Unregulated Forex Becomes Criminal Offence


The explosion of the Forex Market worldwide has created a sort of awkward situation for the Island of Cyprus. Before its acceptance in the EU in 2004, Cyprus was an Offshore Company Tax Haven, because of these tax peculiarities as well as its strategic positioning between three continents, Cyprus experienced a built up of unregulated forex brokers establishing their operations on the island while still being registered in also other offshore tax-heaven jurisdictions such as BVI, Seychelles, Costa Rica, Belize, Mauritius, etc. Since these companies were not and still are not regulated by any well-recognized authority, being just a shell companies, they simply do not comply with any anti-money laundering law, because of this one can only characterize them as cowboy companies.

It is because of these companies amongst others that Cyprus was blacklisted as a money laundering country. But, since 2004 Cyprus has joined the European Union had to comply with European Union law and European Parliament Directives, which it did in large part but not completely. This part compliance has removed Cyprus from the blacklist. The efforts of the Cyprus Republic to regulate its market where serious, in 2003 CySEC was established. CySEC (Cyprus Securities and Exchange Commission ) is a regulatory body – (www.cysec.gov.cy) which amongst others also regulates FOREX. As per its announcement of the 17th June 2009 (full version located at: http://www.cysec.gov.cy/Downloads/English/Announcements/2009/IF/Announcement%2006.17.2009%20regarding%20FOREX.pdf) CySEC defines what is considered to be a FOREX company and what are the requirements to operate one, are: “the persons which provide the abovementioned activity of foreign exchange spot trading have the obligation to submit an application to the Commission in order to be granted CIF(Cyprus Investment Firm) authorization.”

Cyprus wants now to safeguard the good name it has fought so hard to establish, it is for this reason that on the 6th of November 2009 a small announcement of only a few lines was dropped as bomb in the forex industry. It simply stated: “The Cyprus Securities and Exchange Commission (‘the Commission’), in continuance with its announcement dated 17 June 2009, wishes to announce the following:

Persons that conduct foreign exchange trading transactions, which do not aim to the physical delivery of the agreed foreign exchange or are not materially settled in cash, should, within one month from the date of the present announcement:

1. submit an application to the Commission for the granting of a Cyprus Investment Firm authorisation, or

2. cease to provide the above service.

The Commission, upon the lapse of the one month notice, intends to take measures against the persons that did not comply with the above as they will be in violation with the provisions of section 4 of the Investment Services and Activities and Regulated Markets Law”
(see full version at: http://www.cysec.gov.cy/Downloads/English/Announcements/2009/IF/Announcement%2011.06.2009%20regarding%20foreign%20exchange%20trading%20(2).pdf)

This short statement simply announces to all unregulated companies which are operated from Cyprus – having headquarters in Cyprus, accepting correspondence and money in Cyprus and providing forex services to the internet community, (The short list of these companies is – EDITED - See note at bottom of this post) to simply disappear.

This deadline is simply too small for these unregulated companies to go through the process of regulation, it is therefore natural to say that they are not welcome anymore in the Republic of Cyprus and they should either shut down completely or find another country to operate. If they don’t they will be prosecuted at the full letter of the law.

In accordance with Part XVII of the Investment Services and Activities and Regulated Markets Law of 2007 (Law 144(I)/2007) - 140.-(1) A person who is in violation of or does not comply with subsection (1) or (3) of section 4 or section 139, is guilty of a criminal offence, punishable, in the event of conviction, by a term of imprisonment not exceeding five years or by a fine, not exceeding three hundred and fifty thousand euro (€350.000) or both.

This means that nobody will be able to work with these companies, neither Cypriot employee, banks or money transferring organizations; it does not take a genius to understand that if anyone is carrying deposits with these companies will simply not be able to withdraw them and is in very high risk in losing his or her funds forever. This means that these companies become a criminal business.

My best advice therefore is unless a company is regulated, especially if it operates from Cyprus it is not worth to work with. It does not matter how much money in bonus they give you when they will simply not be able to wire it to you, they will disappear one day in Cyberspace like so many others have done before.

Dec 07, 2009
Source: PR Log

AsstModerator Note: The attachments and links in this post are real. Some of the text appears to be fake. This account was registered with a gmail address. The account has used Malaysian and Israeli IP addresses. I believe this was posted by a Cysec regulated broker to attack their competitors.
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FXOpen AU Representative
I see this post mentions FXOpen. FXOpen is regulated by the Mauritius FSC so this decision, while a welcome one does not apply to FXOpen.


Are you really from Cysec? I don't know if they previously had offices in Cyprus or not, but none of the companies you mention are listed on Cysec's warning page:

Cyprus Securities and Exchange Commission

Even considering possible translation issues, much of your post doesn't sound like it was written in an official capacity.


FPA Forums and Reviews Admin
The attachments and links in the first post in this thread are real. Some of the text appears to be fake. This account was registered with a gmail address. The account has used Malaysian and Israeli IP addresses. I believe this was posted by a Cysec regulated broker to attack competitors. I've removed the names of those brokers from the post.

He even misspelled the name of one of the brokers. :D

I will be providing all information I have on that account to the real Cysec.


FXOpen AU Representative
Some unscrupulous marketing strategies to fight competitors have been known to the business community for many decades.

Unfortunately, on some occasions it is quite easy to mislead unsuspected customers and general public by publishing false and imprecise information. In some cases, however, such techniques are employed with a deliberate target to harm competitors’ reputation and their clients’ trust.

Indeed on 17th of June 2009 forex brokerage industry was informed about the decision of the Cyprus Securities and Exchange Commission (CySec) to oblige all companies that deal with forex exchange trading to submit a relevant application to CySec and obtain investment firm authorization. Extract from the original text of the announcement can be seen below:

‘The Commission decided that the foreign exchange trading transactions which:
(a) are not materially settled in cash but the change of the position of the client is anticipated, e.g. ‘rolling spot forex contracts’ or
(b) have as an object of settlement the difference of value between two currencies, according to their differentiated exchange rates, and the object of settlement is exhausted by the client’s disbursed amount of daily security (margin, security deposit) constitute either futures according to the meaning of paragraph 4 of Part III, Third Appendix of the Law or contracts for differences according to the meaning of paragraph 9 of the aforementioned Part of the Law. Hence, the reception and transmission of orders and the execution of orders in relation to the specific financial instruments is considered to be an investment service which can only be provided by an authorized CIF.

Therefore, the persons which provide the abovementioned activity of foreign exchange spot trading have the obligation to submit an application to the Commission in order to be granted CIF authorization. Additionally, the CIFs which today provide this activity as ‘other activity’ have the obligation to immediately apply to the Commission for the amendment of their relevant CIF authorization.”

This was the first time the CySec specifically addressed the issue of foreign exchange trading, de facto placing it into the category of a major financial services activity, which requires licensing for all companies offering forex exchange trading and operating from the business premises located in Cyprus. This, however, does not apply to companies, which are registered outside Cyprus and do not have business premises or operations in Cyprus.

Since internet forex exchange trading is a comparatively new business, which appeared along with the development of the Internet and modern communication technologies, the regulation of this activity is still not very much developed and in many countries no forex regulating legislation exists, even some popular jurisdictions such as British Virgin Islands (BVI), currently having on its registry over one and a half million companies, are only planning to introduce relevant legislation which will be regulating foreign exchange trading.

The EU has harmonized its legislation for financial services sector by introducing The Markets in Financial Instruments Directive (MiFID) which provides regulation for investment services across the 30 member states of the European Economic Area (the 27 Member States of the European Union plus Iceland, Norway and Liechtenstein). As of the effective date, 1 November 2007, it replaced the Investment Services Directive.
A good example of regulation of Forex business outside EU is Mauritius (regulator FSC | MAURITIUS), Gibraltar (regulator FSC - Home Page), Channel Islands (regulator Welcome to the Jersey Financial Services Commission, and Guernsey Financial Services Commission), which are on the so called OECD ‘white list’, and which implement stringent Anti Money Laundering legislation, have developed regulations system exercised by local Financial Services Authorities and enjoy a good reputation worldwide as international financial centers. (see the OECD ‘white list’ at http://www.oecd.org/dataoecd/50/0/43606256.pdf)

At the moment, over 70% of the global retail forex exchange brokerage industry is still not regulated and continues to operate moving trillions of Dollars on a daily basis. Regulation is not an ultimate protection against potential losses, which fact is proved by the recent collapse of the pillar of investment industry such as Lehman Brothers, where investors have lost billions of dollars, or the Madoff investment scandal of 2008 where investors were simply defrauded by the ‘Wall Street blue cheap’ investment house, which was regulated by the most reputable world financial authorities. This list of defaults of stringent regulations can be continued…

There is no ultimate protection and investors are advised to be prudent, exercise a cautious approach and common business sense and logic when selecting their forex broker, investment or trading house, no matter how, where and by whom it is regulated. It is always good to read professional forums, speak to or see the office of a potential broker, building relationship on a step-by-step solid and balanced basis.

FXOpen Investments Inc. is now one of the largest Forex brokers in the world enjoying unprecedented growth with more than 130,000 active accounts and over $55 billion in traded volume passing through its platform on a monthly basis.

FXOpen is one of the world's largest Metatrader innovators having introduced the first ever MT4 ECN with PAMM accounts and decimal lot trading.

FXOpen would like to wish you all a very Merry Christmas and a Happy New Year!

May 2010 bring you more profitable trades, successful market analyses and predictions, perfect connections and many fruitful market discussions with your friends and fellow traders.

May the new year also bring you good fortune for your friends and families. Have safe and merry celebrations in this silly season.

To our Financial Success!
FXOpen Team
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