Security of your money

This was one of the most frequently asked questions posed by clients in my nine years service as a foreign exchange broker. In these uncertain times it is completely understandable security of funds is a vital topic to address especially when you consider an individual may be exchanging all of their life savings.

The majority of consumers know their bank may not offer the best deal on an exchange but one thing they do provide is familiarity and comfort of dealing with a well known high street brand. However, carrying out the correct background checks to ensure you use a trusted foreign exchange specialist will provide clarity around the security of your money and enable you to benefit from significant savings without any worry.

Top tips

As a veteran of the foreign exchange industry having started my career in 2004 working for a London based broker I have compiled a list to help guide you through the jungle of brokers out there to ensure your money is safe and secure every step of the way.

The Basics

First and foremost any broker you are looking into must be authorised and regulated by the Financial Conduct Authority (FCA) under the Payment Services Directive (PSD) 2009 for the provision of payment services. You also need to ensure they are a registered Money Services Business (MSB) with HM Revenue & Customs. All reputable brokers display regulatory information on their website usually under the about us or security and regulation sections and will include the relevant registration numbers.

You can then check each number independently on the HMRC and FCA online registers (see links below) to ensure the company concerned is fully compliant with the regulation.

HMRC online register search:  https://customs.hmrc.gov.uk/msbregister/checkTerms.do

FCA online register search:  https://www.fsa.gov.uk/register/psdFirmSearchForm.do

The above is very much the minimum checks you should be carrying out on any broker you are researching. I have created the following detailed checklist to help you dig a little deeper and identify the most suitable company:

  • Do they segregate client funds from their own company accounts? In a type of business handling huge amounts of money on a daily basis this is an important provision for safeguarding your funds.  It is also part of a guideline set by the FCA regarding ring fencing client money.
  • Have they been established for a minimum of 5 years? This tells you they have some sort of track record and survived the infancy stage of a business.
  • Are their accounts externally audited once a year? This provides some confidence that an independent accounting professional is ensuring that the business is following specific accounting rules and best practices.
  • Do they provide the latest copy of their company accounts by request or on their website? This provides confidence that they are open about the performance of the business and its financial health.
  • Do they hold any insurance policies related to protection of client funds in the event of insolvency or financial crime? This provides some reassurance over the protection of your funds when being held in their client accounts.
  • What is the approximate yearly turnover of foreign exchange? This is a useful way of comparing the size of different companies and will help you to avoid dealing with a small business, likely to pose a bigger risk.
  • Do they have a credit rating? Provided by a credit rating agency, this is a great indicator of the financial health and credibility of a company.
  • Do they provide bank and client references upon request? It’s always reassuring to see an official letter from a bank verifying the accounts being held. It is also great to read testimonials or obtain a verbal reference from previous clients.
  • Where is the company based? It is highly recommended that you use a company based in the UK.

Extra research

  • The people at the Financial Conduct Authority (FCA) are a friendly bunch and well trained to ask any general questions you may have related to foreign exchange brokers (known as payment institutions) and how they regulate them.
  • I always advise people to pick up the phone and call a broker to ask more specific questions and assess how any objections you have are handled. This is a good way of establishing if the person dealing with your enquiry is able to put you at ease and make you feel more comfortable about using their service. If this is not the case then I always recommend contacting other brokers until you find the correct fit for you.
  • Lastly, note clients have access to the same complaints process as a bank through the financial ombudsman service but foreign exchange brokers are not protected by the financial services compensation scheme.

Useful resources

FCA website:  http://www.fca.org.uk/consumers/consumer-helpline

FCA telephone number:  0800 111 6768 or if you are calling from abroad: +44 20 7066 1000



Written by Toby Fischer
Co-founder – Currency Today