Warning Signs of Foreign Currency Trading Fraud

October 23, 2012

The growing number of financial investment opportunities in recent years has been accompanied by a sharp rise in foreign currency trading scams, according to the U.S. Commodity Futures Trading Commission (CFTC). Consumers are constantly contacting the BBB about companies that are using the Internet and e-mail spam to advertise investment opportunities in the Iraqi Dinar. The ads claim that now is a great time to make large profits by investing in Iraqi currency. Consumers report to the BBB that such investments have yielded nothing in return.

Investors are urged to exercise caution. While there are legitimate firms that exchange foreign currency in the foreign exchange market, there are also less than reputable companies that are just out to obtain an investor’s money.

CFTC states that if you are solicited by a company that claims to trade foreign currencies and asks you to commit funds for those purposes, you should be careful. Watch out for the following warning signs and take the necessary precautions before placing your funds:

  • Stay away from opportunities that sound “too good to be true.” Get-rich-quick schemes, including those involving foreign currency trading, tend to be frauds. Keep in mind that there is no such thing as a “free lunch.” Be especially cautious if you have acquired a large sum of cash recently and are looking for a safe investment vehicle. In particular, retirees with access to their retirement funds may be attractive targets of fraudulent operators.
  • Avoid any company that predicts or guarantees large profits because of well-known current events, published reports or predictable seasonal changes in demand.
  • Stay away from companies that promise little or no financial risk. Be suspicious of companies that downplay risks or state that written risk disclosure statements are routine formalities imposed by the government.
  • Be wary of sending or transferring cash on the Internet, by wire transfer, mail or otherwise. Be alert to the dangers of trading online; it is very easy to transfer funds online, but often can be impossible to get a refund. Many companies offering currency trading online are not located within the U.S. and do not display an address or any other information identifying their nationality on their Web site.
  • Be sure to obtain written documentation about the product, the company and its track record, in order to verify data. Before doing business with any company, check it out with the Better Business Bureau and review the company’s materials with someone whose financial advice you trust.
  • Do not deal with anyone who will not give you information on his or her background. Check out any information you receive to be sure that the company is and does exactly what it says.
  • If in doubt, do not invest your money. If you cannot obtain solid information about the company and the investment, you may not want to risk your money.

For more information on foreign exchange fraud visit CFTC’s Web site at http://www.cftc.gov and for more consumer tips you can trust, visit www.bbb.org.

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Kelvin Collins is president/CEO of the Better Business Bureau of Central Georgia & the CSRA, Inc. serving 41 counties in Central Georgia and the Central Savannah River Area (CSRA). This tips column is provided through the local BBB and the Council of Better Business Bureaus. Questions or complaints about a specific company or charity should be referred directly to the BBB at Phone: 1-800-763-4222, Web site: www.bbb.org or E-mail: info@centralgeorgia.bbb.org or info@csra.bbb.org