What is KYC or Know Your Customer? What does online trading have to do with money laundering and the funding of terrorism? If I am an online trader, how do I know that I am dealing with a registered, reputable broker?
I don’t want to open an account and deposit funds only to discover that I am participating in a money laundering scheme or my money is indirectly funding terrorism.
The fight against money laundering, and more pertinently these days, funding of terrorism is intensifying. According to the International Monetary Fund (IMF), “money laundering and the financing of terrorism are financial crimes with economic effects…action to prevent and combat money laundering and terrorist financing thus responds not only to a moral imperative but also to an economic need.”
Money laundering and the financing of terrorism can, and will threaten the stability of any country not only geopolitically but also economically, and consequently therefore, effective measures to combat and prevent this kind of criminal activity are essential to protect society as well as the global financial system.
How does this affect my activities as a binary options trader? Should I even care?
Before we go any further, let us consider the definition of money laundering, and the financing of terrorism.
What is money laundering?
According to the business dictionary,Money Laundering is the “legitimization (washing) of illegally obtained money to hide its true nature or source (typically the drug trade or terrorist activities)’’. Money laundering is practiced by passing money secretly through legitimate business channels such as bank deposits, investments, or transfers from one place, or person to another’’. In other words, if you engage in illicit activities for financial gain, you will have to hide the source of the money from the authorities in the country that you live.
What is terrorism financing?
Terrorist financing “provides funds for terrorist activity. The main objective of terrorist activity is to intimidate a population or compel a government to do something by killing, seriously harming or endangering one or more persons; causing substantial property damage that is likely to seriously harm one or more persons; or seriously interfering with or disrupting essential services, facilities or systems.”
Ever since the 9/11 attacks in the USA, countries have been working together to implement laws that will control and prevent the funding of global terrorist organisations. This is where KYC comes in.
What is KYC or Know Your Customer?
The international Know Your Customer (KYC) policy “is an important policy developed globally to prevent identity theft, financial fraud, money laundering and terrorist financing.“
The main objective of KYC is to enable banks, investment houses, and online trading brokerages to know their customers better and prevent risks of criminal activities. In order to fulfil the KYC requirements, customers are obligated to submit copies of their documentation (i.e., Photo ID; proof of address) and submit these to the institution they are registered with.
Individual institutions such as online trading brokerages are free to ask for any additional documentation such as a completed and signed Declaration of Deposits (DOD), a scan/photo of any credit/debit cards used to fund your account, in some cases a voice signature, and a completed withdrawal form.
When trading on the global financial markets, it’s imperative to ensure that your trading partner is a reputable, registered brokerage.
As far as the practicalities of getting this documentation uploaded, the customer service department of your chosen broker should be able to guide you every step of the way. If the broker does not have a customer service division or is not interested in helping you comply with the global financial requirements, then I would regard that company as suspect with regard to these security measures, and therefore, you could be well advised to avoid them at all costs and look for another brokerage.
I decided to partner with Stern binary options online trading brokerage and their customer support centre helped me upload all the requisite documents. It was a simple and easy to do process. Why battle when someone else will make your life easier. Stern Options gave me the choice whether to send my copies of documentation as email attachments, or to use the online facility on their website which allows you to upload your documentation copies yourself.
But what I like about Stern Options is that they advised me how to protect my sensitive information before making any copies. For instance, they told me to make sure to cover the security code on the back of my credit card before scanning a copy. Now that was a real boost to my confidence to partner with them.
We live in tough socio-economic as well as fast evolving technological times. International crime syndication, including the funding of terrorism and money laundering is on the rise. Companies, and individuals, are able to hide their fraudulent activities in the online cyberspace of the global digital economy and financial system. It is not always easy to separate the “wolves from the lambs”. Consequently, I believe that it is vital to ensure that you are trading with a bona fide online trading company before you invest any funds with them.