Integrating a payment system for receiving funds from traders is a key point of operating as a forex broker. And in order to integrate a particular payment system, it is necessary to go through a process of compliance.
I am Ivan Noskov, a lead partnership specialist at UTIP Technologies Ltd. In this article, I would like to explain the concept of compliance, how a broker should prepare for this process, and the main issues that must be taken into account.
What is Compliance
Compliance is conforming to the
requirements of payment systems, acquiring banks, or other regulators.
A payment platform is a set of rules, processes and equipment that enables the
cash flow. It is also designed to provide clients with a comfortable
environment for funding their accounts. A broker needs to go through a
compliance process in order to be able to use it.
It should be noted that different payment systems may have varying requirements and willingness to cooperate with forex brokers. Some platforms allow working with individuals without the necessity to register a legal entity. Others require a license.
In addition, there are platforms that accept to cooperate with brokers
without a license, but require certain legal components. Those components might
include having a registered company, Legal Opinion document, bank account,
website, verification of a director's identity by database, and others.
The differences between regions and their compliance requirements were
discussed in our previous article.
We further explore three key elements for the compliance procedure:
- A legal basis of the company;
- A website, and a platform availability;
- A CEO of the company.
Required legal framework
To enter into a contract with a payment system, a forex broker's legal background must include a registered legal entity. Basically, it includes an unregulated (offshore) jurisdiction, such as the Marshall Islands or the Seychelles. The mentioned jurisdictions are favored by brokers, and most payment systems are willing to work with such companies.
If you want to accept payments from Europe or South America, payment system providers may require obtaining a Legal Opinion document for your offshore company. Therefore, you should ensure obtaining this document in advance if you plan to work with traders from a wide range of countries.
The UTIP's partnership network will assist in preparing a legal background for your brand.
Website preparation
Your website should feature several important policies on the homepage:
- Client Agreement — a public offer containing the terms of cooperation;
- AML and KYC Policy — standards regulating the brokerage company's obligations to combat money laundering and terrorism financing;
- Refund Policy — a document listing the terms and conditions for refunding a client's payments;
- Risk Disclosure — a document disclosing information on risks associated with trading activities on financial markets.
To comply with the requirements, you need to have a trading platform and a signup page for traders. This will confirm your activity as a forex broker, and the payment system provider will recognize what type of payment they are to process.
You should also have a checkbox on the signup page to confirm that the user is of legal age and accepts the client agreement and the privacy policy.
Director Verification
Verification of the company's director or another executive officer is the final step in the process of compliance. Verification can be performed both offline and online.
Offline verification means checking the director's personal documents, such as passport or ID, and confirming the residence address. A bank statement or a utility bill can serve as proof of address.
Online verification is a separate video confirmation done via a special link from the payment system provider. The director must show their ID through the webcam. It is important for the director to be in contact with the representatives of the payment system from the beginning to the end of the compliance check. Additional requirements may appear during the process.
Tips on preparing to a process of compliance
We hope our tips will help you deal with payment system providers in the future.
Prepare in advance. Assess your capabilities and means of accepting payments. Make sure it meets all the requirements of the payment system provider. Fix any identified flaws before you start the process of compliance.
Seek expert advice. Get in touch with experienced professionals at UTIP Technologies Ltd. for consultation and assistance during the process of compliance. We know how to make it easier for you and will guide you through every step of the procedure. Leave an application form on our website.
Remember that compliance with regulatory requirements and standards is the key to your success and stability in the forex industry.
