Russian Finance Minister Warns Of Risks Posed By Forex Brokers
Russia’s Deputy Finance Minister Alexey Moiseev has highlighted that investors in the country were still exposed to huge risks from the operations being conducted by foreign exchange brokers. The minister stated that the risks posed by these forex brokers were still a serious concern even though financial pyramids schemes that had wreaked havoc in earlier years were reducing.
Moiseev noted that despite more stringent foreign exchange regulations being enforced in 2014, the industry is yet to reach appropriate levels of transparency and efficiency. He indicated this in a recent interview with the media adding that it was causing regulatory concerns.
According to a local news report, Russians lost nearly RUB 2 billion ($33.6million/EUR 31.6million) in 2016 as a result of fraudulent financial schemes. The loss was however lower than what was recorded in 2015 when it was RUB 5.5 billion. The government had tightened penalties for financial crimes in 2016. As per the new laws, those found guilty of operating a financial pyramid scheme would be sent to prison for up to 6 years and a fine of up to RUB 1.5 million will also be imposed.
Under the Forex law passed in 2014, foreign companies are prohibited from promoting or offering their services to Russian nationals from October 1, 2015. Similarly, Russian-owned foreign exchange companies who don’t have a dealer’s license and who are not members of a Russian self-regulated foreign exchange organization will not be allowed to advertise their products and services.
Moiseev pointed out that financial pyramids had reduced over the past year but said there were still financial companies operating that promised high returns, referring to foreign exchange brokers. He noted that these brokerage firms pushed financial products with very high risk to small investors which increased the possibilities for huge investor losses.
According to Moiseev, a major issue in this regard was that offshore foreign exchange companies were still targeting Russian citizens. According to data from the Bank of Russia, around 210 complaints were received against such offshore trading companies in 2016 as opposed to the 236 complaints received in 2015. The Bank of Russia is evaluating a separate set of rules for such overseas websites.
So far only six domestic foreign exchange dealers have been issued licenses for trading by the country’s central bank. However these companies are yet to commence operations because they are awaiting the release of official standards and policies. The standards were to be published in November 2016 by the central bank but that did not happen. The standards are expected to be released sometime this year.
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