Finance Magnates can confirm that the big changes which the forex and CFDs brokerage industry has been experiencing over the past couple of months are just starting. In what seems like a well-coordinated effort, the latest loophole for unregulated forex and CFDs brokers has been closed by Mastercard. The company has sent out an email to payment processors informing them about big upcoming changes.
The company has singled out binary options, CFDs, forex cryptocurrency options and ICOs as businesses which are deemed as “high risk”. The letter from the company sent to payment processors elaborates that any business in this area which is not operating with a license in a given jurisdiction will be recategorized into a new risk category.
High-Risk Securities Merchants
Mastercard has deemed all of the above-mentioned brokers and ICO issuers as “high-risk securities merchants” and has mandated that transactions be categorized into a special group that has a card acceptor business code 6211. The number signifies that chargebacks made by clients can still be executed for up to 540 days.
Effective from the 12th of October 2018, which is 6 months since the payment processors have received the letter, a new set of revised standards for high-risk securities merchants will come in place. The changes which are affecting all transactions globally via Mastercard, Debit Mastercard and Maestro will need to be subjected to additional monitoring.
Brokers and ICO issuers will have to play by the rules and execute transactions only in jurisdictions where they are legally allowed to operate.
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Evidence and Documents
Starting from the 12th of October every payment processor who is processing the transactions of a high-risk securities merchant must demonstrate to Mastercard that adequate due diligence has been applied. Brokers and ICO issuers will be required to present evidence of legal authority to operate in a given jurisdiction.
Such evidence can be a copy of the merchant’s license to operate issued by the official authority in the given country and a copy of a licensed exchange or licensed trading platform with which the broker is operating. Payment processors will be required to cease all processing of high-risk securities transactions from such merchants until presented with the said documents.
Provided that the jurisdiction is not regulating such operations in a given country, a legal opinion from a reputable local firm must be presented by the brokerage or the ICO issuer that identified all relevant trading laws and other laws applicable to the brokerage. Aside from that, the legal opinion must include all relevant trading laws and other laws applicable to cardholders that may transact with the brokerage company or the ICO issuer.
Coordinated Effort on a Corporate and Regulatory Level
So there you have it: after many years of operating in the “wild west”, binary options, forex and CFDs and the relatively fresh ICOs are being targeted by authorities in a well-coordinated manner in tandem with key corporations. As the ESMA rolled out its new regulations in the sector, Google was next to single out and ban the use of Google Ads by forex, binary and ICO companies.
With VISA and Mastercard usually going hand-in-hand, the likelihood that the other major card issuer will skip on this one is very very small.