Verification at the broker: a way to postpone the payment of profits or protection of clients' investments?

It is hardly possible to find a trader who has never encountered a broker's requirement to provide documents confirming his identity, place of residence and other personal data. On the one hand, the desire of a financial company to identify its clients is understandable and reasonable - we are not surprised by the need to show a passport for any banking transaction, even the exchange of more or less large sums in foreign currency. On the other hand, customer verification requirements often become a manipulative tool in the hands of an unscrupulous brokerThe client is not allowed to withdraw the funds from the account, which allows him to postpone the moment of payment of profits and investments or even refuse to withdraw the funds at all.

So what is the notorious procedure of verification at the broker, what is it used for, whose policy actually meets and how to distinguish fair requirements from the manipulation of the broker?

Verification of the account: where does it come from?

Most brokerage companies explain the verification requirements with streamlined wording, which boils down to two main arguments: to ensure your own safety and comply with the recommendations of the FATF.

If the first point is more or less clear: the company must make sure that the person who opened the trading account is not just using your name, but is really you, then the second point raises a lot of questions.

The FATF (Financial Action Task Force on Money Laundering) is the international Financial Action Task Force on Money Laundering. The group develops standards and issues recommendations for governments, financial companies and institutions, but without the adoption of relevant regulations in each state, these recommendations, of course, cannot be considered binding.

In the Russian legislation the FATF recommendations are partially reflected in the Federal Law of 07.08.2001 N 115-FZ (ed. from 02.11.2013) "On counteraction to legalization (laundering) of criminal incomes and terrorism financing", and in the EU territory the Group recommendations are adapted Directive 2005/60/EC (Third Directive). These pieces of legislation are aimed at preventing the financial system from being used for money laundering and terrorist financing. Among other things, they oblige all financial institutions to verify their clients. This, of course, applies only to companies registered and operating in these countries.

So for European brokers The choice to verify or not to verify clients, in general, is not. In the case of a company registered in a country where anti-money laundering is not legally enshrined, compliance with the FATF recommendations is the choice of the company itself and can possibly be used as a cover for manipulating the payment of client funds.

However, do not forget that the process of withdrawing funds from the trading account involves not two parties: the broker and the client, but three: between them there is always an intermediary - a payment system or a bank, which may also impose their own requirements for the identification of the recipient of the payment. Banks are particularly stringent in this regard, so if you withdraw funds to a bank account or card, the verification requirements of any company, including those registered offshore and not formally bound by anti-money laundering rules, are legitimate.

Verification at the broker: check the list of documents

The main document certifying the identity and place of residence of a citizen of the Russian Federation is a passport. Therefore, if a company works through a Russian bank, a general civil passport and signed documents for opening an account (usually a Trade Agreement) should be enough to verify the client and remove all possible questions from the bank.

In the case of foreign banks, the situation is more complicated. Firstly, the data typed in Russian is of no value for banks in the EU or the United States. Secondly, the institution of residence registration as such does not exist anywhere except in Russia and part of the former Soviet Union. Therefore a registration stamp in your passport will not help the bank check and identify your place of residence in any way.

Thus, a broker holding funds and making payments through a foreign bank will be forced to ask customers to provide, at a minimum, for identification, a translation of your passport or a copy of your passportwhere your data are typed in Latin characters, as well as a copy of the utility billwhich is the accepted proof of current place of residence all over the world. Naturally, copies of passports must be certified, because otherwise the bank will not be able to be fully confident that it is an exact copy of a real document, and not the fruit of your work in Photoshop.

Given today's Russian realities - living with a lot of relatives, renting apartments without official registration in them, etc. - Not everyone can boast of a rent receipt in their name. Therefore, a conscientious broker offers customers an alternative - an extract from the bank account or some other valuable in the eyes of the bank document, pointing to the address of the client. If such an alternative is not offered - this is a reason to think about the legitimacy of the broker's verification requirements and intentions in principle.

IMPORTANT: 4 alarms

So, despite the fact that the requirements for verification are common in the market and quite reasonable, many brokers deliberately overestimate them and use them to make it difficult for clients to withdraw funds.

What signs can be considered as a signal of broker's dishonesty and as a reason to refuse his services?

1. Full information on all verification requirements is not displayed on the website and internal documents of the company or is not available until the account is opened. You will not know what documents are required of you until after you open the account.
2. A broker who is not registered in the EU and does not use the services of a European bank, requires documents that meet European standards for verification.
3. Broker does not offer alternatives for the replacement of documents, which a citizen of the Russian Federation is not required by law to have (that is, in fact, alternatives to any document other than a passport).
4. A broker that is not legally required to verify clients and uses payment systems with a simplified identification procedure (for example, withdrawing money to a cell phone account or an e-wallet in the local payment system), requires from you an extensive package of documents, including those in English.

Don't let the broker verification procedure come between you and your money

In order not to become a victim of manipulation and fraud, disguised by pretty words about protecting the interests of clients and anti-money laundering:

• Explore All of the company's verification requirements before you open an account and deposit funds into it, and make sure you are able to provide the company with all of the requested documents;
• correlate the official status of the company, its place of registration and the location of the bank where the client funds are kept, with verification requirements and make sure that they are not excessive (in case information about the bank is not available in public sources, be sure to request it from representatives of the broker);
• in advance select preferred methods of withdrawal and make sure that the company's requests meet the requirements for identification of the offered electronic payment systems, if you plan to use their services;
• if possible, go through the verification procedure as early as possibleIt's better before you start actual trading, not when you urgently need to withdraw funds, and make sure that in the future the company will have no formal reasons for delaying outgoing payments to you or refusing to withdraw funds.