Major bank set money aside to refund customers for wrong foreign exchange payments

If there wasn’t enough grief already in the world of foreign exchange, the latest news emerging from Barclays is likely to cause a new round of complaining and frustration amongst British travellers. According to a recent report, an internal probe within Barclays discovered that the company had been exchanging currency for their customers at incorrect rates between the years of 2005 and 2012. Essentially, customers who had visited the bank during this period in order to exchange domestic funds for various international currencies were likely given less money in return than they had rightfully deserved. Now that the probe has unearthed this controversial information, Barclays has announced that they are setting aside nearly 290 million pounds sterling in order to ensure that they can properly compensate all of those who may have been “short-changed” by this oversight.

It seems as if stories such as this are abundant throughout the foreign exchange industry. Over the past several years, a number of high-profile controversies have occurred regarding the rigging of the wildly frenetic foreign exchange markets and bureau de change locations. In many of these scenarios, banks found guilty of illegal actions in the fx markets are now being sued by their former customers.

It is also important to note that this is not the first substantial monetary loss that Barclays has incurred this year. In May, Barclays was forced to pay a 1.53 billion pound fine due to accusations of fx market fixing. In another recent incident, it was discovered that Barclays employees were verbally offering customers less than optimal exchange rates on foreign currency and then keeping the difference between their stated rate and the actual exchange rate at the time.

According to David Buik, a broker with Panmure Gordon, the fact that Barclays has taken the initiative and announced this new compensation package for their clients is an attempt to minimize the fallout from the situation at large. Transparency has also been an issue in the fx markets, and yet, in recent years, it seems as if bureau de change locations and other foreign exchange services have developed a particular dubious reputation. It will be very interesting to observe what, if any changes will be made in both the short and near future to ensure that these types of problems are properly dealt with before they become a public grievance. If banks such as Barclays are to preserve their relationship with the general public, scandals such as this must come to an end as soon as possible.

Has a major newspaper been used as a front to scam people of money?

In what is likely going to be one of the most alarming and noteworthy stories in recent months, it has been discovered that a series of frauds have been perpetrated by criminals pretending to be members of the journalism staff at The Sun. According to a number of victims who have come forward, these fraudulent calls have involved the criminals making claims that the victims would be allowed to feature in the paper for a fee that would later be refundable.

What is so fascinating about this particular scam is the degree to which the criminals were able to mimic the staff at The Sun. According to one of the victims, “What made this so shocking and clever was that they called me from the Sun’s number and emailed from the Sun’s email address…” With this information in mind, it seems much more reasonable why these victims were convinced that the offer they were receiving was, indeed, genuine.

When asked to comment on the issue, a member of the staff at The Sun stated, ““We have had about 15 [cases] reported to us and, as soon as that has happened, we have referred them to the police.” Have more incidents of this particular fraud occurred? The stigma associated with fraud victimisation has likely led many individuals who may have been affected in this particular case to remain silent. Many of those who have come forward have also chosen to remain anonymous.

Although the details of each scenario outlined by those victims who have come forward varies slightly, one particular incident is quite interesting. According to one of the victims, who has chosen to remain anonymous, a man pretending to be a member of the staff at the paper contacted them and explained that the paper was currently running short on content. In order to meet its pending deadline, the individual explained, the paper would send a reporter to interview the victim. That being said, the fraudster then explained that the reporter must be paid for by the victim. However, following the acceptance of the story by the paper, the funds would be returned. According to the victim, “He asked me to email him an image of the bank transfer to the writer. I did. He told me she [the freelance journalist] would call me shortly. I waited. I waited. My heart started beating. I called the Sun and, after a second attempt, they finally said there was a scam going on like that and that they were investigating…”

In retrospect, of course, it may seem slightly more obvious that such a claim would, indeed, be fraudulent. However, given the degree of authenticity which the scammers were able to display, it is no surprise that so many have been duped by them.

The Sun has released yet another statement claiming that every case of fraud related to this particular incident has now been forwarded to the UK’s national fraud and internet crime centre, referred to as Action Fraud. Although the perpetrators behind this scheme have yet to be apprehended, the paper hopes to spread awareness of the scam in order to ensure that others can remain vigilant and be on the alert in the event a similar call comes through to them.

Is there a method by which an individual can fully protect themselves against internet or telephone fraud? Given the fact that so many of these schemes are quite elaborate, it can be difficult to say with 100% that any individual is truly “protected”. Organisations such as Action Fraud continue to emphasise that those who have any doubt at all regarding the claims of a caller or in-person encounter should contact the appropriate authorities before engaging in a transaction. Only through such early actions can the likelihood of fraud be reduced nationwide.

Where is the best place to exchange your money?

If you are thinking about travelling to an exotic location for the holiday season or buying a home in a foreign country, you may want to forget about Europe and consider countries in the lines of Brazil, South Africa or Malaysia. The reason for this being you will get more value for the money exchange.

Over the course of past 12 months, the Pound has gained considerable value against currencies from other countries. Topping the list of places where the Pound has strengthened most is Brazil with a rise of 42% against the local currency (Real). The above information is in agreement with data compiled by the Post Office. Their online exchange rates for purchases between £500-999 show that on the 17th of November this year, 1£ was buying 5.26 real as opposed to 3.71 real, the same time last year(2014).

Other countries on the top ten list include Russia, Turkey, Malaysia, S. Africa, Norway, Mexico, Australia, New Zealand and Hungary. Currently, the Sterling pound has gained against 75% of its best-selling currencies across the globe when its performance this year is compared with 2014’s; this is according to Post Office Travel Money’s, Andrew Brown.

In recent weeks, the pound has gained substantially against the South African rand and Malaysian ringgit; that is good news for holidaymakers visiting these countries as they will have over an extra £100 when they exchange £500.

The Euro, on the other hand, did not make it into the top ten list; nonetheless, the pound had gained 14.1% to it when it closed at 1.38 on November 17th, 2015 compared to 1.21 on the same date last year. Thus, leaving Britons with an extra £61.91 for every £500 money exchange transaction they make. This makes it high time to book your next winter break in Europe. Or, if you dream of buying a holiday home in the havens of Spain or France, you stand to enjoy buying at lesser prices. For instance a €350,000 house will go for about £253,623 unlike 12 months ago when it was £289,256; thereby saving you a hefty amount of about 36,000.

Despite the pound’s impressive performance against some currencies, it appears to have weakened against others. For instance, it had declined against the Hong Kong dollar by 3% that was considered its biggest fall against the currency. In November this year, £1 bought 11.05 Hong Kong dollars a drop from 11.38 during the same period last year. Other gainers against the pound include the U.S, U.A.E, Qatar, Oman, Barbados and Jordan. When comparing the pound against the US dollar, the pound lost 2.4% over the past 12 months. However, this is not something to stop Briton shoppers from utilising the pre- Christmas sale offers coming up in the coming weeks.

Holidays to the US more expensive due to the British pounds 30 year low against the dollar

British holidaymakers visiting the Atlantic are currently facing higher prices as the pound corrodes with the US dollar, say experts. For the first time, the Sterling has gone below $1.48 since April, which translates to 14% fall as compared to $1.71 it traded in the summer of 2014. This change has changed everything as meals, hotel rooms, theme park tickets and car hire have become more expensive for British families explorers to the United States.

Consequently, the currency analysts say that the worse is yet to hit the pound as it is at a risk of hitting a 30-year low estimated at $1.30. This will raise shopping trips’ costs to the level of New York and Disneyland in Orlando, and Florida’s holidays. However, these changes will raise British’ exports to the American market as products made in British factories like cars and Scotch whisky will be more affordable to American buyers.

They recall that the last time the British pound traded at a low rate of $1.30 was the time when Margaret Thatcher was British Prime Minister, and Ronald Reagan was the president of the United States. According to David Swann, who is Travelex’s bureau de change head of pricing, the rise in US dollar means that UK holiday travelers will see their pounds’ worthless in the United States. He added to say that it is unfortunate for the British travelers who have already planned a trip to America.

Travelex said that currently £500 exchanges for $725, which is $116 lower than its value in July 2014. If the pound’s value falls to $1.30 on foreign exchange markets, then it is estimated that travelers exchanging a £500 would receive less than $650, which translates to $200 less that its value in mid-2014.

Last month the Federal Reserve increased the interest rates for the first time in almost a decade now, from 0 and 0.25 percent to 0.25 and 0.5 percent. Bank of England is claimed to be raising interest rates this year in the UK. This will increase the mortgages’ costs and other loans for residents of the UK. However, analysts have given a warning against this step saying that if Britain hikes the rates, America will get more and this will lead to the pound dropping even further.

Is it harder for tourists to exchange money in Argentina?

For those who have been to Argentina in the last four years, it is evident that you have found out that the excellent deal is to have your money in big bills and exchange it illegally. Travelers from all over the world are currently receiving more for their currency, which is due to the Argentina’s banning of black and illegal markets that used to trade for 30% less that the required official rate. For Argentinian citizens who wanted the safety of dollars, they accepted lower rates from black markets as this was the only way to escape the government’s tight currency measures.

Currently, all these activities are taking another route. President Mauricio Marci, earlier this month, eliminated barriers on how many pesos can be exchanged for dollars and other currencies. The climax of those barriers led to Argentinian pesos’ official value to crumble overnight that dropping by 30% in less than 24 hours. However, on the black market, pesos rose slightly.

According to Dr. Federico Weinschelbaum, a professor and an economist at Universidad de San Andrés in Argentina, the abolition of this gap that exists will result in a steadier economy for Argentina on the long-run. On the short-run, Argentina’s economy that is running in the background is likely to rise. Those who are highly affected by this change are the ones who depended fully on the black market as the main source of income, which is clearly a significant amount.

The centre of Buenos Aires’s downtown, the extremely busy streets have been surrounded by shops and the unique ambient sound of women and men shouting “Cambio! Dolares, Reales, Euros, Cambio,” is common, giving both locals and foreigners the same best exchange rate as that of a black market for the past few years. These black market operators are referred to as “arbolitos” meaning little trees because they do not stay for long in one location as they exchange green paper. The currency that is exchanged on the black market is referred to as dollar blue. The arbolitos have been in operation for over a decade now, but in November 2011, they expanded into a big forest. The black market expanded vigorously, and it was successful to the extent that it was almost becoming legal.

Even if exchanging currencies in a location outside of a designated exchange place or an official bank is illegal, it is common in Argentina to see police officers on black markets, but they watch transactions take place without doing anything.

A 24-year-old confessed that he has been working as a black market exchanger for the past seven years. He said that he started off as a seller of city tours, but for the past two years he has been making huge profits as an arbolito. He further added that on each block there are over 30 arbolitos, which translates to about 500 arbolitos on a single street. However, it is strongly believed that these numbers are yet to reduce soon. He says that in about three to four months there will be a remarkable decrease on the streets. The arbolitos are currently suffering from the economic punch, but they are continuing with their black market business for as long as they can. For them, this means that they can go on with their businesses as long as no new law enforcement has been put in place.

Many are saying that they have been told anything concerning their black market business as illegal. Though, they have been once pulled by Argentina’s Federal Administration of Public Income. They normally don’t take anything serious as they demand identification and take some information and leave.

Pato, who is a middle-aged owner of a newspaper kiosk selling on Florida Street, also said that he just fell into the black market business because getting into it was very simple.

Is it possible to never use cheques?

TransferWise founders clearly indicated that they have never used cheques before. Kristo Käärmann and Taavet Hinrikus said that they have never written a single cheque before the internet age. “I can’t recall ever using a cheque,” says Käärmann, who is 35 years old. He further says that “For nine years that I have been in London, I have received several chequebooks during accounts opening. I wasn’t aware what to do with the chequebooks since we hardly used them in Estonia.”

Fellow Estonian Hinrikus and Käärmann, co-founders of TransferWise’ electronic foreign exchange system, have similar experiences. Hinrikus say that “The banks didn’t provide any chequebook, and I’m glad that I never touched one.”

The two were shocked to find that in their mission of preparing the launch of their foreign exchange system in the US at the beginning of this year, cheques remain operational and actively used in the US.

“Americans use cheques a lot,” says Käärmann. “The US financial system uses cheques on a weekly or monthly basis. Americans use banks differently from us. Apart from working hard to meet licensing requirements, there is a need to adjust our product to the American market. ”

This is one of the escalating pains of TransferWire that began as an easy technique of Hinrikus and Käärmann of avoiding foreign exchange bank rates when they arrived in London for work in 2007.

They exchanged between £2,000-£3,000 cash a month. They decided to bank the money in each other’s bank accounts so that they can calculate the exchange rates of British banks. Some other friends joined them and in two years together they had saved banking fee of approximately £10,000-£20,000, which gave them the idea of launching the TransferWire peer-to-peer currency exchange as an online platform in early 2011.

Currently, the business is operating in the same way. It runs some bank accounts all over the world, collects money in one currency from customers and gives counterparties in other currency, pays each country from its accounts.

According to Käärmann, the model has progressed but hasn’t changed. He says, “When we began it was just a simple idea that used euros and pounds only. Occasionally it took some days to make transfers a success. Nowadays, we are using 400 different currencies, and the transfers are very fast. Also, we are the only agent that can transfer money from the UK to France in 17 seconds or less. We have set records on speed concerning international transfers.”

A major decline in foreign exchange in 2015

According to a major survey that was carried out in 2015, turnover in EUR/USD fell by 17% in October 2015, which translates to $640 billion per day. On the contrary, the turnover in AUD/USD rose by 8%.

A survey carried out in the key financial institutions that deal with the foreign exchange by the Bank of England has revealed that a 14% drop in trading volumes has been experienced since April 2015 and a 21% drop since a year ago. The Bank of England measures the vast volumes traded in the markets of global currency.

The survey further revealed that the average daily volume of FX that was traded in the UK in October 2015 was very huge, about 2148 billion or approximately 2.15 trillion dollars. This translates to two-thirds of the yearly GDP in the UK during an average day. This data revealed a noticeable drop in flows as compared to six months ago. However, this drop was still higher at 2481 billion.

Many of the transactions were from Foreign Exchange Swaps that are utilised by the company to circumvent against foreign currency threat in the future, which accounted for 1019 billion in total. According to the report, the huge fall between April and October was in the Spot FX market. It stated that “The turnover in all products dropped over the six months to October 2015. The FX spot turnover dropped by 24% that is $737 billion per day down to 34% during the previous year.”

Regarding the actual currency pairs, the report showed that the currency pair that dropped the most is the EUR/USD. Turnover in many currency pairs dropped. Ideally, the turnover in EUR/USD dropped by 17% in October 2015 to $640 billion every day. On the contrary, the turnover in AUD/USD rose by 8% while that in USD/CNY progressed higher, up by 3%. The largest currency pair currently is the USD/CNY.

There was no informative explanation from the report as to why trading volumes had dropped by a fifth over the last year. However, Jeremy Stretch of CIBC Capital Markets was pointed out by Yahoo Finance as using increased regulation as a factor.

Certainly, the regulation was promoted in many jurisdictions after the Swiss Franc debacle last January, after the SNB eliminated the cap on their currency leading to high losses for several brokers and their clients. This move by SNB led to regulators in the US to increase the minimum margin conditions on several institutional FX transactions, which would have resulted in an immediate drop in volumes as clients would have needed to set aside extra capital so as to receive the same leveraged volumes as compared to last year.

The elimination of the Franc’s cap resulted in several brokers being bankrupt as many traders lost their trading capital as well. This too might have had a small impact on trading volumes. Another reason that led to the drop in FX trading volumes is the dollar’s appreciation. This is because trading volumes are reported in dollars and the stronger currency translates into a reduction in overall volume as compared to using a different weaker currency to report the turnover. However, while this explains the drop in volumes during the year, an increase in the value of the reporting currency cannot elaborate the 14% drop in volumes from April 2015 as the dollar index merely changed in value from April to October 2015.

According to the BOE’s report, many of the marked drops were in Options Trading and Spot, which dropped from 973 billion to 737 billion between April and October. Spot Forwards and Options are the most preferred tools of speculators that explain why the trading volumes dropped extremely during that period.

The UK remains the key leader in the world of foreign exchange in line with trading volumes with a total turnover of 2148 billion in October.

Analysing Premier League clubs exposure to foreign exchange

There exists a single factor that is usually not recognised when the very rich clubs that belong to the English Premier League use millions of pounds for the period of the transfer window, that is, their exposure to foreign exchange.

The aspect of spending £50m on superstar midfielder may not be the most exciting aspect, but similar to all businesses, the forex is one crucial factor that requires closer attention by those who work behind the bars at football clubs. An extreme rate can simply cost millions of pounds.

In the current transfer window and economic wrangles in China, the global equity market rejects and lows in commodities have inflicted chaos all over financial markets. The Sterling has experienced great losses dramatically in the conversion from pound to euro mostly as the rate drops to a 12-month low due to plunging risk sentiment.

Since the clubs usually pay the players using the selling club’s local currency, extreme rates for pounds indicate that buying players from Europe are a huge investment by like ten percent in some cases. In the same line, the buying power of Europe has been boosted significantly.

These ridiculous rates will cost British teams several millions of pounds more than when paid in Euros during the summer window as compared to the month of January, which is a panic-buying period. The previous transfer window that closed at the end of month August, the GBPEUR high was 1.4386. Currently, the transfer window has fallen to 1.2888, which is very low.

Those that acted during the summer period are safe for feeling smug, especially when the players’ value has increased in the meantime, For instance, Manchester City’s investment in Kevin De Bruyne. This acquisition would cost significantly more than £55m that was paid during summer. A sharp spend despite it being currently injured.

To make sure that these rates are even worse for the clubs, they should be well informed when they are trading a player back to a continental club after purchasing him from one during the last transfer window, that the loss they are receiving is essential and that it does not cost them too much.

To overlook that Premier League football clubs function in a similar way to another international trading business is easy. Forgetting the currency risk is very expensive.

Could it be the end of Bitcoin transactions in Europe?

The European Commission (EC) is set to bring the anonymous transactions in virtual currencies to an end to help tracking of terror groups’ funding. To foster this, the Commission published an action plan that will help reinforce the fight against terrorism financing yesterday. It outlined information on how criminals are looking for new ways quickly that provide lower detection risk of moving their money.

There is no evidence in the plan that points out to finance terrorism being financed by virtual currencies. However, the Commission is certain that there is a possibility and feels that it is in a position to contemplate regulation as one of the continuing efforts to bring terror attacks to an end.

The plan requires the platforms that deal with virtual currency exchange to operate under the capacity of the European Anti-money Laundering Directive so as to ensure that exchanges can reveal who accessed their services and when they were used. According to the action plan, the Commission will as well inspect whether it is viable to include wallet providers of virtual currency.

Bitcoinistas should not feel like they have been left out by the EC since the action plan requires a re-think of how and when to reveal pre-loaded credit cards’ users, without minimising their utility. This is because many of these users are poor who find these cards useful instruments in financial matters because they work as credit cards without necessarily requiring the card holders to be credit-worthy. Consequently, a central register of bank accounts, as well as account holders, is required to be set up in the entire European Union member states.

Meticulous consideration of all exchanges between states and EU members that are known to be great points for money-laundering has not been left out in the action plan as well. About many government responses to situations raised by technologies, this issue remains of value, but pointless at the same time since virtual currencies create a virtue of privacy.

Bitcoin in its advice says, “To defend your privacy, there is need to utilise a new Bitcoin address whenever you accept a new payment. Also, you can make use of several wallets for various functions. In doing this, you will isolate all your exchanges and associating them with each other will not be possible. Those who send you money cannot view your other Bitcoin addresses and what you use them for. ”

Many virtual currency transactions are beyond EU’s reach in such a way that operators will find ways of cashing in cryptocurrencies within Europe. Cryptocurrencies do not allow terrorists to access funds.

Is the Foreign exchange market shrinking?

It took the foreign exchange market decades of build up as well as globalization and deregulation measures to earn the title of the largest financial market there is. However, as much as the forex market cannot get relinquished easily, it appears as if its glory days may just be over.

The situation has been accredited to the shrinking in size of both the market volumes as well the number of employees who work in the currency departments of most major banks. Other factors contributing to the same fact include banks implementing stringent regulations, a downward trend in; the market boom, as well as global economy and growth.

According to statistics, in the last three years, the total number of market traders employed in Europe’s top ten currency exchange banks has dipped by 30 per cent. Based on figures provided by the New York Federal Reserve and the Bank of England, as of last month, the trading volumes have reduced to a three-year low.

According to Coalition; a financial data analytics firm, 332 people were employed by the top ten FX banks that operate in Europe. However, in 2012, 475 people were employed by the same institutions, meaning that in 2012 the number of individuals employed by the banks was 30% higher than in 2015.

According to a central banker, towards the end of the year in 2014, the global forex activity in the market was at a peak. During this period, the average daily volumes amounted to about $6 trillion a day. According to data provided by CLS Bank, the average daily volumes in January amounted to $4.8 trillion. This figure indicates a drop by 9% from the previous year and a far cry from the peak average of $6 trillion.

The downward trend has also been attributed to regulatory changes that took place after the global financial crisis which has resulted in a reduction in the ability and willingness of traders to take risks.

According to Howard Tai, a senior analyst at Aite Group, the regulations carried a psychological effect on the market players and thus traders are o longer as aggressive as they used to be.

Suppressed market volatility has also been blamed for the dwindling average market volumes. A fall in spot volumes and reduced demand for derivative products; for example, currency options, based on the fact that if there is no movement of money in the market, them the demand for hedge quite minimal.

According to the managing director of Chapdelain FX, Douglas Borthwick, there is little volatility due to zero interest rates combined with a global environment that appears to be very dovish. Thus, since the volatility is low then the total average volumes are also low.

Category: Money Exchange Software