By Claire West
‘Beware of foreign exchange operators gambling with your cash’ is the warning from Currency UK following the demise of the online foreign exchange organisation, Crown Currency Exchange.
More than 10,000 consumers have been directly affected by the collapse of the online currency converters which offered unbeatable deals by obtaining the money from its clients more than three months in advance of exchanging the transaction.
Offering exchange up to the amount of £10,000 Crown Currency Exchange, which is now in administration, has a number of corporate and individual customers waiting to see if they will see their money again.
The most confusing point here is that Crown was FSA registered, but not regulated. By only making deals up to £10,000 there was no necessity to make this distinction which is more prevalent among dependable companies.
Adrian Jacob of FSA regulated Currency UK insists that exchanging large amounts of a company or individual’s money into another currency is a perfectly safe transaction as long as you follow some simple guidelines:
• Check that the organisation is regulated by the FSA - FSA regulation ensures that all financial operators comply with guidelines put in place to avoid high risk ventures. Registration does not.
• Enquire how the dealer will make their money i.e. commission, exchange rate for example - If the dealer is holding money in advance of a sale, they are employing a high risk strategy expecting the market to fluctuate beneficially to them. The problem with this is that the market is volatile and as the case of Crown Currency Exchange has shown, when FX rates do not react in the manner that’s anticipated everybody loses out.
• Read client testimonials — review these on their website but also ask to speak to other customers directly to obtain feedback. Any reputable company will be more than willing to put you in touch with its clients.
• Compare the Foreign Exchange market — FSA regulated currency exchange companies usually offer better rates than the banks, particularly for small to medium sized enterprises and individuals. By comparing the market you will get the best deals available as well as some financial tools that will help you protect your cash flow.
• Find out how long it will take to deliver your exchanged currency - The total transaction shouldn’t take longer than a few days and if a rate cannot be offered within that time frame, question why. You should not have to hand over your money more than a couple of days in advance of the transaction.
Jacob says: “The last thing you expect when you visit a supposedly respectable website offering financial services is cowboy operators and risky speculation on your money by obtaining it some three months in advance of the foreign exchange transaction taking place.
“Fortunately this type of behaviour is definitely in the minority in our industry. However, it is essential that customers use FSA regulated currency exchange companies and always question if the rate looks too good to be true; it probably is!”