There was a time when the whole continent of Africa was considered one of the best places for doing business. Investors and executives could go anywhere on the African continent and succeed but these days are long gone. Nowadays understanding the unique situation in each market is essential to make a profit. However, some African countries are still attractive for financial companies. For example, according to the 2019 World Bank Ease of Doing Business Rwanda, Kenya, Nigeria, Etiopia, South Africa, and several other African countries are interesting places for investors to start a business because of their economic growth. But making business isn’t only about the increase in GDP and stability of the employment sector. 

Having a strong regulatory system is something investors always look for. Because of the lack of regulations in Africa, financial companies are faced with a dilemma of whether to move into Africa or not. Since there are very few guidelines or possible strategies that regulators can take in case of a violation from a financial company, many legit companies feel that their brand is going to be tarnished by penetrating this market. This is why they are desperate for regulations. 

Financial fraud in Africa

Financial fraud (or scam as we can call it) is an illegal activity of trying to steal money or other assets from a person through deception or illegal practices. There are a variety of methods doing this, like identity theft or investment fraud. For example, Phishing is one of these illegal activities which means stealing somebody’s identity by making a website and encouraging people to input their credit card or other kinds of personal information. One of the most popular methods for financial fraud is called the Ponzi scheme which is frequently used in the forex trading industry. As the Financial Times report, African countries are at the top of the list of places where the forex trading market is full of scam brokers and financial fraud.

There are lots of scam companies in Africa targeting the citizens of the country. No amount of current regulation has stopped them and will hardly stop them. Therefore, it becomes much more difficult for large companies to acquire new clients because those who were already scammed will never go near these services again, and those who’ve heard of the scams would view this company as one. Especially, there are lots of forex scams in South Africa. Investors in South Africa are faced with a great deal of danger as fraudsters often use the Ponzi method to fool them. They offer the investors to transfer the money which they will invest in the fx market successfully. They promise a double or triple amount of profit, which sounds attractive. Even though it does sound like a scam, they believe it because professional scammers always choose their victims carefully. 

What is the purpose of scamming?

If you wanna know why there are so many fraudsters in the financial industry the answer won’t surprise you. The FX market is something that has been considered as a black market not long ago. There were no rules, no regulation, nothing. It was all about a customer and a seller making business via the banks and the brokers. The situation has changed, but Forex Market is still a place vulnerable to make a profit illegally. There are always people who want to take advantage of the situation and make a profit because there is a possibility to make money. So all they think about is, why not? Why not deceive vulnerable people and make a fortune? That’s how human psychology works. 

Scammers usually pretend to represent government entitles. Their purpose is to steal somebody’s money, benefits, and personal information and this somebody is usually a beginner in trading or someone with financial problems. The beginners are the most vulnerable as they do not understand the situation clearly and all they want is to become millionaires in a short time. They easily make mistakes and that’s why fooling them is pretty easy for fraudster brokers. They just promise these people what they dream about and that’s it, they are already trapped. Scamming people with financial problems is also an easy task. Sometimes they may even doubt that somebody’s trying to fool them, but they need to receive profit so much, that they immediately grab the “opportunity” and get trapped. Other than that, people who are easily scammed are the elderly. They usually have some sort of savings they can invest and also lack financial information. Those people are vulnerable to believe and they even drag other people into this fraud scheme. 

Once the investment is made, receiving a profit for the scammers is almost guaranteed. That’s the way Forex scams usually work and there have been thousands of cases of Forex trading scams. 

The importance of regulation in the African FX market

The forex trading market has come a long way and many brokers have already established a reliable reputation towards their clients. As the interest in Forex trading grows, more and more brokers are deceiving the inexperienced trades. There are multiple untrustworthy Forex brokers in the African market and people need to be aware of them. This is why financial companies are too much concerned about moving to Africa. 

Currently, the Forex ban is not placed in any country in Africa, unlike countries like North Korea or Israel where there are strict regulations. Financial companies actively support for tightening laws because financial fraud has become so frequent. Forex market is decentralized in its nature which makes it hard to be regulated. However, there are ways in which the forex market is regulated and the African fx market urgently needs these laws as well for the safety of financial brands. These guidelines will help them avoid financial losses and be protected from fraud. This is why regulation in the African forex market is considered vital for financial companies and customers.