Russian police arrests forex broker fraudsters, while authorities mull more restrictions

Russian police arrests forex broker fraudsters, while authorities mull more restrictions

Do not invest more money than you can afford to lose.


The police in Russia’s capital Moscow has arrested seven persons suspected of scamming more than 3000 Russian and foreign citizens out of more than RUB 497 million (USD 7.7 million). According to the police, the members of the organized criminal group were posing as brokers. They claimed they were employees of a financial services company and were offering brokerage services on the international forex market.

The police has confiscated working telephones, computers, bank cards, memory sticks and documents, while the prosecution has accused the arrested of fraud. It carries a maximum penalty of 10 years in prison.

The events are taking place against the background of the murky situation with the regulation of legitimate forex brokers in Russia and ongoing discussions on regulation.

Earlier this month representatives of the largest forex brokers in Russia criticized the current regulation. According to the Russian news agency RIA Novosti, during a round table organized by the self-regulatory organization CRFIN, they complained it was very restrictive and contained “gray norms” and “legal loopholes”. In their opinion any new amendments would make it practically impossible to start a legal forex brokerage, which would mean proliferation of the gray sector and infringement of the client interests. The forex brokers also commented that any amendments and introduction of further restrictions through “satellite laws” were wrong.

Such “satellite law” is the draft № 928614-6, amending several Russian federal laws, including that on the self-regulation of the financial markets. According to the Russian-language site Forex Magnates, one of the proposed amendments empowers the Bank of Russia to block the access to the websites of unlicensed forex brokers, with the help of Roskomnadzor (the Federal service for supervision of communications, information technology and mass media). Another proposal includes the dividing of the forex broker’s clients into three categories: professional, qualified and unqualified and banning doing business with unqualified forex traders altogether. There is also a proposal for the introduction of “flexible” leverage, defined by the Bank of Russia, depending on the qualifications of the traders. Currently the maximum leverage a forex broker can offer to its Russian clients is 1:50.

An SMN check on the website of Russia’s State Duma revealed that the draft has already been discussed and passed at first reading in December 2015. By procedure, amendments can be made between the first and the second reading, so it is yet to be seen whether the new limitations will be introduced.

According to the current legislation on the self-regulation of the financial markets that came into effect in the beginning of 2016, the forex brokers based in Russia must obtain a license from the country’s megaregulator Bank of Russia no later than January 2017. By the same law the central bank must reply within 60 days after the application was submitted.

So far only one forex broker, Finam Forex, has obtained a license and several others have applied as early as January-February this year. Even though the reply deadline has long since expired, the Bank of Russia remains tight lipped on the matter.

At the same time, earlier this year a deputy chair of the central bank, Sergey Sveshtov told the State Duma (the lower chamber of Russia’s parliament), quoted by the media, that the regulator has no interest in the popularity of forex trading in Russia. He also described the forex market as “a casino satisfying gambling addictions”.

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