No one wants to risk his hard-earned money with fraud or illegal moves, but what about illegal activities and the violation of trading rules? In forex, some trading tactics and suspicious activities get restricted by banks and most forex brokers.
Many novice traders have quickly discovered a few practical but illegal ways of quickly making huge profits. And they increase their deposits, while all their trading achievements end with a disastrous ban. Why does this happen? Let’s find out the answer:
Can a forex broker ban you?
Your account can be restricted or banned for many reasons, such as due to AML or money laundering policy, unpaid debts, security reasons, any suspicious activity in your account, and the broker scam, or fraud. This ban can be temporary, long-term, or even permanent.
If your account is banned or restricted from unlimited use, you can not withdraw money and transfer your deposits to other countries or exchange your money with other currencies. An entirely blocked account is also known as a frozen account. Thus the investor cannot access his account funds or assets.
Why Does a Broker Ban Your Account: 5 Reasons A Forex Broker Can Ban You
We know forex trading is a global market involving the exchange of different currencies. FX trading offers tremendous growth opportunities for financial criminals also. Therefore, essential regulations have been made in the last few decades.
Your trading account can be banned or blocked due to some reasons, such as:
Money Laundering Policy
Forex trading has serious AML risks; your deposits or withdrawals must comply with AML regulations. The most common reason a broker can block your account is using black money or illicit money. A bank can take any large transaction as suspicious or illegal money and block your account.
In foreign exchange, it’s easy to send a big amount of money to any part of the world through forex trading. Many people use forex trading to turn their illegally obtained money into legitimate money. They deposited large amounts of black money into their trading accounts and coined them roughly to give the impression of white money.
A broker can scam you in many ways, as many fraudulent brokers are ever ready to scam novice traders. Your broker can exploit you by using so-called forex software, manipulating bid/ask spreads, churning, and Ponzi or pyramid schemes. A broker can also scam you by spending your money on gambling instead of investing it.
To avoid brokers scam, you must learn forex trading properly and look for a reliable, legitimate, and registered broker. Firstly, start trading with small deposits. Then make a few trades and a withdrawal. If all goes well, then you can proceed with large deposits gradually.
The bank can block your account for any security reason if they suspect the account holder might be involved in illegal activities. Banking regulations have become strict after the terrorist attack on September 11. The bank might suppose that you are financing money to support some criminal or terrorist actions.
However, banks regularly monitor all accounts, especially if a huge amount is deposited or withdrawn or a bad check is written or cashed several times because the bank can think that this massive amount may come from criminal activity and be deposited in the bank to disguise as it is generated from a legitimate source.
Overdue debt is another reason for this ban. You may not have fully paid your student loan, car loan, or government taxes. Therefore, the government has requested to block your account.
In case, you have not paid your taxes, the IRS (Internal Revenue Service) can issue a tax levy, which can be lifted after you have paid the total overdue amount.
Unfamiliar or Suspicious Activities
Novice traders should familiarize themselves with the rules and regulations of trading to avoid the risk of blocked accounts and to protect the money of both the investor and the broker. A trader account can be blocked for 90 days due to freeriding, an illegal practice.
If a trader sells his securities before finalizing the purchase from a previous trade, he is involved in freeriding.
Another important reason that a broker can ban you is suspicious activity. This activity means someone is trying to open your account from a different device with the same login.
Your broker might have set some restrictions on your account. So, he can ban you if he finds your account being operated or log in from a different device.
How Do I Unblock an Account: 4 Steps to Activate your Account
If your account is blocked, contact your broker or bank and ask for the reasons. You should get information and inquire about the activities that make you a suspect. The most important step is to prove that you are not involved in any illegal or suspicious activity. You should also explain the reason behind your deposits’ large and unusual movements.
You can reactivate your trading account by following these 4 steps:
- To reactivate your trading account, send an email or letter to notify DP that your account has been blocked.
- You should use your registered email ID, or address to intimate DP about your request.
- If the DP accepts your request, you will have to fulfill a fresh set of KYC formalities.
- In the last, verification will take place at the head office of the concerned DP.
After the completion of these formalities, your account will be activated again. Now it’s up to you to close your account or start trading again.
Why is my trading account blocked?
Your account can be blocked for many reasons. Brokerage can grasp your security and prevent you from selling that security if you have used the same security as collateral. Plus, your account can also be blocked for a specific period if you do not have sufficient capital to complete the trade.
Why am I failing as a forex trader?
The main reasons for this failure are overtrading, lack of learning and research work, and trading too much and impatiently without limiting the risk factors. The major causes for overtrading are the desire to make huge profits overnight, inadequate capitalization, and market obsession. Many forex traders book profits before fixing their stop loss.
Can a forex broker block your accounts for making too much profit?
No, it’s not the case. A legit broker will not block your account for making too much profit. He will be happy for your gain. A broker is a middleman, lose no money when you earn profits.
Moreover, a trade closes automatically if you utilize risk management tools and place a stop-loss order or take profit order. However, a forex broker can also block your account for illegal moves or fraud.
Can Brokers Manipulate the Forex Market?
Of course, a scam broker can manipulate the retail trader by widening the spread and creating artificial spikes. A retail trader depends on the broker’s price feed, and a retail broker can easily alter the price feed given to the clients.
To conclude, if you are blocked or banned by a broker, it’s not a positive thing. It can cause many restrictions and losses of funds. Brokers and financial institutions can ban your account if you don’t follow the rules and laws while trading.
A huge transaction can make your account suspicious for black money or illegal activity. Perhaps, you might not involve in any illicit or criminal activity or money laundering, but the bank simply denies it.
Moreover, frequent and unusual deposits can suspect or flag your forex account. Well, there is a chance that you might have won the lottery or you have donated a huge amount to a trust. But you need to explain and prove that there is nothing wrong with your transactions. It would be better to contact a legal adviser to tackle this freaky situation if you are confronting this.