A dangerous trade sweeps Iraq… “Forex” victims lose billions

Noor Al-Ali (20 years old) from Baghdad, at the beginning of 2021, thought that she would move from a housewife with only a high school diploma to financial independence by entering the “Forex” market after her close friend convinced her to do so.

In order to take her first step towards achieving her dream of wealth, Noor borrowed $300 from her cousin, and sent it with her friend to her brother who opened an account for her on one of the trading platforms and took over the trading process in her place. Within a short period, he told her that she had made a profit of $700.

Later, he confirmed that she had received an additional $200, so she was excited and her hopes rose, especially when she learned from him that her capital had become $900. But it did not take long for him to inform her of the bad news, as she received a sudden loss of all her money, according to him.

“I couldn’t even pay back the money I borrowed from my cousin,” Nour says, disappointed, not knowing how it all happened and why she lost everything at once. After her experience, she realized that trading currencies online requires experience, knowledge and a lot of practice, and that it is important to do it yourself “but with extreme caution.” She does not rule out returning to this field in the future, “but now I have to look for an easier and less risky job to do online, provided that I do not pay anything.”

Nour’s loss in the field of e-trading may not seem huge, compared to others who have suffered huge financial losses. But what happened to her is a  similar to many victims of this growing market in Iraq, according to financial traders who consider the whole thing an adventure and that nothing is guaranteed in the scope of dealing with money, whether cash or encrypted.

A number of them mention how there are those who carry out the trading process themselves as an experiment and risk, so they create an account on the website of one of the trading companies, fill out the available forms with the necessary information, confirm the email, upload the required official and personal documents, and then get advice from the company’s agents. Or how it is done through an intermediary, who organizes this process in exchange for a percentage of the profits, as happened with Nour, and happens with many others, where due to the lack of experience and the presence of many fraudulent companies, many of these people fall victim and suffer losses.

Experts believe that the winners in this growing market in Iraq are “professionals in this field, marketers, sellers of educational courses, and company brokers. Most of them are not Iraqis, and they reach Iraqi citizens through Iraqi agents who are active on social media.”

What is “Forex”?

Forex is the foreign exchange market or the global stock exchange for foreign currencies, and the term is a combination of the first two letters of each word of the economic term from the English language “Foreign Exchange”, which is a market that extends throughout the world where currencies are exchanged by several participants, such as global banks, international institutions, financial markets, and individual traders.

The researcher in Iraqi and international economic affairs, Evan Shaker Al-Dobardani, states that Forex (FX) is the largest market in the world in terms of trading, and points out that there are two types of transactions that take place in it, “spot transactions and futures contracts”, and estimates the number of traders through it in Iraq at about one million traders, “the majority of whom are young people between the ages of 20 and 30 years of age of both sexes”.

As for the economic expert, Munar Al-Obaidi, he says that anyone can trade in Forex because it is “a trade that allows many investment companies, banks, and retail brokers for individuals to open accounts and trade currencies in the Forex market”.

He also notes that an investor or trader can “buy or sell a country’s currency, in exchange for another currency, but there is no actual exchange of money from one party to another as is the case in exchange shops. In the world of electronic markets, traders usually take a position in a particular currency in the hope that there will be an upward movement and strength in the currency they are buying or weakness if they are selling it so that they can make a profit.”

According to a study prepared by the Iraq Future Foundation, the acquisition of forex trading through foreign exchange trading operations takes place in five major financial centers around the world, with 79% of them occurring in the United Kingdom, the United States, Hong Kong, Singapore and Japan. The United Kingdom is the largest foreign exchange trading center.

The head of the Iraqi Securities Commission, Faisal Al-Haimus, estimates the combined trading volume of forex companies in Iraq until 2023 at about $900 million. He stated in a televised interview that “all of them are unlicensed,” and indicated that there are investors in Sulaymaniyah with about $100 million by the end of 2023.

He added that the Securities Commission, as the relevant authority, has not granted a license to any of these companies, and that a committee was formed months ago consisting of representatives from the Central Bank, National Security, the Ministry of Interior and Intelligence, as well as the Securities, at the request of the Prime Minister to look into the work of these companies.

He said that the committee’s work focused on “finding a mechanism that would legitimize the work of forex companies,” including providing financial guarantees to the Securities Commission, as the body responsible for licensing Iraqis to trade money inside and outside Iraq. He stressed that finding a mechanism for the work of these companies’ aims to “protect citizen traders through the financial guarantees that these companies will provide.”

He considered that this is the only solution to the problem of fictitious companies and fraudulent operations that traders are exposed to, and added: “Not all trading companies are illegal, some of them are registered in the companies registry but not to practice this type of work.

On July 7, 2024, the Central Bank of Iraq submitted a paper entitled “Draft E-Commerce System” to the Iraqi Council of Ministers for approval, and the bank’s director, Ali Mohsen Al-Alaq, stated in a press statement that this comes in accordance with Diwani Order 24079 to regulate e-commerce.

He said that it focused on the controls for granting licenses to those wishing to practice e-commerce in a way that preserves the rights of all parties.

The institution expects the volume of demand for investments in the Forex market to reach more than $94 million annually, with an annual growth rate in the volume of transactions of 9.8%. Taking into account the population growth rate in Iraq, which is more than 2.8% annually, the annual volume of transactions could reach $130 million over the next ten years.

Economic experts point out that there are many financial brokerage companies working in Iraq without legal cover. They have offices in various governorates, but they hide their real work under the cover of consulting offices or learning academies. They point out that a number of them have designed and published advertisements via social media to attract investors and that there is an increasing demand in the Iraqi market for this trade, especially with the rise in the issued currency, which has reached more than 70 trillion dinars, which has been an important factor in increasing investments in this field.

Trading Mechanism

The common method of trading is through the trading platform used by traders around the world, including (Metatrader 4, Meta trader 5, and C trade), to trade currencies such as the dollar, as well as gold, oil, silver, and other metals and stocks.

Although many Iraqis trade in digital currencies (virtual currencies) such as Bitcoin and others, dealing with them has been prohibited by a decision of the Central Bank of Iraq.

Those dealing with them are subject to the provisions of Money Laundering Law No. (39) of 2015 and the laws related to this matter. However, trading is still ongoing.

Traders contacted by the investigation team indicate that the process of directly trading in the market is done by entering a platform provided by a licensed company, by countries such as the United States or Australia or others, or a licensed broker who is the link between the trader and the global market, to deposit and withdraw capital through it.

After verifying the availability of the legal controls of the company, the trader registers his data and attaches the supporting documents to the platform, then deposits his money and begins work. These traders stress that if the broker is “licensed, the trader can withdraw at any time with the funds he deposited without any decrease, because his financial account is directly linked to the global liquidity provider with global banks and financial institutions.”

The common practice in Iraq is unregistered companies, some of which are fictitious, and most of them follow a pyramid scheme, where a person known as the “leader” communicates with potential victims and tempts them with large profits, and gets a percentage of 10% for each person he brings to trade, and the company gives him a reward if he brings a certain number of traders, and each trader brings another trader, who is also credited with a percentage of 10%, which is why trading in this way is called “pyramid trading or network marketing”.

The trader usually hands over a sum of money to the broker or “leader”, and then receives the supposed profits in his wallet, and to increase the speed of accumulating profits, some traders invest higher amounts, but what happens in the end, after the company gets a large number of traders who have actually provided money, it suddenly disappears with its brokers and there is no trace of its platform or pages on social media.

Trading expert Ali Yahya says: “There is no single global form that governs and monitors the giant Forex market, while many governmental and independent bodies supervise foreign exchange trading around the world. Supervisory bodies grant brokers certificates and licenses after ensuring that they meet the required standards such as regular audits and frequent evaluation. This helps ensure that currency trading is ethical and fair for all participants.” He points out that there are international brokerage companies in Iraq that meet the requirements, operate in many countries and have globally recognized certificates and licenses to ensure fair work. He gives an example of one of these bodies as “the Commodity Futures Trading Commission (CFTC), an independent agency affiliated with the US government, which regulates Forex trading.”

Fraud and Scam

“Trading is one thing, and pyramid network platforms are another,” says Younis Fathi Abdullah (31 years old) from Mosul, adding, “I knew this too late.” Fathi recalls that a friend of his called him in 2021 and told him that he could invest his money in a trading platform with guaranteed profits, and that it would trade on his behalf and work hard to prevent losses.

“I paid $8,000 the first time, and I logged into my account every week and find that I had made a profit of between $200 and $300,  I quickly moved to a balance of $20,000, which made me open an account for my wife with the same amount ($8,000), and both accounts started to make regular profits, as our dreams grew.”

The broker opened a group for subscribers on the WhatsApp, and “whenever one of us increased his balance, he congratulations him, your balance has become $10,000 or $50,000.’”

“The word ‘congratulations’ was the only thing I got!”

After a while, the broker stopped the comments feature in the WhatsApp group, especially after the subscribers insisted on how to withdraw their profits, and then the profits were stopped from appearing in their personal accounts. Since 2022, they, including Younis, have been waiting to hear something new regarding their frozen funds on the platform. “We are not able to withdraw them, nor are they closing the platform and relieving us of the illusion we have drowned ourselves in.”

Al-Haymas mentioned that many fraud cases have occurred in Iraq in recent years, including the unlicensed Unique Finance company seizing an estimated $120 million, and then its owner fled to an unknown location. Some traders confirmed to the investigator that the number is much larger than that, and that it reaches $950 million, and that thousands of Iraqis had invested their money in this company, but the investigator was unable to confirm the number from an official source. Traders reported that in July 2024, social media sites in Nineveh circulated news about the shutdown of a pyramid trading platform called “Linda,” which caused thousands of citizens losses estimated at tens of millions of dollars. Meanwhile, traders who present themselves as experienced confirm that the reason many of their peers are exposed to “fraud and deception” is their lack of sufficient experience and their inability to distinguish between solid and fraudulent companies.

Fake companies

Hussein Al-Saeedi (27 years old) is a cryptocurrency trader. He says that he understood the trading mechanism through educational courses on YouTube, and he confirmed that many traders fall victim to fake companies that exploit them by manipulating prices and causing them financial losses and the loss of their capital “because they basically do not connect them to the Forex market.”

He also says that some traders, despite their losses, return to trading again with amounts larger than those they lost, with the aim of trying to compensate for their losses “but this is wrong and doubles the loss.” He adds that the advertisements promoted by companies tempt traders with alleged great benefits for trading through them, which is tempting for many who dream of getting rich, but they do not know that they are just victims of fraud.”

Al-Dobardani, a researcher in Iraqi and international economic affairs, describes Forex as a “dangerous trade around the world” because it requires, as he says, “many elements to enter and practice it,” and among the elements he talks about are “familiarity with technical and fundamental economic analysis, and risk management.” He points out that this will only be achieved after a long period of practice.

Advertisements targeting women

Promotion through advertisements published on social media sites, some of which are sponsored advertisements, is the most common way that Forex companies target potential customers, and once they register (online) on one of their platforms, company representatives begin communicating with those wishing to trade.

It is noted that Forex has a tempting space directed specifically at women, as advertisements and explanations depict achieving huge financial profits without leave the house or exert effort, and it is sufficient for the trader to have only a mobile phone to be able to do this.

Lack of legal regulation

Academic law specialist from Thi Qar University, Dr. Qatada Saleh, confirms that the financial losses citizens are exposed to as a result of their dealings with fictitious digital trading companies is “a crime of fraud and deception punishable by Iraqi Penal Code No. 111 of 1969”.

He believes that the three elements of the crime are present “material, moral and legal”, and that this applies to people who commit fraud on others, as “Article 456 of the Iraqi Penal Code punishes with imprisonment anyone who obtains or transfers possession of money owned by others for himself to another person by using fraudulent methods or adopting a false name or incorrect description for a specific incident, which leads to deceiving the victim”.

Saleh adds: “Even if the transaction or means used for fraud and deception is electronic, it is considered an advanced means, and the general principle in these incidents confirms that it is a crime subject to Article 456 and Iraqi law.”

He points out that Iraqi law “even if the person who committed the crime, fraud and deception is not Iraqi and resides in another country,” explaining “because the criminal act occurred entirely or partially in Iraq.” However, Saleh acknowledges that “the difficulty lies in implementing the investigation, arrest and trial procedures, and this is impossible except in exceptional cases such as bilateral agreements between two countries.” Saleh also says: “If the broker or agent of a fictitious company is of Iraqi nationality and does not know the identity of the company and deals with it in good faith and the company steals investors’ money, he is considered partially responsible and Article 456 of the Penal Code applies to him and it is his responsibility to prove good faith. If he is unable to do so, he is considered the original perpetrator, and even if he proves his good faith, he remains civilly responsible before the people whose money was stolen.”

What should traders do?

Economic expert Manar Al-Abidi advises traders to check the company’s background before investing in it, and suggests the best way to do this is by visiting regulatory websites such as (FCA, CFTC, PRA, or NFA).

Other experts also advise that the relevant government agency license the work of trading companies in exchange for a guarantee to return some or part of investors’ money in the event of a breach, and to deal with reputable global financial institutions in the field of Forex trading and monitoring financial transactions.