Those famous acronyms that now proliferate the compliance department of every company: Are the funds secure? Is the client, whether a small to medium sized brokerage or a retail end user, au fait with the service that is being provided? Very important indeed — which is why it is perhaps a paradox that whilst reputable brokerages and service providers are taking these matters very seriously indeed, merchant services providers, which are known for their stringent risk management and customer protection policies, are allowing less than reputable companies which are either unregulated, have ties to nefarious individuals, or have had their regulatory license removed, to take funds via credit card with no questions being asked.
Looking at the chargeback policy which is set out by Visa, there is a very well established process which merchants must follow in the event of a customer complaint, as follows:.
In the United States, the use of credit cards for funding retail trading accounts was outlawed by the National Futures Association and the Commodity Futures Trading Commission, meaning that bank transfers are the only means of funding accounts, however the authorities in the post Dodd-Frank Act US are very strict and companies must make daily reports.
Additionally, should something go awry, the US authorities make public investigations into the affairs of companies, and often subject them to very punitive litigation. Whilst other regulators are catching up, an often overlooked point is how merchant services companies effectively enable the loss of customer money, despite very well documented customer protection policies. When facilitating the provision of other services, Visa and Mastercard are often very quick to act.
Had bad service at a hotel? Cellular company made a mistake on the invoice and is unreachable by telephone? Got caught out whilst abroad? Car dealer overcharged for a routine service? No problem — a quick call to Visa or Mastercard and all is well. Often, Visa or Mastercard will remove the merchant services terminal from small companies that have reached a certain number of chargebacks.
The litany of complaints from retail customers that proliferate the internet forums complaining about withdrawals amounting tens of thousands of dollars and high profile news published about specific companies has not provoked any action from the merchant services firms. Indeed, services are still being provided to unregulated brokerages in offshore jurisdictions such as the British Virgin Islands and the Seychelles, where unsuspecting customers can easily send funds.
The merchant services firms do not check the operating model of any of the brokerages that they supply to and it is not part of the standard procedure. Does the company using merchant services operate on a profit and loss model, effectively making its revenues from the losses of customers? Does the company using merchant services have sufficient capital to pay withdrawals should customers wish to take funds from their trading accounts? Due to the very generic nature of merchant services provision, the entire system is not geared toward the electronic trading industry at all.
In that particular circumstance, senior government officials in Cyprus are now calling for action, but the merchant services companies remain silent.
Currently, customers remain out of pocket, with the merchant services firms having not intervened and cut their provisioning when this began to come to light. FinanceFeeds was contacted today by a client of a small brokerage in Cyprus which had its license suspended by CySec recently. It is staring them in the face as there are pages and pages of individuals on review sites who have had there savings wiped out by companies with malintent. Everyone cannot be wrong. Can we all be wrong and companies like the one I used working in the best interests of their clients be right?
In conclusion, whilst the vast majority of bona fide companies are very cautious when it comes to ensuring that their clients are suited to the services being provided, and vice versa, and the vast majority conduct their compliance adherence with aplomb, those which do not are able to benefit from this massive loophole. It is a loophole that is overlooked because many do not consider the merchant services provider to be a part of the process, rather a vehicle to deposit to a company which should be responsible for its own actions and accountable should something go wrong.
Action by merchant services companies in this direction would not only reimburse thousands to customers that have fallen foul of nefarious entities, but would also put a stop to their very existence because the merchant accounts would be closed.
This would benefit the entire retail FX industry and help the great many good companies to uphold their own well-deserved good reputation and make their ability to bring on board new clients much easier as customer confidence would be so much higher without the small minority of bad apples making it difficult for the good people of this fine industry.
They make money per transaction. Liberty Reserve used to be a vital method of transferring client deposits to and from Nigeria. Now Travelex has stepped in, which provides a window of opportunity once again in Nigeria for Western retail FX brokerages. Despite CySec instructing all brokers in Cyprus to desist from offering deposit bonuses and ensuring that they stick to a leverage limit of 1: From freezing FX firm bank accounts for months at a time for no reason, to exposing firms to theft of their funds due to lack of security, and to the apathy and lack of interest from big banks in working with FX firms, FinanceFeeds looks at which mainstream banks get the wooden spoon, and why they should be avoided.
The time has come to innovate and evolve the way payments are processed to online brokerages. We examine why this is, in great detail. Deliverable FX is a mainstay of local economies in certain regions of the world.
Here is why large, mainstream and secure deliverable FX firms should be used, and how regions that are dependent on deliverable FX bureaux such as India or Nigeria, could benefit from using large British companies that are secure and have large levels of commercial experience. Share 1 Subscribe Popular. FX brokers wanting to tap into Nigerian markets now have a means of taking deposits Liberty Reserve used to be a vital method of transferring client deposits to and from Nigeria.
Warehouse brokerages still offering bonuses one month after bonus ban Despite CySec instructing all brokers in Cyprus to desist from offering deposit bonuses and ensuring that they stick to a leverage limit of 1: A very close look — FinanceFeeds Research Those famous acronyms that now proliferate the compliance department of every company: Inside View , Opinion , Technology , Week in Review Which is the best bank for companies in the FX industry to open an account with, and which to avoid?
FinanceFeeds research From freezing FX firm bank accounts for months at a time for no reason, to exposing firms to theft of their funds due to lack of security, and to the apathy and lack of interest from big banks in working with FX firms, FinanceFeeds looks at which mainstream banks get the wooden spoon, and why they should be avoided. FinanceFeeds investigation Those famous acronyms that now proliferate the compliance department of every company: Inside View , Technology Time for FX brokerages to start considering new types of payment processors?
The regulators may turn on the existing ones The time has come to innovate and evolve the way payments are processed to online brokerages. Industry News , Retail FX Deliverable FX office in India robbed — thieves were able to reach across to drawer and remove cash Deliverable FX is a mainstay of local economies in certain regions of the world. The one and only. Subscribe Leave this field empty if you're human: Customers of Interactive Brokers file class action complaint over management of portfolio margin accounts.
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