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Regulated and Unregulated Forex Brokers

In terms of daily turnover, foreign exchange, or Forex (FX), dominates the financial sector. In April 2019, daily trading in FX markets increased to $6.6 trillion from $5.1 trillion three years prior.

Apart from its enormous size and a wide variety of trading platforms, the market is poorly controlled due to its decentralised structure. So, there is room for dishonest behaviour (some could even call it fraud), whether it involves Forex brokers or businesses that advertise secret trading algorithms. It might be challenging to separate good from evil.


Is the forex broker registered and licenced?

The regulations and legislation that businesses participating in the forex sector must abide by are referred to as forex market regulation.

Regulation’s main goal is to safeguard you against hidden financial risk, and dishonest business practices including pricing and order manipulation, and fraud.

The regulation aims to safeguard you from dodgy brokers acting unethically.

The vast, round-the-clock currency market is not governed by a single worldwide authority.

Instead, it is mostly the duty of each nation. The majority of nations have a regulatory body that establishes a set of guidelines and requirements that retail forex brokers must adhere to.

Every currency regulatory authority functions under its legal framework and regulations and enforcement vary greatly from one nation to another.

The regulatory body has the authority to impose penalties and take disciplinary action against a forex broker who doesn’t comply. These penalties, which may be severe, provide businesses with a strong incentive to follow the law.

Should the regulatory infractions be exceptionally serious or if the firm doesn’t successfully adopt modifications to prevent future violations, the regulatory body may finally decide to cancel that company’s operating licence if fines don’t work.

If this occurs, the forex broker will be operating unlawfully and without a licence and will no longer be able to conduct business in this area.

Several nations have different forex laws. This implies that not all regulatory authorities adhere to the same rules or provide the same level of financial security.

Each regulatory body has its own set of regulations and sphere of authority.


Regulatory Bodies

To operate legally and effectively, financial institutions must be licenced and supervised by regulatory organisations. Recognizing your Forex broker’s regulatory status is essential since it affects the security level.

The Financial Conduct Authority (FCA) in the UK, the Australian Securities and Investment Commission (ASIC) in Australia, the Commodities Futures Trading Commission (CFTC), and the National Futures Association (NFA) in the United States are well-known regulating organisations.

For instance, the FCA is the prudential regulator for more than 24,000 of these companies and the conduct regulator for over 56,000 financial services companies and financial markets in the UK. They want to make sure that the financial services industry in the UK is reliable, cutting-edge, and capable of meeting the demands of all of its clients, from small businesses to large multinationals. The ASIC’s role, among other things, helps the financial system and the companies that operate inside it work better. They encourage consumers and investors to participate confidently and intelligently in the financial system.

While they are not well recognised, most nations do have regulatory organisations that keep an eye out for financial misconduct. Forex traders, for instance, are somewhat aware of Cyprus Securities and Exchange Commission (CYSEC), the country’s financial regulatory body.

As you can see, regulation is a very significant factor. It is wise to take the effort to make sure your selected Forex brokerage supports this.


Unregulated Brokers

Even though financial regulation lends credibility, some Forex brokers choose to operate in an offshore jurisdiction where the supply of Forex trading services is not regulated.

It is expensive to establish and maintain a regulatory licence. Unregulated brokers save costs since they do not incur this cost. The FCA states that yearly payments are based on the scope of the firm’s operations, the sorts of regulated activities it engages in, and the cost of regulating those activities.

So why would traders choose an uncontrolled broker over a managed one?

Higher leverage is a typical justification. Exaggerated gains sometimes tempt traders, denying the possibility of equally disproportionate losses. Other brokers entice traders with guarantees of significant gains.

Despite being widespread, unregulated brokers are not in any way against the law. Your ability to seek relief is the major thing you stand to lose. Regulated brokers may not always treat you properly, but if they do, they risk legal repercussions. At the absolute least, a licenced Forex broker must adhere to the rules.

Important things to keep in Mind

When picking a Forex broker, whether licenced or unregulated, traders are advised to take the following factors into account in addition to the regulatory aspect, which is by far the most significant:

  • Demo Accounts. A demo platform must be free and provide the same circumstances as real-time, live marketplaces.
  • A wide variety of markets. There may be times when you wish to venture outside of currency trading and learn other markets outside the EUR/USD, such as trading in stocks, commodities, indexes, or cryptocurrencies. You can stick with the broker you’re accustomed to if you have this option.
  • Tight spreads. Wide spreads are no longer used. Spreads have gotten so tight that, in terms of cost, they essentially have no value unless you’re actively trading Forex utilising an intraday model.
  • Transparency. It’s important to understand the goals of the Forex broker. Where do they have their offices? Are they governed, and if so, by what entity? What do they stand for? Their track record in customer service? What is their source of income? You might call or contact the brokers; in essence, you’re seeking brokers who satisfy your requirements.
  • Various tools. To trade Forex profitably, traders need a variety of tools. Reputable trading platforms—most Forex traders nowadays use the well-known MetaTrader 4 and 5 packages—are a top need. Most retail traders also frequently ask for additional tools like an economic calendar, a correlation matrix, and position size calculators.
  • Education. Education of high calibre is crucial. The foreign exchange market seeks information from professionals in the field. If the brokerage business you’ve picked provides this service, it’s undoubtedly a bonus because it shows that they are attentive to customer demands. Market research is still another important factor. To provide both experienced and novice traders with a variety of trading ideas, both fundamental and technical trading methods should be included.
  • Broker evaluations. Featured brokers can be contrasted side by side, often arranged by rating and regulation. Choose just those with verifiable independent reviews.


Identifying a Forex Scam

A financial market is exactly what Forex is. Forex trading, where investors purchase and sell various currency pairings, is thus a lawful activity. As the foreign exchange market is decentralised, there isn’t a single physical place where investors may go to buy or sell their preferred currencies. Decentralization also refers to the fact that authorities or regulators from several locations regulate or oversee the market rather than a single organisation or agency. Money is the primary commodity traded between participants in Forex trading. Because of this, currencies are exchanged in pairs. You sell one currency when you purchase another, and the opposite is true.

For instance, when you purchase the euro and sell the US dollar when you go long on EURUSD, you are hoping that the euro will increase against the US dollar. Although forex has been around for a while as an investment option, it has only recently been broadly accessible to retail traders. Forex is typically traded as a CFD by retail investors, who are not required to possess the underlying currency. Investors who trade CFDs speculate on the price movements of financial assets, allowing them to benefit from both increasing and decreasing prices. Leverage is a big draw when trading CFDs. To hold a much greater position in the market, traders just need to deposit a little amount of margin with their broker. This implies that gains from profitable transactions are increased. Yet here is where leverage may be dangerous because it increases losses on losing bets. Forex is, therefore, primarily a high-risk, high-return activity.

So why do Forex Scams exist?

Around $7.2 trillion is exchanged internationally every day on the forex market, which is by far the biggest financial market in the world. With such a startling number and the magic of leverage, there is always a great chance of making money on the Forex market, albeit there are also many hazards involved. There are almost no entrance restrictions for retail traders because technology has democratised the Forex industry.
Because anybody may start trading immediately, even though forex trading involves a considerable lot of knowledge, ability, and experience, susceptible individuals are drawn to the possibility without fully appreciating the inherent danger. Since Forex is such a huge goldmine, dishonest firms try to entice unwary clients by promising them the chance to make a lot of money constantly. They present Forex trading and the potential for profit as quick and simple processes. Forex scams will continue to exist as long as there is a profitable forex market. So, it is wise for investors to be able to recognise and stay away from Forex scams in all of their forms.

Types of Forex Scams

There are many different types of forex scams, some of which are more obvious than others. These may originate from brokers as well as from non-broker sources. Although many of the services that are now offered are legitimate, spotting scammers may be quite difficult. Yet, dishonest con artists take advantage of what are often real offers by using trojan horse-style techniques. These are a few of the typical lawful services that con artists frequently abuse:

  • Competent Fund Managers
    Establish the credentials and experience of the fund managers. In reality, many fraudulent funds’ fund managers are not the certified experts they represent themselves to be.
  • Overhyped Returns
    Fraudsters frequently make exorbitant historical returns claims and display data that surpass market standards to entice investors. Make cautious to verify these claims and avoid making investments impulsively.
  • Significant Management Fees
    Fees are relatively common, but before investing, read the “small print” to understand what they are, how to withdraw money from the fund if you desire to, and any potential penalties for doing so too soon.

Fraud using EA/Trading Robots

Trade robots and EA (Expert Advisor) modules are frequently offered as value-added services by reputable brokers and are capable automated trading tools. Investors need to be aware that trading platforms simply automate manual trading strategies. Although there are automation advantages, making endless riches isn’t one of them. Regrettably, there are con artists that provide services that aren’t what they promise to be. Important things to take into account while assessing automated trading solutions include:

  • Limitless profit promises
    Fraudsters will make claims like “guaranteed riches” or “churn out unending gains from the markets round the clock.” This is just untrue, and not even the finest solutions with the best reputations can guarantee accuracy that is 100% accurate or even near to it.
  • Exceptional trading tools and a small number of “approved” brokers
    This is a common con where investors are promised free software or are sold in exchange for a deposit with a broker who has been “recommended.” The purpose of the con artist is to entice gullible investors with unfulfilled promises to earn a commission from introducing new clients to a broker.

Forex Trading Signals Scams

Trading signals provide traders with trade proposals or ideas that will enable them to profit from market opportunities.

Signals can be produced manually or automatically by people, organisations, or both. To provide trading signals, they can utilise either technical analysis or fundamental analysis, or perhaps both. There are numerous reliable signal services, however, there are also scam offerings and important red flags to watch out for:

  • Higher precision
    Statements like “90%+ accuracy” should immediately raise red flags. This degree of precision is beyond the capabilities of even the finest traders and technology. You may compare their prior signals to historical market data with a little research.
  • With “recommended” brokers, Free signals
    When you join up and make a deposit with the broker they propose, introducing brokers and affiliates who are paid a commission by recommending new customers to a broker will frequently claim to be able to provide you with Free Signals.

Here are a few instances of outright fraud that must be avoided at all costs:

Forex “Holy Grail” Scams

Scammers are aware that finding and seizing the greatest trading chances on the market is the most challenging aspect of complete trading activity. When naive investors find the “holy grail” trading strategy that will drain gains from the market 24 hours a day, seven days a week, they assume they will be on the road to endless wealth. Any advertisement for trading software or a firm that promises to offer the “holy grail” trading technique that would protect you from market losses is a fraud and ought to be avoided at all costs.

Scams with Guaranteed Returns

Even though this is perhaps the least sophisticated fraud, it nonetheless attracts victims. Investors are urged to sign up for a service or business that trades the forex market in this scam in exchange for the promise of regular, set returns. Given how quick and active the forex market is, this is a complete hoax. Forex trading involves both gains and losses, neither of which can be predicted. It is almost impossible to produce gains on the market that are assured. No method is perfect and will not result in some losing trades, so beware of anybody who guarantees profits out of the Forex market is only out to take your money away from you.

Scams by Forex Brokers

The unsettling aspect of Forex scams is that certain Forex brokers may potentially be involved in their execution. Here are some of the most common con games out there:

Manipulation of prices

The scam that con artists use the most is this one. Some brokers intentionally manipulate their trading systems to the detriment of traders. Negative slippage, where entry and exit orders are completed at prices unfavourable to the transaction, is one possible manifestation of this. For instance, a purchase order is completed at a significantly higher price, which reduces, if at all possible, the potential gains from the deal. Also, there is “stop hunting,” in which the broker tries to eliminate the investor-applied stop loss before moving on to stream the accurate prices. In essence, price manipulation will cause investors to place losing transactions.

Extraordinary high leverage

In CFD trading, leverage is a fantastic concept. Yet leverage always has two sides to it. Profits from profitable transactions can be substantial, but losses from losing deals can also be substantial. Some brokers promise investors extraordinarily high leverage ratios of up to 2000:1 in an effort to entice them with claims of large gains, but market risks can cause a single failed transaction to wipe away the majority of a trader’s balance.

Unsegregated Client Bank Accounts

Scam brokers sometimes manage a single bank account for both the cash of their clients and their operating funds. This implies that they will be more inclined to look for methods to support operations using client money when funds on their accounts are running low. This is a very terrible business practice, and if the broker is unable to pay their debts, your money will be linked to theirs and may be taken by their creditors.

Fake promotions and bonuses

Incentives and promotions are frequently provided by brokers, even trustworthy ones. Brokers that are registered and licenced must make sure that any bonuses and promotions they offer adhere to legal requirements and don’t “lock” the trader. Yet, some dishonest brokers entice investors with false promos that feature onerous or completely unreachable terms and conditions. This implies that their investors will nearly never be able to take any winnings before they lose their trading money. It’s usually true if something seems too wonderful to be true.

Personal Data Fraud

You will be needed to provide some of your private and personal information when joining up with a brokerage business, as well as perhaps payment information like credit card numbers. To guarantee that your data is kept private and is never shared with or sold to a third party, a licenced and registered broker is obligated to implement the essential security measures. Scam brokers might not take the appropriate security measures or, worse yet, they might sell your information to a third party. These third parties can start contacting you with offers you haven’t chosen to receive or send you unwanted emails. Innocent investors may sustain losses as a result of identity theft and the sale of personal information.

How to avoid broker scams

In comparison to other scams, broker scams are more cunning and damaging. A business that ought to be your trading partner could turn out to be your biggest opponent. It is crucial to be able to spot them and stay away from them entirely. How to avoid broker scams
In comparison to other scams, broker scams are more cunning and damaging. A business that ought to be your trading partner could turn out to be your biggest opponent. It is crucial to be able to spot them and stay away from them entirely. Regulation with a respected organisation is the first step in locating a reliable broker. Brokers that are subject to regulation are required to manage segregated bank accounts for client monies that are distinct from their working capital accounts. They are moreover exposed to sporadic platform audits to guarantee that they consistently provide consumers with transparent trading services.

Authorities also make sure that brokers don’t make unsupported promises or employ questionable marketing strategies. Investors also have some recourse against a third-party organisation whose only responsibility is to safeguard investors in the event of a dispute. Investors should study evaluations from reputable websites online in addition to the regulation, where they may read about other traders’ actual experiences. Several review websites also carefully examine complaints as well as security and safety concerns, such as KYC procedures and website encryption requirements.

Do Forex Brokers Want You to Lose?


Fill a need if you see one. The retail FX market, which allows anyone to trade the biggest market in the world with as little as $500, was originally founded as a result of this mindset.

Retail or individual forex trading simply did not exist in 1999, more than a decade ago. Due to the high capital requirements for trading, only large banks, hedge funds, and high-net-worth individuals were able to participate in the foreign currency markets. Typically, the minimum trade size was USD 1,000,000.

Yet, as word of the profit potential of forex trading spread, more individuals were interested, even if they were unable to participate in the conventional interbank market because they lacked the necessary capital.

The retail forex market was created in response to the rising need for investors with less than $50,000 to invest to have access to the foreign exchange market. To fulfil this tremendous demand, new forex brokers started (and still do) popping up quickly, but this part of forex trading is still mostly unregulated.

Many of the available forex brokers follow the “market maker” or “bucketshop” business model, and these are the people who, in reality, have NO INTEREST IN SEEING YOU SUCCEED AS A TRADER. Do you ask why?

Moreover, it is their responsibility to provide smaller investors with access to the currency market (hence the term market maker). They must be able to fulfil every order you enter on your trading platform for them to be able to do that, and they accomplish this by taking the opposite position on every transaction you execute. The majority of merchants will be harmed by it because they don’t comprehend their company model.

Which brokers want you to lose money?

The best way to prevent them is to be aware of the types of brokers that trade against you. There are primarily two categories of brokers.

Dealing Desk Broker

Market makers are another name for dealing desk brokers. These brokers give their customers access to the market. They operate as the counterparty to the trader and take the opposing side of the transaction. Not that the dealing desk brokers lack access to market participants—quite the contrary. They establish connections between traders and actual market traders, but they make decisions on which orders to send and which to hold in-house.

There are essentially two categories of clients:

A Book Clients: The clients that the brokers choose to link to the market are known as A-book clients. There is no conflict of interest because the broker sends the order straight to the market; they are unconcerned about whether you gain or lose. How often you conduct business with them is all that matters to them. A-book clients are frequently profitable and successful traders who brokers prefer not to compete with.

B Book Clients: Clients on the B-book are customers that the broker chooses to keep on staff by internalising their orders. Often, these are novices that the broker is confident will lose. So, they earn by trading against the trader. Because there is a blatant interest conflict, your broker will want you to lose at that point.

Non-Dealing Desk Brokers

Banks and other significant financial institutions are known as liquidity providers and non-dealing desk brokers submit deals. They provide their client’s access to actual market players in this way. They serve as pure intermediaries, sending just deals without profiting from your loss. They seek the best costs from all liquidity sources to assist their clients.

There are two types of non-dealing desk brokers: STP (Straight Through Processing) and ECN (Electronic Communications Network). Both of them route orders to liquidity providers via computerised systems. Just the commissions and spreads are different.

Be sure the ECN broker you want to work with is legitimate, though. Despite being market makers, several brokers claim to be ECN brokers. One of the most crucial aspects of forex trading is selecting a reliable broker, so conduct your research before investing with one.

How to Spot Bonus Scams in Forex Trading

In recent years, forex trading has been quite popular, particularly during the Covid Era

Yet, luring retail investors to your platform necessitates marketing work, which notably frequently manifests itself in the form of welcome, deposit, or refund benefits.

Regrettably, both professional and novice fraudsters seize the chance to take advantage of incentives like this. Let’s examine how your forex trading software can now identify bonus misuse.

How Does Bonus Abuse Affect Forex Trading?

Incentives are designed to assist draw in new clients and keep existing ones. Your FX platform stands to lose a lot of scammers who take advantage of them:

  • Every incentive offered is money you won’t receive back from your marketing budget.
  • Fraudsters are drawn to your platform by your perks, and once they’re signed up, they may cause all sorts of trouble, driving up chargeback rates and problematic transactions.
  • Possible legal and KYC difficulties: The fundamental component of bonus misuse is multi-accounting. Moreover, fraudsters will utilise stolen identities to open several accounts. Your compliance requirements might suffer as a result, which is risky.
  • The greater quantity of manual reviews: It takes time and effort to separate the good users from the bad ones. Your risk team would presumably prefer to spend these funds elsewhere.

How Can Bonus Abuse In Forex Trading Be Spotted?

Several accounts made by the same individual are crucial factors to consider when trying to find and stop bonus abusers, as was previously indicated.

It may be an alone, simple fraudster. Alternatively, it may be a big network of organised crime. The outcomes are the same: dozens of accounts coming from the same source try to benefit from your incentive programme.


The way you respond should be guided by this information. Here are a few possibilities:

  • Increased identity verification standards? IDV is wonderful in principle, but it can be difficult to implement, especially if you want to increase your user base.
  • Additional reviews of manuals? This might be effective, but your organisation might not have the resources required. That doesn’t scale, too.
  • Behavioural research? Sometimes it’s necessary to look at how users engage with your FX platform to determine who will be high-risk or not. You can achieve this with the aid of a smart fraud protection tool.

Identifying relationships between accounts? This is an important technique to adopt to spot fraudulent accounts as soon as they start using your platform to sign up or even claim incentives.
To reach the sweet spot that attracts more consumers without taking on too much risk, you should frequently assess your incentive programme in addition to optimising your bonus abuse prevention.

Top 3 Individual Guidelines to Prevent Bonus Abuse in Forex Trading

Let’s explore the rules to implement on your FX exchange in more detail now that we have a clearer understanding of our risk approach intended to identify bonus abusers.

1:Password hashes are the same among users

Bonus abusers who set up several accounts are unable to spend hours methodically constructing every aspect of their registration to build a false identity. They occasionally use the same elements again. And in this manner, proof of a link between several accounts might be missed.

With a password hash, this is more obvious than everywhere else. This is a password-generated, anonymous identification parameter that is encrypted. When two of them match, it indicates that even though you can’t read the password, the users have the same password.

Also, the chance that you’re interacting with the same individual increases if two or more people have the same password hash.

It should be noted that the identical rule may be produced using either a browser or device hash. They examine various software and hardware setup settings (OS, window size, device version, etc.).

Based on these choices, you may make distinctive identifiers to identify connections between people.

2: Cookies turned off by the customer

The browser that a user selects to access your website delivers a wealth of information, speaking about browsers. The use of their configuration as an identifier has previously been highlighted, but you may also concentrate on certain data points that are regarded as questionable.

In the context of this rule, a lack of data points—missing cookies on the user’s end—raises concerns.

Why does this seem odd?

There are two possible outcomes. One, you’re working with a new session or a privacy-focused extension.

Yet, it’s also possible that you’ll be bringing on a user who uses a browser that is made to evade anti-fraud detection.

Once more, this is a sign that you’re dealing with a pretty experienced fraudster who manually generates several accounts (or uses bots). The very fact that they’re attempting to hide their identity should raise red flags.

3:IP and Card Country Do Not Match

Two rules used at the signup step have been examined thus far. Another critical period to keep an eye on consumers is when they make their initial deposit onto your FX platform.

There is still time to gather further data to detect fraud because it’s likely that you only permit clients to claim their incentives after that step.

Here, a straightforward custom rule is created to assist us in identifying cards associated with a place that is distinct from the IP address.


This addresses two potential deception strategies.

The consumer is signing up for a VPN (which we can also identify) while using their actual card to disguise their IP address.
Your situation can include a stolen credit card, which is more concerning. In both cases, you should raise the deposit’s risk score to request additional verification.

Finally, it’s crucial to remember that the sort of card you are using may be a sign of fraud. For instance, prepaid cards have a larger risk than regular credit cards.

How iforexview Helps Foreign Exchange Trading Firms in Combating Bonus Abuse

Ifoexview is made to enable you to ask your broker for as much information as you can with the aid of reputable financial attorneys. Since they are experts in their fields, these lawyers.

To eliminate low, medium, and high-risk interactions with your platform, we even enable you to define rules that evaluate user behaviour.

You should be able to manage risk more effectively as a result. This is essential for FX trading platforms to identify links between clients intended to take advantage of your promotions and bonus programmes, both at the registration stage and between existing accounts.

Interested in finding out more about how iforexview might benefit your forex trading business? Get a demo or register for free right now.

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