FX Regtech adapts to WFH

October 2020 in Regtech

A sudden and drastic change in work life has hit the financial markets in 2020, with traders, salespeople and operations staff all forced to move from the office and confine themselves to their homes for the foreseeable future. 

As a result, Covid-19 has produced a dramatic change on the day-to-day operational processes of businesses with seemingly no end in sight. While firms have by and large managed to adapt to the changed surroundings, the new environment has opened up interesting new trends in digitising historically manual operations as well as the risks associated with working in a remote environment. 

TruNarrative is a technology firm that has been at the forefront of this digital transformation, working across Identity Verification, eKYC & eKYB, Fraud Detection, AML Compliance, FRAML, Risk Assessment, and Account Monitoring. 

Mike Harriss, Head of Partnerships at TruNarrative, says he has seen “an accelerated move” to digital onboarding. In foreign exchange markets that trend is no different, with the speed to get people up and running becoming critical to businesses functioning effectively. Retail trading platforms have seen more business as people stay at home and – either to earn more income or because of job losses – have turned to trading to earn money. 

“At the moment, many businesses are facing new challenges, but there are also new opportunities. The online trading market is seeing more activity as people turn to trading to earn some money and pass the time,” says Harriss.  

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Covid-19 has produced a dramatic change on the day-to-day operational processes of most businesses


Volatility in the FX markets has also helped in this regard. Since reaching historic lows in February, the JP Morgan Global FX Volatility index has sky-rocketed since then – particularly in March when volatility was at its highest, before settling down at levels not seen in recent years. 

This has led to more trading and therefore more individuals seeking to set up accounts from different regulatory jurisdictions. This means onboarding clients from areas with potential risk of money laundering and KYC considerations which requires some potential change in data needed to make those additions to trading platforms correctly and in compliance with regulations. 
“As firms expand into different markets and jurisdictions, they need access to different data sets and sources to onboard potential customers. Whether this is a data provider who can verify identity in a specific company, or a provider who can meet the regulatory requirements of the new country. To integrate new data providers in a solution usually requires a lot of time and resources,” says Harriss. 

The institutional FX market also has similar considerations in digitising its onboarding processes from one that has been historically manual. 

“The increase in demand on trading platforms we’ve seen in the past months would put a large of strain on manual processes, which means a potentially lengthy, high friction experience for potential customers. Being able to automate these processes increases efficiency, and means that investigators can focus on cases that actually require manual review,” says Harriss. 

Moving what would be considered back office processes into a digital environment can come with the added pressure of higher client expectations. Irrespective of the sector, digitisation helps breed more competition because more businesses are going to market that way and that just increases the choice for customers. 

“As other industries become more digital and are able to onboard customers more quickly and with less friction, we see customers’ expectations raise across all industries. Companies who meet these increasing expectations from a customer experience perspective often gain a competitive advantage over those who can’t,” says Harriss. 

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Meeting regulatory obligations has not changed for FX businesses


There are of course downsides, too. The lack of staff congregated in one office and working together means there is higher risk of internal fraud, less man-management and less visibility of staff. Plus, there is a heightened set of considerations in terms of input security, meaning each of these generate their own thread of challenges. 

The FX market has faced its fair share of abuses since the 2008-2009 financial crisis, including market manipulation of benchmarks and money-laundering which has slapped billions of dollars’ worth of fines on the banks and led to some individuals facing jail time. Banks have been busy cleaning up behavior and bringing in new compliances and controls to keep staff under watch.  
In financial markets more broadly fraud has been on the rise. This coincides with more individuals working from home and practically making controls harder to implement and keeping business lines in check. That creates a triage effect in terms of what is investigated and can lead to certain problems areas falling by the wayside. 

For technology providers that deliver software to FX trading platforms, this has led to a period of adaptation to the new environment in order to accommodate the needs of customers, as those businesses themselves are having to make radical changes in terms of how they do business.

“There is a demand in terms of technology resources,” says Harriss. “That means there’s a need to prioritize what’s at the top of the list and make sure they’re delivered for clients potentially at the expense of other projects. If those technology providers are focusing on those immediate needs of customers, that means they’re having to put some things on pause.”

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Mike Harriss

Compliance activity

Increased customer business and additional account applications means that there’s more compliance activity to be done, too. Meeting regulatory obligations, which range from GDPR, MIFID, 5MLD, FATCA, have not changed for businesses and remaining compliant with the ever-changing regulation and guidance is essential to staying in business.

Significant numbers of staff are directly involved with ensuring and demonstrating adherence to regulation. This includes governance and oversight, audits, or filings and the day-to-day manual checking of customer applications and transactions.
But because there is more business now than before, if a company was stretched with their current resources, then it’d be even more stretched now that everyone is working from home. So businesses are faced with a choice: either recruit more staff, do less due diligence, or be more efficient at what they are doing. Even though the last few years has seen a growing interest in digitizing compliance and onboarding processes, the pandemic has accelerated that demand and those projects around digital transformations. 

“TruNarrative has seen a lot of interest around automation of onboarding corporates, businesses, the retail side and the consumer side,” says Harriss.

Historically, business onboarding, which is more challenging and more complex from a regulation point of view, has typically been served by individuals manually doing various checks and due diligence activity before signing up.

“The current global situation has definitely pushed businesses to embrace automation and digital transformation. We’ve seen a lot more transactions come through the TruNarrative platform, especially from the trading industry and the online retail markets, as people buy and trade online more frequently. A drastic increase in an individual’s activity would be difficult to monitor manually,” says Harriss.

“Ensuring that you’re able to adjust your detection capabilities on the transactional side is typically done fairly manually on a daily basis generating daily reports, whereas technology allows them to automate that process and only look at the things that need investigating from a money-laundering suspicion or other suspicious activity,” he adds. 

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The challenges different businesses across the FX industry are facing means there is a need to automate large swathes of operational processes

Changing work routines

Given the number of people working from home there is also an increase in the risk of working unsociable hours by different members of staff given IT equipment like laptops are being used at home rather than in a controlled office environment.  This means the way internal staff work is potentially changed, meaning the way internal monitoring of staff activity needs to be changed, too. 

“In the current COVID-19 environment staff could end up being stuck at home working, or they could end up being more flexible in terms of the hours, they work,” says Harriss.  “Therefore, the profile of activity has changed. So being able to adjust and re-profile user activity is important because it could be a world where, from a technology point of view, adjusting a strategy or a way of profiling what staff are doing takes two or three months to change – that’s a long time from a risk perspective.” 

The challenges different businesses across the FX industry are facing means there is a need to automate large swathes of operational processes.  TruNarrative’s helps their customers reduce the time taken to onboard an individual or a business. The firm promotes high levels of automation at onboarding and it predominantly does that through their breadth of data which are integrated into the platform. 

“That means as businesses operate in more global jurisdictions, then there’s a good chance that we can still maintain that electronic verification or automated due diligence is part of the onboarding process. And we also have technologies in relation to things like identity document authentication, that can be done online, too,” says Harriss. 

“With so many third party data suppliers, and the ability to build and adapt strategy inhouse, we can facilitate businesses growth into new markets and jurisdictions.”

Naturally, the increase in automation allows businesses to scale up. If businesses are not looking to reduce headcount, but they are seeing higher demand, TruNarrative is able to support them through those periods of peak activity.

The firm also provides a ‘virtual agent’ which uses artificial intelligence which learns from the operators who are making decisions on due diligence activity. This means when there’s either a peak or a shortage of staff, a virtual agent can step in and make decisions within the same sorts of parameters that the regular staff or operator would make. 

Partnership model

One element that is specific to FX platforms is TruNarrative’s partner model. 

“Through our partnership model we deliver businesses a host of capabilities through a single integration. Our partners and their customers gain access to our complete orchestration & decisioning platform and App Store of over 50+ data providers. To integrate and build this inhouse would have required our partners to spend a lot of time and technical resources, which can now be spent on other areas of their roadmap, says Harriss.

The single pipe model helps to reduce reliance on IT staff – typically a costly portion of any FX operation. Within TruNarrative’s model, strategy and rules are configured and changed within the TruNarrative no code platform. Rather than having to make a change request, to change the rules, the configuration or the design of the process flows, this can be done within the platform. This means business users get to understand the changes, and they get to implement those changes themselves without having to go to IT or go to go to a vendor to make those changes. 

 “Our platform is designed to facilitate both the onboarding & monitoring of businesses and individuals, helping businesses to mitigate risk and remain compliant at every stage of the customer journey. Within the TruNarrative platform firms can utilise or risk rating capability to mitigate risk using both internal and third party data,” concludes Harriss.