RBI warns against illegal forex platforms, releases ‘alert list’ of 75 entities

The Reserve Bank of India (RBI), in its latest notification, has once again cautioned people about "unauthorised entities" offering foreign exchange (forex) trading facilities with the promises of "exorbitant" returns.

To tighten the noose around such entities indulged in unauthorised operations, the central bank has re-issued an “alert list”, which contains the names of 75 unauthorised entities or ETPs violating the RBI norms.

The RBI says its investigation shows these entities have taken recourse to engage local agents who open accounts at different bank branches for collecting money towards margin, investment, and charges.

"These accounts are opened in the name of individuals, proprietary concerns, trading firms etc. and the transactions in such accounts are not found to be commensurate with the stated purpose for opening the account in several cases."

As per the central bank, these entities are providing options to residents to remit or deposit funds in rupees for undertaking “unauthorised forex transactions” using domestic payment systems like online transfers, and payment gateways.

"There is a need for greater vigilance to prevent the misuse of banking channels in facilitating unauthorised forex trading, says the RBI, while advising the authorised dealer category-I (AD Cat-1) banks to be “more vigilant” and exercise “greater caution”. “As and when AD Cat-I banks come across an account being used to facilitate unauthorised forex trading, they shall report the same to the Directorate of Enforcement, Government of India, for further action, as deemed fit," says the central bank.

The RBI's alert list, last released on November 24, 2023, contains names of entities neither authorised to deal in forex under the Foreign Exchange Management Act, 1999 (FEMA) nor authorised to operate electronic trading platform (ETP) for forex transactions. The alert list also contains names that appear to be promoting unauthorised entities/ETPs, including through advertisements.

"This list is not exhaustive. An entity not appearing in the list should not be assumed to be authorised by the RBI. The authorisation status of any person/ETP can be ascertained from the list of authorised persons and authorised ETPs," the RBI says.

The RBI in February 2022 had first noticed that such unauthorised ETPs were placing ads about offering forex trading facilities on social media platforms, search engines, OTT platforms, and gaming apps. In some instances, such ETPs-engaging agents personally contacted "gullible people" to undertake forex trading or investment schemes and enticed them with promises of "exorbitant returns". The RBI's observations showed many lost money by trading with these unauthorised platforms.