Openness and clarity enhancing chances
Belarusians warned against playing on the foreign Forex market
By Alexander Belkovsky
We need to be cautious…
Dmitry Nabzdorov, the Head of the National Bank’s Department for Non-Banking Operations, notes that a significant number of citizens have been playing the international currency market. “Clearly, there’s no exact data; however, judging by information from Russian broker companies, over 20,000 Belarusians have recently used their services,” he notes. Sadly, this brings an outflow of capital from the country and the paying of taxes into ‘foreign’ budgets; meanwhile, citizens’ rights are vulnerable.
“As a rule, a foreign economic treaty is signed between a legal entity (non-resident) and an individual. Information on the public offer treaty is placed by the company on its website and the individual agrees to the terms,” explains Mr. Nabzdorov. “Printout of correspondence, key Internet pages from the non-resident site and copies of payment documents may serve as proof of such an agreement. However, it would also be possible to swindle non-residents.”
In addition, Russian and Ukrainian Forex brokers sometimes lack registration on the market on which they work, being registered in the Cayman Islands or in New Zealand. Where clients’ rights fail to be met, juridical procedures must take place in the country in which the company is registered. “Even if an agreement is legal and complies with all legal rules, few citizens would be materially ready to take a non-resident legal entity to court, paying for a lawyer’s services and for flights,” Mr. Nabzdorov asserts.
Russian Forex brokers confirm the fears of the National Bank. Fortunately, since Belarus gained its own financial market, the number of swindles has significantly reduced. Nevertheless, companies remain which offer to help citizens play the currency markets. The professional community has an ambiguous attitude towards the activity of such companies, believing they may use incorrect data to fleece clients of their money. Some independent experts even think that 90 percent of clients’ money becomes ‘lost’ through such schemes.
According to Mr. Tikhomirov, the Director General of Admiral Markets, most citizens within the post-Soviet space are wary of Forex trading. He notes that ‘lack of understanding leads people to view it much like a lottery scam or a financial pyramid’. Unfortunately, since those who do take part choose to do so regardless of their lack of true understanding, it would probably be difficult to persuade them otherwise.
Pioneers of financial market
Market participants are concerned that lack of clear regulation could lead to the uncontrolled operation of many companies offering citizens access to Forex trading. Legislation in Armenia, Azerbaijan, Georgia, Kazakhstan and Uzbekistan has no reference to this sphere and Ukrainian law remains vague. In Russia, a draft federal law was recently submitted for consideration to the Government, obliging Russian brokers to register locally. This should enhance transparency while demonstrating that a company has statutory capital of at least 35m Russian Roubles. Needless to say, this is only the first step in tackling the problem, with many revisions likely to be needed in future. Our Russian colleagues believe that Belarus is in a more advantageous position and may become the first post-Soviet country to launch efficient regulation of such non-banking over-the-counter trading.
In late 2012, a draft decree by the Belarusian President was prepared, regulating some aspects of the financial market. It gives power to the Government and the National Bank to regulate various segments of the non-banking sector of the financial market, including Forex dealing. Igor Volkov, Managing Director of Forex Club LLC (Moscow), approves greatly of the move.
He notes, “In particular, Belarusian legislation is inserting Forex dealing into the existing legal environment, creating an open and transparent market.” He believes this will pave the way to other opportunities, since capital is more likely to remain within the national economy, promoting the growth of the financial market. It should also enhance the financial literacy of the population.
The National Bank is confident that Belarus can create conditions for a local Forex market, with more attractive terms than those offered by rivals in neighbouring states. For instance, citizens will be made exempt from paying income tax on their profits for three years. Mr. Nabzdorov stresses that, as Forex brokers have operated without paying any tax to date, any tax paid can only be to the ultimate benefit of the state.