The influential state-owned Egyptian Arabic language daily newspaper Al Gomhuria, which translates into The Republic, published an article on 29 March 2014 that should attract the attention of forex brokers and perhaps should stir up some concerns in their ranks. The article by Hany Saleh was published under the telling title, in free translation from Arabic, “trading forex via the internet is the most recent scam scheme” and the equally provocative subtitle “young people are the victims and all those who carry out transactions end up losing their money”.
It is clear how such over-simplifications and over generalizations are not appropriate, but the content of the article is not less controversial. The article refers to the ways the forex retail market operates and the effects it has on the Egyptian economy. The reporter interviews an individual who is named only by his initials MZ, who carries out transactions through retail forex companies, and who is quoted as saying “there are two kinds of such firms. The first group is made up of serious companies which are regulated and come under the scrutiny of international competent authorities, but still carry a high level of risk. The second group is made up of companies which are known as international scam companies, which showcase appealing false promotions in order to attract clients and strip them of their money. The majority of these firms are located in Cyprus and are managed by international circuits.”
The article also cites statements by Sharif Sami, the head of the Egyptian Financial Supervisory Authority (EFSA) who mentioned that online retail forex activities are considered as illegal according to the Egyptian legislation and therefore all those individuals who transact with such companies are liable to the consequences of the relevant legislation governing investments. Mr Sami also added that “the companies which engage in such profit making activities operate through countries such as Cyprus, Malta, Brazil and others.”
Moreover, the article hosts the views of the Egyptian currency exchange companies whose representatives maintain that the online retail forex transaction volume is low and does not affect the activities of their own conventional companies. However, they argue that often online retail forex transactions fall within the framework of money laundering and therefore they should be closely scrutinized. One currency exchange company owner pointed out that the forex transactions are executed through certain Egyptian banks and he therefore wonders how it is possible for such transactions to be illegal and still be processed through national banks, which are regulated and controlled by the Egyptian Central Bank. He also claims that “90% of the forex companies have offices in Cyprus and in Greece.”
Given that the Middle East and the Arab world in general is a potential and promising market that the forex and binary options retail industry wishes to conquer, such bad publicity in influential media should worry the industry stakeholders who should attempt to isolate and expel the fraudsters and crooks from their ranks if they want to protect the reliability and good name of the industry and enhance its prospects for future growth.