FBI looking at foreign exchange practices
The WSJ reports that the FBI is at the early stages of an investigation into how American Express won clients business by misrepresenting pricing.
In August, the WSJ reported that business clients were recruited with the promise of cheap FX conversion rates, only to see them raised later without notice.
Rip-offs in foreign exchange are a big part of the business model for a large part of the financial services community, including retail stock market brokers, companies like paypal, credit cards and many others. Those margins are going to be continually squeezed in the future and anyone's model who depends on big FX markups is (hopefully) going to be bled dry in short order.
The thing is, it's opaque. Firms are allowed to advertise things like 'no foreign exchange commission' and yet they're charging huge spreads, which are just commissions by another name. At some point there needs to be some broader regulation in the market on deceptive marketing. There's also no reason that anyone should ever be paying more than 1% on the spread, unless it's the physical delivery of cash or trading in some obscure currencies.
