How to spot a forex (FX) trading scam

Many Brits are losing thousands of pounds each to forex scammers, lured by the promise of huge returns. Samuel Leach, director of Samuel & Co. Trading, explains five easy ways to tell if that offer you’ve received is legitimate or a con.

Victims of forex (FX) investment scams lost an average of £14,600 last year as the financial regulator warns that such scams are booming.

The Financial Conduct Authority said scammers stole a total of £27 million through crypto and FX scam in the 2018/19 financial year, with the number of reported crimes tripling compared to the previous year.

Targeting victims on social media

Forex (FX) scams are commonly seen on social media platforms such as Facebook, promisingly extremely high returns on currency investments.

If you’re not careful, what seems like the magic solution for boosting your finances could end up trapping you in a cycle of growing debt.

To avoid becoming one of the victims lured in by FX scams, watch out for the following warning signs.

1. Lack of regulation

The first thing to check when you are approached by, or even considering, an apparent FX trading scheme is whether they’re on the Financial Conduct Authority (FCA) register or warning list.

If the business you are dealing with is on the warning list, needless to say, you should avoid them.

Similarly, if they’re not on the FCA register, and therefore not vetted by them, you should question why they would want to avoid regulatory scrutiny.

Even if they aren’t actively seeking to scam you, investing with an unregulated firm is risky as you won’t be protected by the Financial Services Compensation Scheme, meaning there’s little chance of getting your money back if there’s malpractice.

You should also check individuals aren’t simply pretending to work for a legitimate company.

To check the firm you’re dealing with isn’t a clone, get in touch with the named company independently using its firm reference and switchboard number.

Don’t fall for this currency spread betting scam

2. Over-promising

As with all investments, forex trading comes with a risk. If the individual offering to manage your money is downplaying the likelihood of you losing it, or promising significant returns, alarm bells should be ringing.

Although we’d love it to be different, if something sounds too good to be true, the chances are it is.

3. No live track record

Always ask for a track record of verified stats from live trading accounts, so you can assess their capabilities for yourself.

If they have one, they’ll be happy to send a link to a tracking website, such as myfxbook, which will show you years of data.

If they refuse or offer to show you stats from demo accounts, you should exercise caution.

A demo account might initially seem as good a proof as any for their competence, but it only proves their ability to make or lose virtual money and, as any good trader will tell you, it takes a certain mindset to be successful in a live trading situation.

Ultimately, you should ask yourself why you would trust them to trade with your money when they aren’t confident trading with their own.

Read what happened when loveMONEY's deputy editor learned to trade with the Samuel & Co. team

4. Pressure to deposit money

Any legitimate FX trader would want you to be entirely comfortable investing with them before you transfer any money.

As such, they would never pressure you to deposit funds during your first conversation or try to incentivise you to act quickly with limited time offers.

If an individual is doing this you should terminate your interactions immediately, as it’s highly likely they’re trying to involve you in a scam.

Advice to not withdraw your money at any time should also be met with similar scepticism.

5. Evasion

Those with nothing to hide have no reason to be evasive, so be conscious of whether the person you are talking to is answering your questions up front or trying to divert your focus, talk over you, or even getting argumentative.

If you’re unsure whether they’re intending to be evasive ask them the location of their offices.

A legitimate trader wouldn’t find this question out of the ordinary or offensive. If they do, they’ll reveal themselves through their refusal to give you the answer.

Similarly, you could request a meeting at their offices.

An authentic organisation would understand your desire to learn more about them and the specific person who would be managing your funds, whereas a con artist would deny your request.

When conducted by a trained professional, FX trading can deliver significant financial returns.

However, the promise of these shouldn’t blind you to the signs that the individual or company offering to trade with your funds is running an illegitimate operation.

Unfortunately, if you’ve invested in a scam once, you’re far more likely to be targeted again or to have your details sold on to other criminals, so to prevent this happening in the first place always exercise caution.

Samuel Leach is the director of Samuel & Co. Trading.The views expressed in this article do not necessarily represent those of loveMONEY.