Forex scams are becoming more rampant these days with the amount of money swindled growing even larger than ever before. Last December, police seized RM2.7 million cash from Forex scammers. Learn how you can spot a forex trading scam to protect yourself from becoming a victim and losing your hard earned money.

What Is Forex Trading?

Forex or FX, is the short form for foreign exchange which involves the buying, selling and trading of currencies. The most widespread scams in relation to foreign exchange are forex schemes which usually promises very high returns or profit rates.

Although forex trading has been getting a bad reputation because of all the many scams reported in the news, it is actually not illegal in Malaysia. Forex trading is only deemed illegal if it is not done through a Licensed onshore Bank or via individuals who have not obtained approval from Bank Negara Malaysia (BNM). This is because only financial institutions like banks, insurance companies as well as remittance service providers and currency wholesalers licensed by BNM are allowed to provide such financial services in Malaysia.

Here’s a list of licensed financial institutions and licensed money changers, remittance service providers and currency wholesalers provided by BNM.

How Do I Spot A Forex Trading Scam?

They ‘Operate’ Overseas

Many forex trading scam operators are based overseas in order to take advantage of their victims. The operator usually informs his or her ‘investors’ that they have to send the contract and documentation of the investment to the operator’s headquarters which is located overseas to get it signed.

What happens next is the victims later find out that the contracts were left unsigned from the operator’s side. With no binding contract between the two parties, legal action cannot be taken regardless of whether the investors are unhappy with the transactions or not. And as the forex scam companies are based outside the country, the Malaysian authorities cannot do much.

They Offer High Initial Returns

In order to lure investors and get them to pump in more money,  the operator may initially offer you extremely high returns for the initial investment. This is to convince you to increase the amount of investment when you reinvest during the second round. But what usually happens is victims lose everything when the illegal foreign trading scheme operators fail to produce the promised profits and cut off contact completely.

They Claim To Be A Small-Scale Operation

Illegal foreign trading operators tend to operate on a smaller scale and will claim they do so in order to provide more efficient remittance services. They will also say you don’t need any documents or identification. These illegal operators will be reluctant to use documents to validate and verify transactions and will often give various excuses or delay processing the documents for verification. By engaging with such operators, investors risk being cheated as a result of the lack of documentation as proof.

How Do I Protect Myself From Forex Trading Scams?

Only Use Licensed Traders

When it comes to forex trading, one should only deal with licensed onshore banks in Malaysia. This is because in the event that anything happens, it will be difficult to recover your money when dealing with offshore banks. The licensed banks that are allowed to conduct foreign currency trading in Malaysia are commercial banks, Islamic banks, investment banks and international Islamic banks.

Make sure you engage a licensed broker to manage your investments. Deposit taking is illegal unless you are licensed by Bank Negara, so never trust anyone who is not legally licensed to manage your money. If someone claims to be able to manage your investments and promises high returns, yet is unlicensed, that is a red flag which you need to avoid at all costs.

Always Check With The Authorities  

Check with relevant authorities such as BNM and Securities Commissions Malaysia (SC) before remitting, investing or depositing money to any operators. The SC has a list of unauthorised websites, investment products, companies and individuals not authorised to provide investment advice, financial planning or fund management services.

Aside from that, BNM has a Financial Consumer Alert page which provides a list of companies and websites which are also not authorized to provide any financial services.

Investing always involves risks, and some investments are more volatile than others. However, do remember that if it seems too good to be true, such as promising extremely high returns within a short span of time, be wary! When it comes to financial schemes or products, stay safe and deal with licensed companies or individuals.

See also: How To Spot And Avoid MLM Scams in Malaysia

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