Exclusive interview: GetID’s CEO Dmitri Laush Talks about KYC of Brokers

The forex brokers faces greater compliance challenges in client onboarding as European Securities and Markets Authority (ESMA) and Australian Securities and Investments Commission (ASIC) tightening the regulation.

Today, Dmitri Laush, the CEO and co-founder of GetID, joins Fazzaco today to talk about why KYC matters for brokerage companies and how to choose KYC providers etc, to help brokers meet the demand of stricter compliance requirements of regulators.

GetID​ is a solution that enables clients to swiftly and seamlessly perform online identity verification, KYC & AML checks to significantly improve the onboarding process for brokers.

1. Firstly, please tell us about GetID. What do you do and what have been some recent developments for the company?

GetID is an all-in-one identity verification service that helps other companies and organizations to streamline their customer onboarding process, comply with regulatory requirements and reduce fraud. So basically, it is a third-party solution for companies that are obliged to check the customer’s identity by law or need to verify the customer to prevent fraud (like sharing economy services). I’m talking about financial services, online casinos, telecommunication services etc. 

Our goal is to help our clients to make the onboarding experience faster and easier while ensuring that all necessary compliance requirements are met. 

Also, our clients are our number one priority. That’s why we’re striving to make our product and service as flexible as possible. If a business needs some specific feature, we should be able to deliver it without putting the client into strict frames. In addition to this, our other goal is to create a no-code solution that will allow our customers to seamlessly integrate our solution into their existing workflow without the help of a development team.

During the past year we’ve seriously enhanced our product making it more flexible and easy to use for both our clients and end-users.

2. What motivated you to create GetID?

Since I’ve been working for one of Europe’s biggest asset trading platforms, we initially faced a lot of challenges - compliance problems, multiple operators checking customers’ identities using different software, etc. 

Thus, we decided to create an all-in-one solution that would allow to automate the process, have all verification checks in one place, be able to customize the solution according to one’s needs, and have cost-efficient & transparent pricing.

3. Could you give a brief introduction about KYC and AML?

AML is ‘Anti-Money Laundering’ regulations. Financial institutions are required to obtain and verify every customer’s data, monitor their activity, and report anything suspicious to the relevant authorities. In this sense, the term ‘AML’ refers to the whole scope of techniques employed to help meet the requirements of this legislation.

AML can be considered a framework rather than a procedure, itself. AML policies tend to be composed of several protective arms to help intercept financial crime as or before it occurs.

KYC or ‘Know Your Customer’ is one of the numerous AML mechanisms installed to meet regulatory compliance. Most often used during application processes, KYC helps to identify and verify customer identity. The purpose is to ensure that a potential or existing customer is who they claim to be. In this sense, KYC is predominantly an identity verification process. A thorough and necessary risk assessment, KYC is often, but not exclusively, applied during the customer onboarding process.

4. Why KYC matters for brokerage companies?

First of all every brokerage company has to meet regulatory requirements. Even the offshore companies with simple licenses have to perform basic KYC procedures in order to comply with AML regulations. 

Thus, brokerage companies are obliged to verify customers when they deposit or withdraw money to avoid dealing with illicit funds. 

Also, KYC helps to prevent and detect other fraudulent activities that can bring financial harm to a company or affect its reputation. 

KYC is a necessity that every financial organization has to have in order to be able to legally operate. 

5. After collecting personal information for opening accounts, how do brokers finish the verification procedures?

Every company may have its own approach to this. Generally, after a client’s personal information has been collected (either manually or automatically), client’s data is checked against AML Watchlists. Then a company can send a notification to a client that he/she can make transactions.
Usually, bigger companies tend to ask customers more questions about their source(s) of funds, work, etc. This way companies minimize the risks so they can stay compliant and keep their license.

Companies with an offshore license tend to have simpler forms of verifications whereas companies with more complex licenses (like the UK one) tend to have a more thorough approach to verifying clients. So, every company builds this process their way.

In general, there should be a healthy balance between compliance with regulations for a company and the ability to quickly open the account for a client.

6. Except basic personal information like name, date of birth etc, some brokers have stricter KYC procedures and require additional information. What kind of company has stricter rules? And what are their rules?

Bigger companies with multiple licenses tend to have stricter KYC procedures. For example, the process of opening an account at Interactive Brokers can take anywhere from 3 to 6 months. Bigger and older companies have more experience (including fraud and money laundering cases, penalties from regulators). Stricter KYC enables companies to avoid any possible risks. 

On the other hand, some (younger) companies are compromising proper KYC for faster growth. But we’ve seen several cases when companies were struggling to stay compliant with regulations because of that and had to face some serious consequences.

7. For brokers, which one is better? Stricter KYC rules or loose ones?

Of course stricter, if they want to be compliant with all AML regulations. If KYC provider is good enough, stricter KYC will not spoil user experience or slow down the onboarding process.

In some cases it comes down to a company’s strategy. Some companies that are trying to grow fast would simplify the KYC process in order to obtain new customers. Sooner or later these companies would face some money laundering or fraud cases which will cause them to make their KYC process stricter. There’s no perfect onboarding process. Ideally, it’s a balance between compliance and great customer experience.

8. What are factors brokerage companies need to consider when choosing KYC providers?

Companies that mainly operate in specific country or region should choose a local provider who can verify local ID documents and knows the nuances of local ID documents and regulations. It’s a good idea to test KYC providers in specific markets. Global KYC providers might not always be able to check/verify some specific ID document while local ones are able to do that. So, companies looking for a KYC provider should understand what their target markets are and choose KYC services accordingly; it’s a good idea to test several KYC providers for specific markets.

Also, verification speed is crucial as it affects the conversion rates. Automated systems allow to get verification results in a matter of minutes or even seconds. Thus, customer are able to open an account almost immediately.

9. How are you adapting your company in response to the regulatory changes in Europe and Australia?

There haven’t been many changes for us. The regulatory changes mainly affect the brokers. In some cases they have clients to fill out more questionnaires and control their source of funds. With the help of EU PSD2 directive companies could easier control the source of funds of their clients via banks. This, in turn, will help to speed up the process even more.

10. In 2020, COVID has provided both boosts to volatility and challenges to operation. How are the KYC businesses in this period?

As a matter of fact, brokers have doubled (and even tripled) their revenue during that period. So, the amount of requests has increased greatly. GetID’s challenge as a KYC provider is to process a bigger number of requests with the same good quality and speed as before.

KYC business is booming because of world pandemic. Many services had to shift online and hence needed online verification. Number of identity fraud has also increased by 5% compared to 2019, so many services which are obliged to check their customers are in need of a convenient third party solution which will help to identify fraud online.

11. According to you, what has changed for the forex industry in 2020, and what to expect in 2021?

Spot forex trading experienced the increase in 2020 as well as average retail monthly forex and CFD volumes. 2020 was a bull market for the forex industry, and the number of individual investments and trading professionals has risen too.  The S&P 500 has gradually recovered its losses, targeting new highs this year.

What to expect in 2021 will depend on how the world will be dealing with the COVID-19. If we will be over it and the global economy will be recovering then there will be some changes. We might expect commodity price rise as well as a stronger euro.

We also need to take into consideration the booming crypto industry market. It might give new opportunities to investors.

The regulations are continuously becoming stricter. As we can see, regulations are affecting both companies and their clients. 2021 is the challenge of power and capacity. If you weren’t ready for rapid growth then you might face problems with infrastructure, cybersecurity, overall burden, etc. So you have to retain and serve your current clients, obtain the new ones while increasing your infrastructure (staff and capacity).