Overcoming regulatory and operational challenges

For global FX firms, one of the primary challenges is keeping up with ever-changing regulatory requirements across different jurisdictions. Ensuring the client experience isn’t negatively impacted in the process adds a further layer of complexity.

Before partnering with ComplyAdvantage, Monex’s payment screening process was not efficient. The company had an over-reliance on manual efforts and used generic rule sets that failed to address the specific needs of its diverse client base. This lack of customization and automation resulted in operational inefficiencies, leading to delayed transactions and an increased risk of overlooking potential matches that could indicate fraudulent or suspicious activities. 

We were using monitoring rules that were not tailored to our client base. This meant the process felt like a tick box exercise, rarely producing ‘real’ alerts that indicated suspicious behavior.

Dean Smith, Financial Crime Manager & DMLRO at Monex Europe

As the company expanded into new territories and diversified its product offerings, Monex needed a solution that could scale and continuously update without additional development work. 

Enabling a transition to automation

Monex decided to partner with ComplyAdvantage for customer screening and transaction monitoring due to the seamless initial integration that ComplyAdvantage offered. Having a single provider for both services meant the company benefited from a unified point of contact at ComplyAdvantage, accelerating the process of iterating and updating operational processes in line with the evolution of Monex’s products and offerings.

As our company has expanded into new countries and regulatory requirements have changed, ComplyAdvantage has scaled its support to meet our growing needs.

Rheann Randall, Projects Manager, Compliance at Monex Europe

Since implementation, Monex has transformed its transaction monitoring and customer screening approach. Where the process once involved extensive manual effort, stretching over undefined periods, ComplyAdvantage enabled a transition to automation that allowed Monex to get up and running with its new solutions within two weeks. The ability to quickly adapt and implement necessary transaction monitoring rules means Monex can now manage its compliance obligations and mitigate financial crime risk more effectively than ever. 

Enhanced operational workflows

Monex’s integration of ComplyAdvantage’s customer screening and transaction monitoring solutions has transformed its approach to compliance, thanks to the flexibility to tailor rules and thresholds. This customization has led to a noteworthy decline in the rate of false positives encountered by the compliance team – a pivotal improvement highlighted by Projects Manager, Compliance Rheann Randall. 

Monex attributes this success to several key factors, including the precise customization of screening lists to better meet jurisdictional regulatory expectations and the capability to refine adverse media screenings, focusing on particular categories of relevance. The solutions also demonstrate an “enhanced proficiency in recognizing Chinese names,” a feature that helps increase screening accuracy. 

Randall also highlighted the system’s efficiency in streamlining alert management. She emphasized the platform’s comprehensive design, consolidating pertinent data for payment and client activities to facilitate a faster response to alerts.

The transaction monitoring platform contains all the necessary information related to the payment and client activity needed for an analyst to manage an alert. This has helped reduce the time taken to resolve alerts.

Rheann Randall, Projects Manager, Compliance at Monex Europe

Monex’s Financial Crime Manager & DMLRO, Dean Smith, also noted that the partnership had significantly improved their handling of alert escalations. Where responses to critical issues might have previously followed a less structured path, ComplyAdvantage’s solutions provided a framework that streamlined these processes, “ensuring urgent issues were addressed and resolved with increased efficiency and effectiveness.” 

A strategic partnership

Monex’s extended partnership with ComplyAdvantage has been vital to its growth and success. The tailored support from ComplyAdvantage’s technical and customer success teams and the platform’s ability to segregate data and workflows for different jurisdictions have played a crucial role in Monex’s expansion into new markets and compliance with diverse regulations. 

ComplyAdvantage has played a significant role in supporting Monex’s expansion into countries such as Canada, Luxembourg, Spain, and Singapore. Each jurisdiction has different screening and monitoring needs and requirements, which we have been able to quickly meet thanks to the customizability of ComplyAdvantage.

Dean Smith, Financial Crime Manager & DMLRO at Monex Europe

When asked why Monex has chosen to stay partnered with ComplyAdvantage since 2018, Smith pointed to the platform’s reliability and the opportunity for continuous development. With “virtually zero downtime,” the platform has supported Monex’s operations seamlessly, allowing it to expand confidently into new markets, including ventures such as securing an e-money license in the UK. This expansion required a sophisticated transaction monitoring system capable of adapting to new types of payments and managing higher volumes without the need for increased staffing, “something our previous vendors wouldn’t have been able to do.” 

The post Monex achieves global growth with enhanced customer screening and transaction monitoring appeared first on ComplyAdvantage.

We caught up with founder Ariyo Raji to learn more.

Introducing Treegar

“Treegar is a mobile application working to democratize investments in Africa. Prior to our offering, the investment options available in the African market were limited, and the ones that were available were not diversified. As an investor, your options were generally restricted to the financial sector or fast-moving consumer goods (FMCG) sector. There was no access to the forward-thinking investment opportunities of big tech, the energy industry, or electric vehicle industry. 

“We changed this with Treegar. A lot of US investment mobile apps have blockers in place that make it difficult for Africans to use them. With Treegar, we have made the same investment opportunities that are available in the US available to the African investor market, without the need to provide information specific to US citizens, such as a social security number.” 

Keeping up with the global market

“We started Treegar because we wanted to provide a solution for Africans struggling to manage their finances due to the rising inflation rates. Nigeria is one of the biggest economies in Africa but our inflation rate and Naira to USD exchange rate is extremely volatile. Even shopping on Amazon is near impossible because the exchange rate is so high.

“We saw this as a major problem that needed solving, so I began to look for ways to make more money myself – not in Naira but in a more stable currency that is acceptable across the world. This is when I started to use a lot of investment apps and couldn’t believe that there were only six companies listed on the Nigerian stock exchange, compared to the thousands that are listed in the US. 

“At this time, we were also seeing a lot of Nigerians, and Africans in general, moving to the US for better opportunities. So we built Treegar as a way to make these opportunities more readily available to the African market and move one step closer towards investment democratization.”

Proudest moment so far

“We now have a working product and we’re so proud to launch in Nigeria on April 1, 2022. It is amazing what our early adopters have to say about us and it gives us validation that we are on the right track. See what early users are saying about us on our website.”

What’s next for Treegar?

“The next steps for Treegar fall under two categories – geographical expansion and product expansion. We want to expand across Africa and we want to do it fast. We will be expanding into more West African and East African countries in the next few quarters.

“We will also be expanding our product offering as we expand into new markets. Some value-added features will include cryptocurrency trading and social investing. We will revolutionize the space by pushing innovative features to further democratize access to global investing from Africa.”

Are you an early stage FinTech and need a KYC and AML solution?

Ready your start-up for scale with free access to our transaction monitoring and customer screening tools through ComplyLaunch.

Register for ComplyLaunch today

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The post ComplyLaunch Customer Spotlight: Treegar appeared first on ComplyAdvantage.

FX services are offered by a wide range of entities, including hedge funds, investment firms, traders, brokers, and money transfer companies. As an FX service provider or a financial services firm connected to a provider, it is important to understand the money laundering risks that the industry faces and how to comply with the relevant AML regulations in order to detect and prevent criminal activity.

AML risks for foreign exchange service providers

The key money laundering risks faced by foreign currency exchange service providers include:

• Identity verification: Many foreign currency exchange services do not require the same identity verification measures as other types of financial service firms, meaning that criminals can use their services to launder money anonymously. The cash-intensive focus of foreign exchange services and the possibility to obtain cash transfers using associated remittance services allows criminals to transform money quickly or simply use money mules to carry out transactions on their behalf. Similarly, the proliferation of online foreign exchange services makes customer identity verification all the more challenging, and more difficult for the authorities to supervise.  Therefore bringing more AML risks to foreign exchange companies. 
• Regulatory disparity: The fact that foreign exchange transactions often involve different jurisdictions, heightens AML risks, as money launderers may seek to exploit differences or deficiencies in regulatory standards across borders. FATF has warned that many countries, especially those considered higher-risk, do not have adequate AML/CFT regulations or supervisory structures in place to deal with the threat that money launderers pose in the FX industry. That regulatory disparity may see firms use different reporting thresholds for suspicious transactions or see international financial authorities struggling to communicate with each other during investigations, 
• Structuring potential: Given the disparity in regulations between jurisdictions and the relative anonymity associated with the service, FX may be vulnerable to structuring, which is when money launderers use a series of transactions to disguise the source of their illegal funds before embedding them within the legitimate financial system. Foreign exchange transactions are particularly vulnerable to structuring because criminals may move their illegal funds through multiple FX service providers, using multiple currencies, to disguise their origin and embed them within the legitimate financial system. 
• Beneficial ownership: There is an increase of AML risk to foreign exchange companies, as the proliferation of foreign exchange service providers, both in physical premises and online, has made it easier for money launderers to gain ownership of this type of firm and use that ownership to circumvent AML regulations and protections. Criminals may seek to own FX firms outright (or by using a sub-agent) or may seek to have someone own the firm on their behalf through financial incentive or coercion. Financial authorities may struggle to determine the beneficial ownership of an FX firm, allowing money launderers to conceal their activities.

Complying with AML regulations for foreign exchanges

Foreign exchange service providers should be familiar with the AML/CFT regulations that apply in their jurisdiction, including any licensing requirements. In Financial Action Task Force (FATF) member states, firms must take a risk-based approach to the money laundering threats they face and implement commensurate measures as part of an internal AML/CFT program. 

In practice, that means that Foreign exchange firms should:

• Perform customer due diligence (CDD) checks at onboarding and throughout the customer relationship to verify customer identities accurately. CDD checks should also be used to establish beneficial ownership if dealing with another FX company.
• Implement transaction monitoring solutions in order to spot suspicious FX transactions that might be indicative of suspicious activity. This includes transactions over certain reporting thresholds, unusual transaction patterns or transactions involving high-risk countries.
• Screen and monitor customers for sanctions, politically exposed person (PEP) status, and for their involvement in adverse media stories. 
• Appoint an AML compliance officer to oversee the compliance program, liaise with financial authorities and manage audits. 

FX red flags: Foreign exchange employees should also receive adequate training in order to implement the appropriate AML/CFT measures when customers use their services. With that in mind, firms should be aware of the characteristics, or “red flags,” of money laundering methodologies that target foreign exchange services and increase AML risks. Those red flags include:

• Transactions above jurisdictional reporting thresholds.
• Suspicious transaction patterns, such as customers making an unusually high frequency, or an unusually high volume, of transactions.
• Customers consistently using non-face-to-face FX services, concealing their identities or sending third parties (money mules) to conduct transactions on their behalf.
• Multiple exchanges in different currencies that appear to be connected.
• Multiple exchanges across different service providers.
• Transactions involving PEPs, sanctioned customers or customers involved in adverse media stories.

Automated AML compliance

Implementing an AML/CFT program manually may be unfeasible for many foreign exchange service providers, who must collect and analyze large amounts of customer and transaction data in order to spot potential criminal activity. With that in mind, in order to manage their AML risks, foreign exchange service providers should ideally implement suitable AML software, automating their compliance process where possible and avoiding the costly inefficiencies and human errors associated with manual AML/CFT. Software automation not only adds speed and accuracy to the AML process but helps firms meet their compliance  obligations on an ongoing basis.

The post AML risk in foreign exchange: How to comply appeared first on ComplyAdvantage.