Deliverable FX office in India robbed – thieves were able to reach across to drawer and remove cash

Deliverable FX is not often a type of business that is associated with any form of criminal activity, as quite often, large firms offer secure and trusted means of sending and receiving sums in different denominations to settle overseas transactions.

That may be the case within regions with established deliverable FX entities, however there are specific markets in which deliverable FX is a mainstay of the national economy, with residents and small business owners relying on it, one of those regions is India.

Unfortunately, occasionally these traders of deliverable FX are not always safe. Yesterday, K Chandrasekhar Reddy, 40, a resident of Ramanthapur, who owns Tulsi Networks, a foreign exchange trading office, at Moosarambagh area of Malakpet in India, called the police and reported that two foreign nationals approached him in the evening and asked him to exchange US $100 with Indian currency. “During negotiations I agreed to pay 6,400 for the dollars and I also asked them to provide me a copy of their ID cards,” Reddy told the police.

The two foreigners, who Reddy said seemed to be from Thailand, requested a glass of water. When the FX trader went to get water, they stole the 2,000 notes, and US$250 bills from the drawer in the office.

At the entrance, the duo made a hasty exit from the forex trading office, saying they had to rush to the airport. The trader lodged a complaint with the Malakpet police. “As per their appearance the foreigners seem to be Thai nationals,” said victim Chandrasekhar Reddy.

A case was registered by the police and efforts are on to identify them with the help of CCTV footage.

An interesting point is that the dramatic growth in this sector, which includes international firms such as MoneyGram, Travelex, and Western Union operate in such a separate business environment to the FX brokerages in the electronic trading sector that the paths do not cross in any shape or form, however it is a very interesting market in which the need for security of currency and the effective delivery of said tender could present an opportunity for FX firms wishing to step in and resolve matters such as this occurrence in India yesterday.

On a generic level, the electronic trading industry and the deliverable FX businesses share common ground, and in some cases, services are provided by liquidity companies which are veritable giants in the prime brokerage and non-bank liquidity business.

One example is Sucden Financial, and earlier this year we took a look at how the company’s deliverable FX system works, including aspects such as the offsetting of margins in which currency can be bought and sold with no margin requirement, and how the entire business is structured from voice brokerage right through to API connectivity for electronic participants, hence providing absolute security.

“We assist money service businesses by being able to provide an all-round service, with pricing from multiple participants. This is accessed via our online trading platform or API, where a client effectively plugs in their own trading system to our infrastructure” said Falgun Khamar, FX Sales Trader at Sucden Financial in an interview with FinanceFeeds

“Our deliverable FX offering is designed to make it as simple as possible for our clients, from the moment clients execute a trade online or over the phone, up to when we transfer funds back to our clients” he said. “We offer an all-round service for FX money service businesses with same day payments, forward lines for up to two years and provide the option to drawdown when required.”

Just last week, the Central Bank of Nigeria’s proposals to end the black market for the local Naira began to signal the beginning of some stability for Western firms to enter Nigeria’s extremely localized retail FX market, and stimulate the IB relationships between local representatives and Western FX brokerages.

Nigeria, like India, is a region in which deliverable FX via high street bureaux is very commonplace and is a cornerstone of Nigerian commerce.

Nigeria was once a very interesting market for medium sized retail FX firms, as attracting customers from that particular region of Africa meant utilizing strong introducing broker (IB) networks to onboard often loyal, local customer bases across the country.

Several hindrances have curtailed the interest in forging strong IB networks in Nigeria recently, one particular event being the end that was put to the nation’s preferred payment channel.

Liberty Reserve, which was shut down by United States federal prosecutors under the Patriot Act after an investigation by authorities across 17 countries. The United States charged founder Arthur Budovsky and six others with money laundering and operating an unlicensed financial transaction company. Liberty Reserve is alleged to have been used to launder more than $6 billion in criminal proceeds during its history.

Due to the risk profile of Nigeria which is recognized by payment solutions providers and merchant services companies such as Visa and Mastercard, Liberty Reserve was a very popular method of transferring client funds from Nigerian customers to western brokerages and vice versa.

In October, a move in this direction occurered in the form of a new arrangement between the Central Bank of Nigeria and British deliverable FX company Travelex which has taken the place of the 3,000 Bureaux De Change operators in Nigeria, and can also facilitate global transactions of money to and from Nigeria.

One of the main aspects that will perhaps be a catalyst in opening up the transfer of funds capabilities in Nigeria is that as a result of this partnership, Travelex began disbursing $15,000 to each of the 3,000 registered Bureaux De Change (BDC) operators across Nigeria as of October 7.

Aminu Gwadabe, President of the Association of Bureau De Change Operators of Nigeria (ABCON), who disclosed this on October 6 this year, stated that with each of the 3,000 BDCs getting $15,000 each, a total of $45 million will flow into the system.

He lauded the Central Bank of Nigeria for authorising Travelex to take responsibility of disbursing huge dollar inflows from the diaspora estimated at $21 billion annually to BDCs.

Acessibility to global markets by Nigerian investors and traders has been severely limited of late, as a result of sanctions by governments and also by the risk-averse nature of merchant services providers.

Mr. Gwadabe believed at the time that the experience and integrity of Travelex would be key in getting the dollars down to Bureaux de Change, which are offices that many Nigerians rely on for transferring funds abroad, including to investment firms or brokerages.

Additionally, Mr. Gwadabe said the Travelex biometric data capturing would enable the Bureaux de Change to access the International Money Transfer Operators (IMTOs)/Travelex dollars window, resolving some of the compliance related difficulties often experienced when receiving remittances from Nigeria.

Travelex being a large national firm that does not operate under the radar in the way that Liberty Reserve did has the ability to generate a stable environment for transferring funds to brokerages, as well as from brokerages to client accounts, which has to be a good thing indeed.

Nigerian FX traders are indeed willing and wish to seek alternative means of investing and generating a profit, largely by operating via IBs, many of which hold FX seminars in Lagos in which many potential and existing investors attend and become clients of a particular brokerage en masse.

Nigeria is a very different country than it was at the turn of this decade, however. The economy is faltering, despite Nigeria’s natural resources being a source of tremendous wealth, and the local currency – the naira – is in freefall.

The gravest problem of all is that a massive black market in local currency arose, adding to the international concerns about risk and potential fiscal instability, hence the difficulties doing business with Nigerian partners as cash is hard to extract via conventional means, and the country’s government has been shuttering FX bureaux due to attempts to stop the black market rate being executed by deliverable FX firms via high street offices

The Central Bank of Nigeria (CBN) will now try to eliminate the spread between the official and black market exchange rate against the dollar, the Minister of Finance, Mrs. Kemi Adeosun said on Tuesday.

The naira is trading on the parallel market some 40% lower than the official rate as low global crude prices have dried up vital oil revenues and pushed Africa’s largest economy into recession.

The central bank scrapped a 16-month-old peg of N197 to the dollar in June, but it continues to trade in the official market, so that the naira remains far stronger against the dollar there than on the parallel market. The government has blamed that black market for damaging the already shaky economy.

On this basis, electronic trading firms with institutional presence in bona fide regions, that offer deliverable FX are now in a strong position to sweep the entire global market, to the great benefit of the millions of individuals and businesses that rely on deliverable FX in such regions.