Identifying and Evading Forex Trading Frauds in Malaysia
Forex Trading Frauds in Malaysia
Legitimate trading in the foreign exchange market is a form of investing that can lead to potential profits. This market is by far the largest of its kind, seeing $6 trillion pass through it each day. Unfortunately, there are a worrying number of fraudulent schemes and scams active within the market, and Malaysia has not been immune to this issue. Although the authorities are doing what they can to combat these scams, they remain a problem.
In Malaysia, trading foreign currency is permissible. This activity may only be carried out with banks that have been granted official licenses, such as commercial banks, Islamic banks, investment banks and international Islamic banks, as well as money changers that have been approved as money services business providers.
The Shariah Committee of the respective Islamic financial institutions, with the endorsement of the Shariah Advisory Council of Bank Negara Malaysia, the central bank of Malaysia, approves all Shariah-compliant financial products, comprising of foreign exchange related transactions, provided and executed by certified Islamic financial institutions.
Authorities regulating Forex trading in Malaysia
Retail investors from Malaysia can utilize the services of many online foreign exchange brokers. However, for these brokers to be able to legally offer their services in the country, they must either be licensed internationally or officially registered with the Securities Commission Malaysia (SCM), the regulatory body that manages Malaysia’s securities market.
The Labuan Financial Services Authority (LFSA) is another important authority in the area, which is in charge of regulating the Labuan International Business and Finance Centre (IBFC). Malaysia has officially declared Labuan as a free-trade zone and a financial center. Those interested in money brokers can find a list of those licensed by LFSA.
Malaysia’s declared religion is Islam, and as a result, forex brokers providing service to its retail traders must provide Islamic forex accounts that comply with Sharia law. Therefore, utilizing an Islamic account enables forex trading to be in line with Halal principles.
An Islamic trading account is an alternate account form that forbids the receipt of income from interest payments. Open positions kept overnight are not subject to interest when using an Islamic foreign currency account, however, some Islamic accounts may impose a commission or provide larger spreads than a conventional forex account.
The purchase or sale of foreign currency in Malaysia by any person who is not a certified onshore bank or who has not received the approval of Bank Negara Malaysia is seen as an unlawful foreign exchange trading scheme.
Operators of fraudulent currency exchange activities generally work on a small scale and assert that they can provide efficient services without requiring official paperwork or identification. They rarely use documents to authenticate and confirm the deals that are made. Customers engaging in these exchanges are in danger of being deceived and their money may not ever reach its destination.
Scammers in the forex market generally attempt to draw in job seekers through placing alluring advertisements. After they’ve been hired, the employees are then utilized to acquire additional investments. Typically, they will be prompted to contact their close family, relatives and friends before attempting to solicit people outside of their circle.
Deceitful dealers tempt investors to either make investments via their trading accounts with the company or through intermediaries that the company has appointed. An agreement is usually drawn up between the investors and a parent firm abroad, though it is usually left unsigned. If the investors are displeased with the trades and transactions, no legal action can be taken against the organization as the contract is not legally binding.
Investment returns may start off high, but ultimately, investors can be left with nothing when the fraudulent operators vanish.
How to stay away from Forex Trading Frauds in Malaysia
If you think you have encountered a fraudulent situation, our article on forex trading scams may be of assistance in determining whether that is the case.
Above all, make certain that the brokers and operators you are trading with have the necessary legal licenses. Always be wary of sending money to organizations that you have not thoroughly checked.
Do not let yourself be deceived by any pledges of large profits in a brief period. Trading foreign exchange carries a high level of risk and numerous traders suffer losses on their investments. There is no assurance that your funds will be successful. The forex market is intricate, exchange rates can be unpredictable and success is not a guarantee. If a proposal appears too good to be real, it probably is.
Be sure to document all interactions with the operators and pay close attention to the details of any document before signing it.
The Securities Commission Malaysia has published a catalogue of unlicensed entities, investments, firms and people operating in Malaysia. It is advisable to review this list to ensure the individual or enterprise you’re engaging with is not included.
The best way to protect oneself from being scammed is to open a trading account with one of the highly regulated brokers. Reportscam team of professionals compiles a list of the scam brokers 2023 and many other lists to stay away from these brokers.
You can also file a complaint to get a refund from scam brokers.