Russia has seen a declining activity of financial pyramids but FX brokers still provide clients with instruments carrying high risks of losses.
Although Russia has had its Forex law since the end of 2014, the nation still has a long way to go in terms of implementation of the law provisions and actually seeing a transparent, efficient and fully-working Forex industry. The reputation of the Forex sector in Russia is currently undermined by the activities of fraudulent financial schemes that present themselves as FX firms. And although the activities of Forex pyramids have subsided over the past year, the Forex industry continues to spark regulatory concerns.
These concerns were reiterated by Russia’s Deputy Finance Minister Alexey Moiseev, who, in an interview with Russian daily newspaper “Rossiyskaya Gazeta”, noted the risks associated with Forex companies.
Mr Moiseev said that the financial pyramids had become more scarce, whereas there are entities, which formally are not pyramids and theoretically can provide high returns given their business activities. However, he adds, these entities carry high risks.
Mr Moiseev says Forex brokers are such entities. He stopped short of identifying them as pyramids, but stressed that they provide their clients with instruments with gigantic risks – in most cases, a client loses money.
A big problem for Russia in this respect are overseas FX companies targeting Russian residents. We may refer to data from the Bank of Russia, showing that the regulator received 210 client complaints against Forex companies registered overseas in 2016. This is slightly down from the 236 complaints received in 2015. To tackle this type of fraud, the Bank of Russia is considering a set of rules for the websites of such overseas entities that seek to lure Russian clients.
The Bank of Russia has thus far issued Forex dealer licenses to eight companies – a humble number. The latest company to get such a regulatory permission is Promsvyazbank’s PSB-Forex.
The relatively small number of licensees can be attributed to a certain extent to the bureaucracy accompanying the Russian Forex law. For instance, the licensed FX brokers (formally known as Forex dealers) are still not allowed to officially commence operations in Russia, as they await a document on the standards for the industry. This document, however, has yet to be published. That is why the regulated FX industry in Russia has somewhat frozen.