Q: I had an investment firm call me to say that Iraqi dinars are a hot investment right now, and that I can look at future returns to be worth three to five times of what I invest today. It seems pretty tempting. Has the BBB heard of any scams involving Iraqi dinars or foreign currency investing?
A: Over the years, BBB has received complaints nationwide about a number of dinar investments surrounding the profit potential of dinar currency investments. In dinar exchange scams, potential investors exchange U.S. currency for dinar with the lure of receiving high returns on the investment if the value of the Iraqi money were to increase. In other complaints, it appears that companies are not providing the dinars ordered nor are they returning money back to the customers.
While there are legitimate firms that trade foreign currency in foreign exchange markets, others utilize promises of large profits, religious associations, and charity affiliations to take consumers’ money. It is extremely important to look into the company where you are investing your money. This is true with any investment you make. Take the time to find out information on the company and make sure they follow ethical practices and provide the services they advertise.
BBB offers the following tips to help avoid a potential dinar scam:
Make sure the company has authentic currency and verify the product. To avoid buying counterfeit foreign bank notes, purchase currency from dealers registered with the U.S. Treasury as a Money Services Business (MSB). Keep in mind that registration is not a reflection of experience in trading currency nor does it entail any qualifications on the part of the dealer, other than basic anti-money laundering requirements. Also, make sure you are receiving new dinar introduced in 2003; most of the old dinars have a picture of Saddam Hussein on them. Research what is the company’s policy if the dinars are never received or are the wrong ones.
Be informed about exchange rates and fees. Iraqi dinar sells online in various denominations for a wide range of prices. The reason for the wide range is that it is difficult to find objective exchange rates because the Iraqi dinar does not trade freely in international markets. According to the Central Bank of Iraq, the current change rate to sell is 1166 dinars per US dollar. Consider the fees charged by dealers, which ultimately affect the price paid for dinar. Sellers have made a substantial amount of money through currency conversion fees they charge buyers.
Make sure the company has a long history and is transparent. When investing in a company it is important to be able to look at the company history and see that it has established itself over time. This shows that the business is not one that will disappear overnight or take the money and run. Find out who is running the company and where else the company is connected. It is also important for the business to be up front about the worth of the money and give basic and realistic estimates about growth opportunity in the future.
Make sure the company follows regulations. It is important when working in foreign currency to ensure that the company follows all necessary regulations, including industry, state and federal. These standards are put into place to help protect the consumer, and help ensure ethical procedures. For more information about currency trade regulations visit: http://www.cftc.gov/ConsumerProtection/FraudAwarenessPrevention/ForeignCurrencyTrading/index.htm.
Be skeptical about predictions. The Iraqi parliament has been in debate for some time about whether or not to delete three zeros from its currency to make counting money and trading “simpler.” Some investors believe that by doing so, this “revaluation” will instantly give them 1,000 times the profit on their original investment. However, what is more likely to happen is Iraq will create the exchange rate to be 1,000 dinars for one new dinar. While some sellers foresee the Iraqi currency substantially increasing in value, currency investors face considerable risk. If Iraq inflates its currency or devalues it, not to mention the current Middle East situation, the value of the dinar could plummet.
Watch out for unsubstantiated, sweeping statements on religious or charity affiliations. Statements such as “pray for advice from God before making a purchase” or “our company has committed 10% profits towards providing for military-based charities,” can be used in an attempt to connect with consumers and entice them to invest in dinar. Other statements such as “everybody will want to get in on this,” are also used. However, remember there is currently no active market for dinars – you can buy them, but can you sell them?
Attend the next BBB Smart Investing seminar. To learn more about how to avoid scammers getting a hold of your hard earned money, attend BBB’s next Smart Investing seminar on Tuesday, September 10th from 8:30 a.m. -9:15 a.m. held at the BBB, 508 N. Market St., Chattanooga, TN. The seminar is free, but please RSVP your attendance to Kasandra Helms at email@example.com or call (423) 266-0396.
Jim Winsett is president of the Bettter Business Bureau of Greater Chattanooga.
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