Why Obtaining a Bank Account for Unregulated & Non-Licensed Forex Brokers Is Becoming More Challenging – 3 Important Reasons

The rapid development of forex regulation around the globe is one of the reasons fewer banking choices are available to unlicensed FX brokerages.

As each day passes, it is becoming more difficult for non-regulated and unlicensed forex brokers to obtain banking solutions, especially direct banking relationships. Although we have some banking solutions in place for SVG registered forex brokers, it’s important to understand the realities of banking, especially if you are interested in starting your own forex brokerage.

Consider 3 reasons why banking solutions are more challenging for non-licensed forex brokers to obtain:

1) The Majority of Jurisdictions in the World Now Have an Established Regulatory Framework for FX & CFD trading

We are often asked for banking assistance by new forex brokers that have registered there business in a country that has an established regulatory regime, for example in Cyprus or the United Kingdom. Our advice, as always, is to shut down the business and incorporate the new brokerage in a jurisdiction without any forex regulation such as St. Vincent & The Grenadines or Marshall Islands.

We suggest taking this approach for a couple of reasons. First, it is illegal to operate an unlicensed forex brokerage in a country that requires a license. Secondly, if your broker ever wishes to obtain a forex license in the future, the chances of approval will decrease significantly if it is ever discovered that your broker was operating illegally in a licensed jurisdiction.

2) Unlicensed Foreign Exchange Trading Is Perceived as Too High Risk for Most Banks

If there is any takeaway from this article, it’s that your new broker will struggle to find any bank that will open an account without some type of license or regulation. Although you are welcome to search the Internet for banking options, you will spend many weeks if not months trying to search for something that is just about impossible to find. Our advice comes from experience, which is why we are more than happy to share our findings in this article.

One of the main reasons banks are hesitant to work with forex brokers is that global regulations pertaining to banking have become more strict. Unregulated foreign exchange brokerages are categorized as high risk for the majority of banks around the world. The few banks that do onboard this type of business often face severe penalties. For example, banks are often threatened with the suspension of all US dollar transactions if they open accounts for businesses in certain high risk categories, making it far too risky for most banks onboard an unlicensed forex brokerage.

As a final warning, we suggest exercising extreme caution with any bank that accepts an account application without questions, or minimal due diligence. Most likely the offer is not legitimate and your broker could end up placing not only operational funds but those of your clients in jeopardy. If you are unsure whether or not the bank you are speaking with is reputable, feel free to contact us for a free assessment.

3) The Forex Industry Has Matured

The final point is a summary of the first two. In essence, as the FX industry has matured, more countries have adopted  a regulatory framework to improve the image of their region and weed out unreputable businesses. In addition, the majority of banks are now familiar with the foreign exchange market, a niche industry that banks didn’t fully understand in the past.

For these reasons, and the points outlined previously, the ability to simply set up an offshore company and obtain a bank account is mostly a thing of the past. Although you can initially launch  and operate your new forex broker out of St. Vincent, licensing should always be a consideration for the future growth of your brokerage. 

Explore Banking Solutions for SVG & Non-Licensed Brokerages with Atomiq Consulting

At Atomiq Consulting we always advise new brokers to seriously consider obtaining a forex broker license in order to avoid the banking challenges outlined above. Nevertheless, it’s still possible to initially start your forex broker by registering the business in St. Vincent & The Grenadines or Marshall Islands. In addition to guidance with the initial company registration, Atomiq Consulting also has several banking solutions available to help you get started.

To explore our payment solutions in more detail, learn more about obtaining a white label, or starting your own forex brokerage, don’t hesitate to contact us today!

Have a look at some of the additional services our clients have found to be helpful in the growth of their business.

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