Suszek also stated that “The lack of integration with existing systems and high costs have been a barrier too long.  Our goal is to arm all companies with a versatile and affordable tool which addresses these challenges” (Yahoo, 2017).

The Global RADAR Sanctions Search program can be accessed at https://search.globalradar.com.

Who’s the Most Lenient EU Country on Money Laundering?

With the frightful terrorist attacks seen in Brussels in 2016 leading to profound injury and death totals, one would think that the country of Belgium would be taking strong measures to ensure that no such activity would occur again. It seems however that little has been done in this regard, as “Belgium’s anti-money laundering (AML) measures have been called into question recently, as new research reveals the country is the most lenient European Union state towards those found guilty of the crime” (White, 2017). Money laundering activities are often used to help fund terrorist groups, thus by issuing the proper sentencing for these crimes, it is possible that future terror activity could potentially be reduced or avoided. However, the maximum sentence for money laundering crimes in Belgium is just 5 years imprisonment. To put this into perspective, numerous countries across the globe (many of which are less exposed to terror activity and risks of this form of financial crime) have statutes in place that sentence money launderers to double-digit years in prison.

Although Belgium does have separate sentencing procedures for those found guilty of terror financing, these cases are often much more difficult to prosecute than money-laundering cases. Belgium’s somewhat-laissez faire stance to money laundering enforcement is surprising given the EU’s continuing efforts to coordinate uniform AML legislation. Global RADAR recently reported on the passing and implementation of the EU’s Fourth Anti-Money Laundering (AML) Directive. 17 countries reportedly failed to implement the new rules before a set deadline; Belgium was one of these countries.

KPMG Issued Hefty Fine By SEC

On August 15th, the Securities and Exchange Commission (SEC) announced that prominent professional services company KPMG agreed to pay more than $6.2 million in order to settle multiple charges against them. In its statement on the charges, SEC officials stated that KPMG “failed to properly audit the financial statements of an oil and gas company, resulting in investors being misinformed about the energy company’s value” (SEC, 2017). The SEC’s statement also discusses the components that factored into the decision to charge the organization. According to the SEC’s order, “KPMG was hired as the outside auditor for Miller Energy Resources in 2011 and issued an unqualified audit report despite grossly overstated values for key oil and gas assets” (SEC, 2017).

KPMG reportedly failed in assessing the risks associated with taking on Miller Energy – a company charged with accounting fraud in 2015 – as a client, as well as failing to properly staff the audit. KPMG also failed in considering data known to them that should have raised doubts into the true value of the company. Although KPMG neither admitted nor denied the SEC’s claims, they agreed to creating a system for improving their own quality control levels. Additionally, KPMG also agreed to pay the fine of $4,675,680, as well as hundreds of thousands of dollars in interest and a $1 million penalty.

Citations

“Global RADAR Launches a Cloud-based Watch List and Sanctions Screening Tool.” Yahoo! Finance. Yahoo! 16 Aug. 2017. Web. 

Lambouris, Stavros. “How to Prepare for the Future of Forex.” World Finance. 16 Aug. 2017. Web.

“SEC Charges KPMG with Audit Failures.” U.S. Securities and Exchange Commission. 15 Aug. 2017. Web. 

White, Lucy. “Belgium Is the Most Lenient EU Country on Money Laundering.” City A.M. 14 Aug. 2017. Web.

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