Scottish shell companies are being used as fronts for unregulated and unlicensed binary options trading platforms, many of which have been condemned as internet scams, according to a report today in Herald Scotland.
International watchdogs, including Britain’s Financial Conduct Authority (FCA), have published warnings about such internet sites in recent weeks amid concerns that consumers are losing “substantial sums of money” executing high-risk trades.
Huge Financial Losses
The Herald’s investigation found that some binary options websites are trading using controversial Scottish limited partnerships, known as SLPs, a kind widely marketed in eastern Europe as zero-tax “offshore companies”, or other Scottish shell firms.
The government has warned about SLPs being exploited with the latest allegations of unethical behaviour underlining the need for action to make Scottish limited partnerships transparent with the imposition of penalties for illegitimate transactions.
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Binary options traders identified in the investigation noted to have links to Scottish shell companies include three websites recently blacklisted by France’s financial regulator, the AMF, which also warned that it could not find any authorised investment services provider for the sites Finpari, Barclays Traders and Solution-Capital.
Binary options trading sites have substantially grown across the globe in the last year. At least two more such sites were found to be trading under a front that is an SLP and there are growing international concerns over binary options trading sites cropping up on the world wide web, often with offshore tax haven addresses.
The FCA has stressed there is no law under which such businesses can be licensed as investment services in the UK.
In a formal warning on binary options trading last month, the watchdog said: “Unfortunately, many of the reports we have received are from consumers who have dealt with fraudulent binary options firms that have no regulatory status either with the FCA, Gambling Commission or other EEA or non-EEA regulators.”
“Fraudulent firms operating in the binary options market without the necessary authorisations or licenses tend to be based outside the UK yet often claiming to have some kind of presence here, often at prestigious City of London addresses.”