How To Ensure You Are Using A Reputable Currency Exchange Broker

The fluctuations in the global economy mean that there are more opportunities than ever to secure a great rate when exchanging pounds for foreign currency.

And if you are financially clued up, you will have realised that the best deals are not available from high street banks or travel agents, but from online foreign currency exchange brokers.

However, handing money over to an unknown company can feel like a big risk so how can you be sure the broker is an authentic as they claim? This article explains the steps you can take to protect yourself and the badges of protection to look out for.

Past problems

The near collapse of the financial sector highlighted concerns about the way in which financial firms deal with client's money. 

In particular, it became apparent that many mainstream providers were using money from their customers in order to make speculative investments. This meant that in the event of a financial disaster, the money would not be available to return to customers and they could effectively lose everything. The worst part about this problem is that individuals were not aware this was happening with their cash, and had trusted the banks to act responsibly. A solution was clearly required.

A status to trust

All firms now offering payment services must be registered with the Financial Service Authority. Any company providing these types of services without registration is operating illegally. 

The FSA has introduced two different types of schemes, both of which require firms to undergo certain checks and appear on their public register. 

Whilst having any kind of validation from the FSA is very reassuring, there is a marked difference between the two different types of checks which are carried out.

To become simply registered with the FSA as a payment provider requires a far less detailed level of checks, and are not subjected to ongoing capital requirements. Only relatively small operations are allowed to opt for the scaled down checks, and this means they are not allowed to offer services in other European countries. 

The full check - and the one that you should always look for - is a firm who holds the status of an authorised payment institution with the FSA. To pass the eligibility criteria, it is necessary for staff to be checked and there is an ongoing audit and reporting responsibility. 

However, crucially, an authorised payment institution is required to safeguard their customers' money. This means that all funds collected from clients must be held in a totally separate account to company money, and under no circumstances can be used for corporate investment, speculative or otherwise.
All firms holding authorised payment institution status will normally show this clearly on their website, along with their FSA number which allows customers to check the FSA register more easily should they choose to do so.

Whilst being an authorised payment institution offers no absolute guarantees, the ongoing capital requirements, audits and checks means that you can be certain that not only is the company operating in a scrupulous manner, they will be as financially robust as possible.

Other indicators

Without question, the authorised payment institution is the primary indicator to look for when considering using the services of a company. If you opt to use a company who does not hold this status, there is a risk attached. 

However, there are some other factors which you can also look out for, just to give added reassurance. 

Membership of the trade body, the UKMTA is another positive sign. Although not a regulator, the UKMTA only accepts membership applications from firms who are properly registered with both the FSA as well as following HMRC regulations on Money Laundering. Note - firms do not have to be authorised to be registered with UKMTA, just registered, so this should not be taken as a sign that full 
checks have been administered.

Taking a slightly different approach, firms should also be registered with the Information Commissioner's Office, the public body responsible for Data Protection in the UK. The company you plan to use should hold a registration number which can be checked should you wish to do so. This ensures that the highly personal and sensitive data you are about to hand over will be treated in an appropriately confidential manner and not disclosed elsewhere.


If you follow the above steps you can sign up to online foreign currency brokers safe in the knowledge that your funds will be managed properly and your data handled securely. There are many examples of these which offer their services whilst meeting the above criteria.

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