The Cyprus forex industry is going through another round of soul-searching in response to recent investigations by Israeli authorities and the FBI into fraudulent trading methods.
Already, the financial regulator and watchdog CySEC has suspended two major financial firms, resulting in which 2,500 people have lost their jobs – on the trading floor and in administration.
Although the forex market is widely described as a ‘revolving door’ when it comes to employment, in other words, traders and marketeers move from one company to another, sometimes even within six months, the suspension of at least two firms and more under investigation has revived Cyprus’ reputation as a happy-go-lucky jurisdiction.
Probes by Cyprus and other authorities suggest this is not a new phenomenon and widespread, impacting the good reputation of companies that adhere to the rules, maintain ethical trading standards, and ensure their traders are licensed.
Checking the reputation of some traders, it is clear that those who do their job well also benefit from favourable feedback from customers.
In effect, this has a positive impact on Cyprus’ reputation in general, which has survived a number of scandals in recent years.
The new Chairman of CySEC has pledged to “re-invent” the Cyprus financial services hub by introducing more hi-tech services and bolstering its image.
But to do that, stricter regulation is needed in this multi-billion sector, with hundreds of millions trickling back into the economy in the form of state revenues, employment, and consumer spending.
Some of those who were made redundant (if they were lucky) or lost their jobs and options may not return to the forex scene, resulting in a brain drain and a clean up on the other.
It is a double-edged sword and a great opportunity for the sector to fix itself and move on to new, innovative products and services.
Once again, the bright example of the shipping sector must be used to show that mostly through self-regulation and innovation, the maritime family has progressed to become a major ship-management hub, where the Cyprus flag might be an obstacle in the case of ship-ownership and visiting certain ports.
The forex sector and the wider financial services industry need a major rethink and overhaul to ensure this activity continues to employ thousands and inject millions into the economy.
There is no room for crooks or those who tolerate crooks.
They should be censured, punished even, by expelling them from Cyprus or the industry.