Wednesday, 17 June 2015

Why did poor compliance checks damage Plus500?

Plus500, an online forex trading company, was recently bid for by Playtech, an Israeli online gambling company. Shortly before the takeover bid, Plus500's share price had plunged by 60 per cent, so Playtech are likely to get a great deal. Why did it fall so much? Because the Financial Conduct Authority had frozen the accounts of their subsidiary Plus500UK.

So why did the FCA do that? Well, it all comes down to KYC. KYC is Knowing Your Customer and, while it sounds like it might be a sales mantra, it's actually about fraud. Or, more precisely, stopping fraud.

Companies like Plus500 have to collect data on their customers that proves they are who they say they are. It's the same as taking your passport and a utility bill along to your bank when you open a new account. But the FCA said that Plus500UK's checks on these pieces of KYC information were inadequate, and that there was a risk of money laundering or other fraud. Plus500UK weren't able to allay their fears, so the FCA instructed them to freeze the accounts of most of their customers, in effect shutting them down.

If Plus500 had been able to store their KYC data more easily, or if they'd been better able to keep an eye on Plus500UK, it's possible they wouldn't have had so many problems with compliance, and would have stayed safe from the FCA.

We offer automated services to help you manage your compliance data and risk assessment. If you're worried about how your company is handling this or think you could benefit from doing it better, get in touch and we'll see how we can help.

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