A trend in the global economic market towards creating strict policies and regulations in every financial sector was created in 2008 following the Financial Crisis. In this exclusive interview, the CEO of Fly Money, Tal Ekroni, shares with us more about the strict regulations and challenges currency exchange providers are facing today.
Hi Tal, so what is required to be able to sell currency?
So many times I hear the question: “Why can’t I sell currency to my clients, I know my clients, they are all travelers, I can just sell them money myself.” What I tell them, and what I’ll tell you now, is that in order to sell currency to other people, you must have one of two things – either a Banking License or a Money Business Service license.
Can you elaborate on this? What is a banking license and how do you acquire it?
A banking license is a prerequisite for a financial institution that wants to provide banking services including fractional reserve lending, held at the bank in numerous forms including currency. There is a relatively long and complicated procedure that goes into this application. The licenses are typically issued by the banking regulatory body in which the gank is established.
What is a money service business license?
A money service business license is held by all the money service businesses across the globe including TravelEx, Western Union, Money Gram, and ICE. These money service businesses all have a money service license that allows them to transfer money between countries, to exchange currencies, to give travelers checks, and to move financial assets from country to country.
If I decide to apply for a money service license, what is involved?
You must apply for a license to become a money service business for each country that you will provide its currency. This procedure can be very cumbersome and could last between 3 months to a year. Then, you will have to follow very strict procedures that will ensure that you will not be exposed to financial fraud. These policies are needed to make sure that the traveler does not have any illegal intentions. You will also need to buy currency in advance and predict the demands. Then and only then, will you be able to sell currency. In addition, many markets in different countries have very different regulations. As an OTA you will need to ensure that you oblige by each country’s rules and regulations for each traveler that will want to exchange currency with you.
It sounds like there are many different regulations for different countries. What are some examples of requirements in some countries but not in others?
Every country in the world has different regulations regarding how they background check travelers. Some countries require only to verify a traveler with an ID. Some countries require the traveler to have financial and legal background checks. Some countries require the traveler to present other documents to prove that they live in the country they say you live in. Some of these apply only to transactions over a certain amount of money and some don’t. Your company will not be able to sell currency without applying them individually.
If I’m about to sell currency, what should I be aware of?
Companies may not be aware that in order to sell currency you have to follow very strict rules. These rules are put in place in order to prevent such things that happened in the financial crisis of 2008. For example rules are put in place to prevent the next money laundering issue, to prevent a currency collapse or a forex collapse, or any other issue that might arise because the company may not have handled regulations and procedures properly.
It seems as though becoming a currency provider may open your business up to some risks. Can you discuss this in some greater detail?
Because selling and transferring money are all financial actions or moves, companies involved in currency exchange are exposed to many threats. Criminals usually take advantage of the currency exchange process to launder money. They use financial institutions and money service businesses in order to put money into the regular financial system transferring money from country to country making it very hard to track and make it appear as though their payments are coming from a different country of origin than where they first began.
What do these risks pose on the currency exchange market?
Because money service business can be a great tool for terrorists and criminals to launder money, all the regulations are very strict on the rules that money service businesses have to follow. In every country in the world, when you sell currency or make a financial transaction from country to country, you have to impose something known as KYC (Know Your Client). KYC is the process that a business uses to verify the identity of its clients. KYC policies are becoming much more important globally to prevent identify theft, financial fraud, money laundering, and terrorist finance. And in the money service business it is very easy to open yourself to these threats.
If I had a money service business license, are there any drawbacks?
Licensed brokers may be subject to recurrent audits, reviews and evaluations to check that they meet the industry standards. Foreign exchange brokers may have capital requirements which require them to hold a sufficient amount of funds to be able to execute and complete foreign exchange contracts concluded by their clients and also to return clients’ funds intact in case of bankruptcy.
With a license to handle cash, money service businesses in several markets, and giving companies an opportunity to earn money through earning fees from every transaction for every currency sold, Tal Ekroni has established Fly Money. Fly Money eliminates a company’s need to become a money service business in all the countries they may want to operate in and with one simple API so that travel players don’t need to
handle anything regarding the demanding regulations and policies, legal implications, financial institutions, currency buying and exchanging. Fly Money handles it all.
