Making Cross Border Payments Safer and Easier Through Compliance

By AiPrise
28, Aug 2023
4 min read

As businesses continue to expand their reach across borders, making cross-border payments has become an increasingly important part of international commerce. From large players like Wise and Currencycloud to incumbents like Supra and Efexpay, the space is seeing huge growth and transformation.

However, with the complexity of different regulations and cultural nuances between countries, it can be difficult to ensure compliance with all necessary requirements. To make cross border payments safer and easier, it is essential to understand the regulations and have the right technology in place.This article will discuss the importance of understanding international payments, compliance requirements for safe cross-border transactions, and how technology can streamline the process.

Understanding International payments

Annually 23.5 Trillion USD, roughly equivalent to 25% of GDP,  are moved by global corporates across borders. Cross border payments make up a significant portion of this. As the rules, regulations, payment methods, and currencies vary from country to country, understanding the nuances between domestic and international payments is essential for companies looking to make safe and efficient cross-border payments.

Domestic payments are regulated by the laws of the country in which they are made. However, when making a payment across borders, additional regulations may come into play. Companies must understand the different regulatory requirements that apply to their transactions to ensure compliance with all necessary laws. For example, businesses sending funds abroad may need to comply with Anti-Money Laundering (AML) and Counter Terrorist financing (CTF) regulations.

Furthermore, different countries have different preferred payment methods which companies must take into consideration when making cross-border payments.  Companies like dLocal, Ebanx are trying to solve this challenge. Businesses should research what payment methods are most popular in each target market they wish to send funds to in order to ensure their customers have a smooth experience. Additionally, it is important for companies to be aware of exchange rates when sending money abroad as this will affect how much money will ultimately reach its intended recipient.

Compliance requirements

Adhering to compliance requirements is an absolute must for businesses making cross border payments.  In case of sending money to individuals, companies should adhere to following KYC regulations:

  • Know Your Customer (KYC): This regulation requires businesses to collect and verify the identity of their customers, including their name, address, date of birth and government-issued ID cards.
  • Anti Money Laundering (AML): This regulation is designed to prevent criminals from using the financial system to launder money. It requires businesses to screen their customers against lists of known criminals and terrorists.
  • Sanctions: Businesses need to be aware of sanctions that have been imposed by governments against certain corruntries or individuals. These sanctions can restrict or prohibit businesses from doing business with these entities.
  • Foreign Corrupt Practices Act: This US law prohibits businesses from bribing foreign officials to win or keep business.

In case of B2B payments, companies should adhere to Know Your Business (KYB) regulations:

  • Business Information Verification: This regulations requires businesses to collect tax Id numbers, business name, good standing certificates and registration information of the business.
  • UBO Verification: This regulation is designed to prevent shell companies owned by sanctioned individuals to transfer money through different corporations.
  • Sanctions: Businesses need to be aware of sanctions imposed by countries on certain companies.
  • Documents on file: Businesses are required to keep documents like operating license, trade certificates, business registration documents on file in case of questioning by regulators.

Following these steps will help companies make cross border payments safely and easily while avoiding any potential repercussions associated with non-compliance of governing bodies’ regulations.

Role of technology in compliance

Technology is playing an increasingly important role in making cross border payments safer and easier. Automation eliminates the need for manual processes such as identity verification, while artificial intelligence (AI) and machine learning can detect suspicious activity. Additionally, biometrics are being used in user authentication to further reduce risk.

AI-enabled systems can perform customer due diligence checks in real-time, helping to ensure that transactions remain compliant with regulations. AI can also be used to monitor customer activity for any suspicious behavior, allowing companies to detect fraud before it happens. This reduces the chances of a company facing fines or other penalties from regulatory bodies due to non-compliance.

Biometric authentication technology has become increasingly popular in recent years due to its ease of use and improved security levels over traditional forms of authentication such as passwords or PINs. Liveness detection technologies are being used by some organizations as another way of verifying users' identities when making a payment online or through a mobile device. Liveness detection ensures that the person submitting payment information is actually present at the time of submission - this helps reduce instances of identity theft and fraud associated with online payments by detecting if someone is attempting a transaction using stolen credentials or data from another user's account.

By utilizing these innovative technologies within their compliance processes, businesses can make sure they remain compliant with various regulations while providing secure services for their customers during cross border payments - making it easier than ever before to make international payments safely and securely without sacrificing speed or convenience.

If you're ready to learn more about making your business's cross-border payments compliant and secure, book a demo today!