International Money Transfer - Why Regulatory Compliance Matters

. 5 min read

This is the fourth in a series of articles about risk management as it relates to foreign exchange and money transfer services for business. Our last article introduced a number of value-added services which can save your business money when sending funds abroad. We also suggested some ideas to manage the administrative requirements related to international payments.

Regulatory compliance should be an absolute priority for any organisation involved in currency transactions with overseas customers and suppliers.

You will need robust processes in place to generate the information your foreign exchange providers will legally require in order to transact on your behalf. If you don’t, there’s a danger payments may not go throughon time, potentially jeopardising relationships with suppliersand customers, or even adversely affecting your supply chain. Your cash flow may also be diminished.

Despite this imperative, regulatory delay is a common problem in foreign exchange. Financial institutions must comply with strict regulation if they conduct foreign exchange transactions on behalf of their customers. Under Know Your Customer (KYC) and Anti-Money Laundering (AML) rules, we are required to verify the identities of all the parties we deal with, including the foreign parties with which your business may have contact.

Any hold-ups in the verification process may delay your transaction being processed and transmitted to the intended recipient. This is to satisfy financial regulatory requirements, and is not a technical or administrative issue related to the service provider. It protects your interests as well as the broker.

white concrete building under sky
American Government Building by Katie Moum / Unsplash

You should also be careful not to get caught out by unfamiliar overseas banking details. While bank identifiers in the UK are standardised around account numbers and sort codes, the equivalents vary from country to country internationally. They may require you to deal with data such as international bank account numbers (IBANs) and bank identifier codes (BICs).

Your foreign exchange provider should be able to help you handle these potentially confusing variations while remaining compliant.

For example, are online systems in place to automate data entry – and to quickly identify mistakes or missing information that may get in the way of your payments being made on time?

Does your provider offer simple, jargon-free advice on the information you require from foreign counterparties and where to find it? Can the provider store payment details on their secure customer relationship management system so you don’t have to keep re-entering them each time a transaction is due?

Personalised  Service, Internationally Regulated

If you’re not sure of the regulatory requirements in your country, speak to a foreign exchange broker or international money transfer services provider. We have regulatory approval in every country that we operate in, including:

  • FinCen in the USA (Financial Crimes Enforcement Network)
  • The EBA in Europe (European Banking Authority)
  • The FCA in the UK (Financial Conduct Authority)
  • ASIC in Australia (Australian Securities and Investments Commission)
  • The FMA in New Zealand (Financial Markets Authority)
  • Financial Transactions and Reporting Analysis Centre of Canada (FinTRAC)

We also have important detailed information on our terms of service and the regulatory standards we are obliged to meet in your area.

Invite a Foreign Exchange Advisor to Consult with Your Finance Team

Internal communication issues can get in the way of good foreign exchange practice and risk management, especially as organisations get larger. Business functions that operate in silos and rarely talk to one another may have little idea about how their particular currency market exposures fit into the overall exposure of the company.

In the worst cases, businesses that may even be taking autonomous decisions about transactions and risk management that don’t make sense in the context of the business as a whole. Supply chain managers, for example, may be hedging out the risk of higher import prices without understanding what revenues the sales department is expecting to book from overseas.

Such communication breakdowns make it very difficult for your business to approach foreign exchange holistically – to get the best deal possible on rate and service, and to managerisk as effectively as possible. If your business is suffering with this issue, it’s important to take action quickly, before risks lurking unseen in one area of the company cause real problems for the rest of your business.

Is your finance team in denial about the risks associated with foreign currency exchange?

Working with your foreign exchange service provider to develop a robust risk management policy is the best way to counter this danger. Once you better understand every aspect of your business’s currency exposure, you’ll be able to implement the right processes for dealing with it on a holistic basis – and by embedding these processes in every part of the business, you’ll eliminate the danger of any single function causing a problem.

Finally, you should think about how easy it is to communicate with your foreign exchange broker on an ongoing basis. Online self-service account and transaction management systems make day-to-day operations quicker and simpler for most businesses, but there will also be times when you need additional help. Look for a provider that offers phone-based customer service to help you deal with problems as quickly as possible. Do you know, in person, who you can expect to deal with – is there a single person or team responsible for your account, for example?

Does your financial advisor equip you with the information you need about foreign exchange markets to make proactive decisions? If not, you should be talking to Team XE.

Stay tuned for the next article in this foreign exchange risk management series. You'll discover insights about why you should evaluate multiple foreign exchange advisors or money transfer service providers. We'll also discuss the benefits of working with a service provider that has flexible terms, while adhering to international regulatory standards.

Please Note:

The information, materials, accompanying literature and documentation available on our internet site is for information purposes only and is not intended as a solicitation for funds or a recommendation to trade. XE, its officers, employees and representatives accept no liability whatsoever for any loss or damages suffered through any act or omission taken as a result of reading or interpreting any of the above information.

While we take reasonable care to keep the information on the website accurate and up to date, there may be occasions when this is not possible. Case Studies and articles are not intended to predict future moves in exchange rates or constitute advice.  

XE makes no representations, warranties, or assurances as to the accuracy or completeness of any information derived from third party sources. If you are in any doubt as to the suitability of any foreign exchange product that you are intending to purchase from XE, we recommend that you seek independent financial advice first.

For more information about XE, please click here: Regulatory Information