If there wasn’t enough to deal with in China like the increasing scrutiny from Chinese regulators over the past few months. A new issue for forex brokers in China has appeared. Clients that fund their accounts most commonly with a system like China Union Pay will report that the deposit was fraudulent after the client loses their money. Even though the client authorized the funding of the account, they are reporting to the payment providers and regulators as unauthorized.
With all of the false reports, the result is that China Union Pay and payment providers end up dropping the forex brokers as a client. China Union Pay is considered to be one of the only reliable means for Chinese clients to fund their trading accounts. Bank wires are usually out of the question as Chinese Banking restrictions only allow $50,000 a year for individuals. Many of the banks’ restrictions include prohibiting the funding of many broker’s deposit banks.
Having a reliable payment processor is critical to operating in China, and if that is taken away, then many brokers will have no choice but to leave that market. The actions of these dishonest clients and their false reports illustrate that is isn’t always the forex broker that is at fault. Forex brokers have suffered a great deal of reputational damage since the highly publicized scandal involving IronFX. Since then forex brokers have become an easy target for regulators and now the trading public. It is highly unlikely that Chinese regulators would ever side with brokers even if they are apparently in the right.
Another challenge presents itself to brokers in a highly lucrative but extremely challenging market. Forex Brokers in China that wish to continue to operate need to do so with extreme caution.