Rogue online forex traders mushrooming in Somalia
The foreign exchange market or better known as the Forex market is a global decentralized market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all aspects of buying, selling, and exchanging currencies at current or determined prices.
Basically, forex trading is the buying and selling of currencies against each other.
However, if you are a beginner, be cautious since forex products are complex and very risky, thus not suitable for everyone. One can easily lose all of their invested money if they don’t analyze or have a clue how forex trading works
How forex trading works:
Any interested trader can access the forex market for free through a dealer or commonly known as a broker who offers the trading platform.
The interested party will be required to open a free trading account with the dealer and deposit capital into the account, however, the capital can differ in an amount from time to time which is also determined by the amount of investment sort.
From the trading platform offered by the dealer, a trader is able to access the live market in real-time as it is happening across the globe. From the platform, the trader chooses the items he/she wishes to trade-in based on personal preference, capital size, or risk appetite.
However, it is not only currencies/cash that is traded on the forex trade market as one has the liberty to trade in minerals such as gold and diamond, commodities and indices that are offered in the forex market, albeit under different segments.
From this point, the trader has to analyze the segment he is interested in and choose whether to buy or sell a certain quantity and wait for the market to either follow their analysis where they either make a profit or a loss depending on their analysis.
For investors who have little knowledge of the trading scene, they can choose a broker to work with by checking out online for a tailored recommendation on any forex website and choose the country they are interested in trading.
What makes a good forex broker?
The first and most important quality of a good forex broker has to be fair trading fees and low withdrawal fees. He/she should allow you to deposit funds and withdraw your earnings hassle-free.
The trader should also have a good understanding of the market and that includes the hitches, highs, and lows.
A high level of security is key since you will be handing over thousands of dollars to a person who simply claims he’s legit. One should check the brokers’ credibility through regulatory agencies that separate the trustworthy from the fraudulent.
Forex trade, a booming business in Somalia
The mushrooming of forex traders in Somalia is/was alarming and a cause to worry since many of those conducting the business are not legit or are unregulated.
The situation escalated in 2019 forcing the Central Bank of Somalia to halt and order the closure of Forex trading companies’ accounts in all commercial banks across Somalia. The decision was informed by intelligence that most forex bureaus have been used to cleanse and dispatch illegal money and also encourage money laundering.
“All commercial banks should, with immediate effect surcease bank accounts owned by forex trading companies and submit their names and all monies held in the accounts,” a circular from the Central Bank Governor dated 23rd December 2019 read in part.
The Central Bank also asked the financial institutions not to hold banking accounts for any firms involved in currency trading.
“This is to inform you that the Board of Directors of the Somali Central Bank, in its 43rd session held on 28-10-2019, has issued resolution number 43/G, which directs all private commercial banks in the country to close the accounts of all Foreign Exchange (Forex) traders,” the statement signed by the bank’s Deputy Governor, Maryam Abdullahi Yusuf said.
Crackdown on the forex bureaus
There is currently no regulatory framework governing online forex trading in Somalia, explaining the neck-break speed at which the forex bureaus are mushrooming in cities like Mogadishu, Banadir, Bosaso, and Kisimayu.
Earlier in October 2019, the Somali security forces raided online forex centers in Mogadishu. They raided three offices of a company called Camel Online Forex and directed the immediate closure of their business.
The crackdown did not stop locals trading forex on platforms operated by foreign brokers, which appear to be exploiting regulatory loopholes, notably that their business is based offshore.
However, those in the business insist that not all the apples are rotten. The booming business has attracted thousands of investors especially Somalis living abroad.
According to www.brokerchooser.com, which is the most visited site in Somalia for those interested in forex business, XTB is listed as the top forex brokers in 2020 for Somali citizens.
XTB is a global forex broker with headquarters in London and Warsaw and is regulated by several financial authorities worldwide, including the UK’s Financial Conduct Authority (FCA) and the Polish Financial Supervision Authority (KNF). XTB is also listed on the Warsaw Stock Exchange.
Use of social media
With the ever-growing digital space, a great number of sham Forex traders, using sponsored adverts on social media platforms such as Facebook, Twitter, Telegram and Instagram, continue to filch millions of hard-earned savings of hapless ‘investors’.
The scammers prey on unsuspecting subscribers by using a number of irresistible adjectives with alluring adverts and fake testimonials that lead the unwary to believe that he/she is dealing with a bonafide, international forex platform.
Fake messages of happiness from, seemingly, relieved ‘investors’ are also posted and shared widely on social media as proof that the schemes work.
Those targeted are mostly Somalis abroad who are lured by bynames in remittance that they trust unreservedly, the likes of Dahabshil, Talk Remit, World Remit, etc. appearing in the list is more than an adequate guarantee to save, quick delivery, which many times is not the case.
Billions of investments go under
A huge percentage of Somalis who invested in quick money schemes fashioned as forex trading companies are yet to recover from the shock that befell them after a number of the companies announced indefinite closure amid what they term as ‘loss of money’.
One such company is Forex 252 in Mogadishu which issued a stark notice to its clients late February 2020 through its manager Mohamed Tahlil. ‘We are very sorry to inform you this but it is necessary to do so. We lost all our money in our account”.
“We had $157,000 for our clients and together with ours, the total was $252,000 and we lost all,’ added Mohamed in a WhatsApp group message to his company’s investors.
Star Media Development Centre, SMDC has established that the story of Forex 252 is just one among others which could be facing a similar fate as fears emerge that what has been going on a forex trade was actually a pyramid scheme.