Consumers chasing returns through foreign exchange trading are being warned about scams surrounding the market.
Tom Hartmann, Personal Finance Lead at the Commission for Financial Capability (CFFC), says people searching for information about foreign exchange, or forex trading, may come across teaser ads for courses, seminars or software to help them convert one country’s currency to another in the hope of turning a profit.
“Forex can look like another form of share investing or cryptocurrency, but it's quite different,” says Hartmann. “There are a million get-rich-quick ads out there promoting it – but beware. This is where scammers lure us in.”
The CFFC is raising awareness of forex-related scams during Fraud Awareness Week (November 15-21). Hartmann says in the current low-interest rate environment it’s natural for individuals to look for ways to make their money work harder, but be aware that forex trading is traditionally the domain of large corporations and hedge funds.
“The internet has made it easy for individuals to take part in forex trading, but it’s a complicated field, full of jargon, and easy to lose a lot of money very quickly. You take a punt on whether one currency will become worth more or less and try to profit from the change in value. This is more akin to speculating than investing. Scammers play on our need to be educated, offering exorbitantly priced courses or software.”
Red flags to watch out for:
• Forex trading platforms which are unregistered and often based overseas. They can vanish overnight, and you have no legal protection.
• Requests to supply personal information such as a driver’s license or credit card. This opens you to identity theft.
• Claims to teach you how to predict sudden movements of currency. It’s impossible to do this consistently.
Hartmann says “recovery room” scams are rampant in this field.
“Sadly, when people do lose money they are often targeted by more scammers offering to get it back for them, but this is just throwing good money after bad,” says Hartmann. “If you want to dip your toes in the waters of forex trading, make sure you do your research. It’s very easy to get bitten.”