Forex scams target new markets


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21 shares, 4 points

The last few years have seen an explosion in forex trading, partly thanks to expanding access to high speed internet, which has seen it spread into new markets. While this is great news for eager traders who were previously excluded, it has also provided an opportunity for scammers to prey on large groups of people who are new to forex and therefore vulnerable. Inexperienced legal and judicial systems struggling to work out how to respond has made the situation worse in many places. If you’re concerned about your risk of becoming a victim in this situation, what do you need to know?

Phony brokers

One of the big problems with new markets is that anybody can set up as a broker and there is no regulator to make sure they operate fairly. The result is that phony brokers proliferate – operators with professional-looking websites which invite would-be traders to transfer funds to them and then just keep the money for their own purposes. They can be very difficult to track down and even harder to prosecute successfully under older, established laws. The best course of action for traders in countries in this situation is to register accounts with foreign brokers which they are able to confirm are fully regulated. If you wish to do this, you will need a US dollar bank account.

Phony funds

Along with phony brokers, there’s a serious problem with phony funds which claim to manage traders’ money for a fee. Some of them simply take the money. Others will give you bits of money back for a few months, making you think that they’re getting good returns on your behalf, until they have tempted you to trust them with a larger amount, and then they will disappear. Others will genuinely trade with the money on your behalf but will charge such high fees that you really don’t make very much while they make a comfortable profit out of your funds. If you really don’t want to have to do all your trading yourself, it’s better to work with a group of friends you’ve known for a long time. Don’t trust strangers who approach you with offers that sound too good to be true. Whenever you see adverts for funds with very high returns you should beware of forex scams.

Signal sellers

Something that’s the same in people the world over is that we all have a habit of spotting patterns in the world around us – real ones and, unfortunately, ones that aren’t actually there at all. This makes it all too easy to believe people who say they’ve found hidden patterns in the forex market that let them know the best time to make trades. Many legal systems find it difficult to prosecute people doing this because it’s difficult to prove that they don’t genuinely believe their system works, but the fact is that no such system does, so you shouldn’t pay money for the ‘secret’ or pay people for ongoing tips which give you no more than an average chance of trading successfully.

How governments are responding

Many governments have responded to this situation by making forex trading illegal or trying to dissuade people from engaging in it until they can develop laws that will reduce the risk of fraud. The fact is that forex fraud happens in places like the US and Australia, too, but smaller nations are particularly vulnerable to it because there’s a lack of public awareness of the techniques scammers commonly use. Here in the Philippines the government has issued two advisory notices discouraging citizens from trading and the legal position of traders is not 100% clear. What is clear, however, is that the government is more concerned about catching scammers – especially phony brokers – than it is about prosecuting individuals who are risking nobody’s money but their own.

In Tunisia, which faces similar challenges, the government has opened up its markets and made forex legal for banks only in the immediate term, drawing on the experience generated by this to develop laws and regulations that should help to protect individual traders. It is widely acknowledged by the governments of smaller countries that it’s impossible to keep people from trading altogether and equally impossible to provide them with complete protection, so the aim is to keep them as safe as possible. If you’re trading forex, you will also have to play a role in protecting yourself by using your common sense and staying informed about the scams that are out there.

 

 


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21 shares, 4 points
Michael Vicente
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