The UK handles up to 36% of all transactions, making the country the most important currency exchange center in the world.
While many businesses with foreign exchange requirements are aware of the potential pitfalls of adverse market movements and exposure to currency risk, not all take into account the various regulations which dictate the way forex transfers both from and to the UK are managed.
• The Financial Conduct Authority (FCA)
The FCA is there to ensure that businesses which operate within the financial services sector don't abuse their position and that the transactions they conduct are legal and in accordance with regulations. Both retail and wholesale financial services firms are regulated by the FCA.
(Your business should be aware of Money Laundering)
• Foreign Exchange Tax Rules:
If you're based in the UK and have to submit an account of your finances to HM Revenue & Customs, the odds are that you will be subject to taxation. This may not be the case for some businesses based overseas, but the rules applied to companies are different to those applied to private individuals, so it's worth seeking independent advice from us on your circumstances and the best approach to take.
In the UK, stringent Money Laundering Legislation is adopted. The legislation, which is tied to the Proceeds of Crime Act of 2002, is known as the Money Laundering Regulations.
These Regulations demand that any institution conducting a deal on behalf of a new customer verifies the identity of the client and (in some cases) the legitimacy and source of the funds being traded. Any currency exchange provider which suspects that a client is involved in illicit activities or is handing money which has evaded UK taxation has a duty to report their suspicions – with the law taking precedence over client confidentiality.
Some key Money Laundering checks currency exchange providers must make include:
- Identifying the identity of customers
- Identifying the identity of beneficiaries
- Monitoring business activities and reporting anything suspicious to the relevant authorities
- Keeping all documents related to financial transactions and the identity of a customer