Forex scheme networks and individuals charged with swindling the public of millions reached global headlines in the past few years. From trials in courts in Israel, the Philippines and the U.S. governments around the world are concerned with the growing specter of online frauds and are looking for ways to prevent it.
The actual source of the blame may be on technology. COVID-19 was the catalyst for a dramatic increase in online financial schemes that cost many consumers their savings. Because they were at home during the pandemic, were unemployed or underemployed and looking for ways to pay their bills, more consumers took the risk with online forex trading.
In addition, technology has made it easy to disguise one’s identity, to adopt a false social media presence, and convince people to make short-term forex trades only to disappear with funds a few hours later. This type of scenario was repeated so often in the past couple of years that more schemers realized they could make money easily, not with actual forex trading, but offering false deals under assumed names.
As a result of these losses, the number of complaints against forex brokers has increased. Although it isn’t always possible to track them down, financial companies adept at fund recovery services can consult with clients, gather evidence, prepare intelligence reports and help them present their claims to banks and regulators.
FundRecovery UK will prepare your case and be your advocate. Our professionals have expertise and strategies that will improve your chances of getting your funds back. We consult with clients, assist them with intelligence reports and negotiate with banks and other institutions. Ask us about chargebacks, wire recalls intelligence reports, and crypto recovery.
The Crackdown on Forex Trading Schemes
The Chinese government is pretty forceful when it comes to crackdowns. Those who follow cryptocurrency may recall in 2017 that it was the sudden closing of three major cryptocurrency exchanges in China that led to a downturn in cryptocurrency that has only recently been revived.
Forex is the newest culprit of China’s strict regulations, which aim to step up scrutiny of forex brokers, create higher limits for market capitalisation and make the application process of licenses more bureaucratic.
Although it is unlikely the FCA will adopt rules as draconian as China’s, there is some indication that Western regulators may tighten regulations in response to the increase in online forex trading schemes and the public demand for action.
Increasing market capitalisation, inspecting and monitoring licensees, and intensifying scrutiny in the application process may be some steps regulators may take to protect consumers.
What do New Regulations mean for Brokers?
Tightened regulations may pose a problem for small, new brokers who are applying for their licenses for the first time. They might barely reach the market capitalisation minimum, and if these are raised, they may find that they can no longer apply for a license. The lengthening of the application process may be an impediment or a deterrent to new brokers.
However, these stricter rules may be good news for established and larger brokers. They may well be able to afford the market capitalisation and easily pass the requirements for renewing licenses.
What Stricter Forex Rules Mean for Traders?
A tightening of forex rules may mean that fewer brokers are offering their services, but it can validate existing ones and ensure that only the most stable obtain licenses. This can be a positive development for new traders who are unsure of which brokers are reliable.
However, the new regulations may not decrease the incidence of forex fraud by much, simply because most of the schemes are run by unlicensed financial services and brokers. Those who are not licensed in the first place and do not feel they have to answer to regulators are not likely to mind if rules are tightened. After all, these are not rules that would concern them and only applicants for their licenses.
Similarly, traders who are not inclined to do due diligence and research brokers and their licenses carefully may not enjoy any increased protection from these new rules, since they are lax with their precautions
Therefore, the best way to protect consumers from online fraud is to educate them about safe trading and encourage them to adopt best practices for researching financial companies and brokers before trading forex or any other asset.
How to Trade Forex Safely
The following are important considerations to stay safe when trading forex:
- Open an account only with a regulated broker
- Be aware of the risks involved in forex
- Use a practice account at first
- Find out who the broker actually is
- Read terms and conditions carefully
- Ensure commissions and fees are in-line with industry standards
- Confirm all information
Since the majority of fraudulent behavior is committed by brokers who are not regulated, opening an account with a regulated broker is the best protection. Ensure this license is genuine by confirming the information on the regulator’s website. Also, find out the names of the people at the brokerage and research their credentials.
Understand that forex trading is risky and that many traders lose money in the beginning. Informing yourself of how forex works and how volatile it is will help you see through all of the false promises and guaranteed returns characteristic of unregulated brokers. Read the terms and conditions carefully and check that all commissions are in line with industry standards.
Finally, use a practice account before trading with actual money so you can test the broker’s platform and get an idea of what forex trading is like.
If you have lost money to a forex broker and wish to file a claim or need an advocate in a dispute, a financial company that offers fund recovery services can help retrieve your funds.
Consult with Fund Recovery UK if you are trying to retrieve your funds. Talk to us and we will map out a strategy with effective tools and methods for fund recovery. Our professionals have a strong working relationship with banks and regulators and understand how to make a claim persuasive and successful.