FX Regulations, Compliance, and Ethics
Conduct, AML and market rules
FX is subject to AML/KYC, sanctions, market-conduct rules and cross-border licensing. The FX Global Code sets voluntary principles for good practice, including execution, transparency and conflict management. It is not itself a statute, but regulators and counterparties may require adherence through contracts or supervisory expectations.
- AML/KYC: identify the client, beneficial owner and source of funds; monitor for suspicious activity.
- Sanctions: screen parties, banks, vessels and jurisdictions; freeze and escalate matches rather than execute.
- Best execution: consider price, speed, size and execution venue; document the approach.
- Conflicts of interest: separate client order flow from proprietary trading; do not front-run or misuse confidential information.
- Record keeping: retain trade, communication and client records according to local rules.
Worked example
A client asks a dealer to backdate a trade to a prior day's benchmark fix because the client "missed the rate". The dealer must refuse. Backdating creates a false record, misstates the execution time and may manipulate a benchmark. The correct action is to execute at the current valid rate, document the request and escalate any continued pressure. Similarly, if a payment instruction matches a sanctioned party, the operation should be frozen and escalated, not processed.
Traps
- Treating the FX Global Code as binding law in every jurisdiction.
- Screening only the remitter and not the beneficiary or beneficial owner.
- Disclosing client order flow or front-running client orders.
- Assuming compliance approval resolves all ethical conflicts.