Account Takeover in Forex Trading

by Bence Jendruszak
Forex trading platforms are under increasing scrutiny from regulators. KYC and AML regulations must be met, not to mention the need for flagging fraudulent behavior in order to protect your business and customers.
Transaction monitoring can help.
Transaction monitoring helps forex trading companies in a number of ways:
Note that the last point is also valid when it comes to social engineering. If your customer has found themselves involved in some kind of scam, their behavior might suddenly change. You can also nip this in the bud with proper monitoring.
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Like in every other industry, transaction monitoring starts with risk rules. You tell your fraud prevention or AML software what should be flagged. The data flows in via APIs (or internally if you have a built-in solution), and certain combinations of data points trigger a rule.
Note that transaction monitoring can be set up proactively or reactively. The data may be gathered in real-time or parsed from logs. As for the kind of risk rules you can deploy, they tend to fall into two key categories:
Let’s dive straight into some concrete examples of transaction monitoring rules to help your forex trading platform, as deployed within the SEON platform.
While you should be able to catch most KYC and AML risks at onboarding, another crucial part of the journey to monitor is the first deposit. Below is a perfect example of a velocity rule, where we monitor a number of time-based actions:
How you would handle this scenario is up to you. We’ve decided to add +1 to our risk score with every new deposit. While this isn’t strictly an AML red flag, it indicates that you should closely monitor this user’s activity (and maybe run their name through an AML checker, if possible).
Another velocity check, which once again attempts to catch suspicious activity in the act. Here, we’re looking at a sudden increase in transactions.
How you define transactions is up to you. It will most commonly be a withdrawal but it can also refer to a deposit or even a conversion.
Above, you will see that the timeframe is set to one day, and the percentage increase is set at 200% – but such preferences are up to you.
In the example, we want this action to increase our risk score by 20 points – which can trigger an automatic decline or review, depending on your risk appetite. And here, on the right hand side, is the rule, triggered:
The $3000 rule is currently defined by the Bank Secrecy Act as the threshold where financial institutions (including forex trading platforms) must verify and record the customer’s identity. In the context of AML, this usually involves logging data for a Suspicious Activity Report (SAR).
Luckily, it’s one of the easiest and most straightforward rules to set up with our fraud prevention tool. In the example below, you can see how the transaction amount (sent via API) lets you instantly send the transaction to manual review.
A noteworthy point for people new to AML regulations is how easy it is to edit or duplicate such a rule. This will be particularly handy when AML regulations inevitably change.
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SEON is designed to gather all your business data and turn it into a sophisticated filter that catches bad agents, to prevent fraud and help your compliance.
Transaction monitoring is one aspect of its functionality, but the solution can also help with other AML and KYC concerns and fight fraud at large, with features such as:
Whether you need to understand your customers’ behavior to reduce fraud, benefit from better customer intelligence, or meet compliance requirements, SEON is an easy-to-deploy, efficient and customizable solution for your FX trading company.
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Bence Jendruszák is the Chief Operating Officer and co-founder of SEON. Thanks to his leadership, the company received the biggest Series A in Hungarian history in 2021. Bence is passionate about cybersecurity and its overlap with business success. You can find him leading webinars with industry leaders on topics such as iGaming fraud, identity proofing or machine learning (when he’s not brewing questionable coffee for his colleagues).
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