Question
My sister has had an offer accepted on a house in Austria. She has to put down 20, 000 Euro as a deposit but will obviously have to convert this from Sterling.
Apparently when you are transferring such large amounts of money the best way to do it, and to get the best rates, is to use foreign exchange dealers. The only problem is she is not sure they are regulated and have mixed customer service reviews.
Can you offer any advice on the best way to proceed safely?
Answer
Despite the potential benefits of good exchange rates and low charges, using foreign exchange brokers remain a dilemma due to concerns over the safety of your money. Especially in light of the high profile collapse of Crown Currency.
I would only consider using exchange brokers that are authorised and regulated by the Financial Services Authority (FSA). Some companies are just 'registered' with the FSA (e.g. Crown Currency was), but I'd give these a miss as they don't have to jump through many hoops to do so - becoming authorised is more hassle hence companies who do this are arguably more serious businesses. See my answer to this earlier question for more details.
However, even authorised and regulated currency brokers are not totally safe, as any losses might not covered by the Financial Services Compensation Scheme (FSCS).
Is there much risk? In theory, no. An authorised and regulated currency broker must hold your money in a segregated client bank account - i.e. they can't touch the money for their own use. Provided the broker follows FSA rules then your money is safe while they hold it (unless the bank goes bust, in which case you should be covered up to £85,000, but double check this with the broker).
However, in order to physically exchange your money into another currency the broker must pass your money to a third party (called a 'counterparty'), at which point it's no longer held in the 'safe' segregated account and you could lose your money if either the broker or counterparty goes bust at that point. The counterparty will usually be a large bank so the chances of a problem are minimal, but always check which counterparty will be used and make your own judgement of how safe they'll be.
Once the counterparty returns the foreign currency to the broker it's once again held in the segregated account before being sent to the final destination bank account you've specified.
Provided you stick to a well established FSA authorised and regulated foreign exchange broker I think the chances of anything going wrong are very slim. You might get more peace of mind using a bank, but the rates and charges will probably look grim by comparison.
Hope your sister enjoys the new house.
My sister has had an offer accepted on a house in Austria. She has to put down 20, 000 Euro as a deposit but will obviously have to convert this from Sterling.
Apparently when you are transferring such large amounts of money the best way to do it, and to get the best rates, is to use foreign exchange dealers. The only problem is she is not sure they are regulated and have mixed customer service reviews.
Can you offer any advice on the best way to proceed safely?
Answer
Despite the potential benefits of good exchange rates and low charges, using foreign exchange brokers remain a dilemma due to concerns over the safety of your money. Especially in light of the high profile collapse of Crown Currency.
I would only consider using exchange brokers that are authorised and regulated by the Financial Services Authority (FSA). Some companies are just 'registered' with the FSA (e.g. Crown Currency was), but I'd give these a miss as they don't have to jump through many hoops to do so - becoming authorised is more hassle hence companies who do this are arguably more serious businesses. See my answer to this earlier question for more details.
However, even authorised and regulated currency brokers are not totally safe, as any losses might not covered by the Financial Services Compensation Scheme (FSCS).
Is there much risk? In theory, no. An authorised and regulated currency broker must hold your money in a segregated client bank account - i.e. they can't touch the money for their own use. Provided the broker follows FSA rules then your money is safe while they hold it (unless the bank goes bust, in which case you should be covered up to £85,000, but double check this with the broker).
However, in order to physically exchange your money into another currency the broker must pass your money to a third party (called a 'counterparty'), at which point it's no longer held in the 'safe' segregated account and you could lose your money if either the broker or counterparty goes bust at that point. The counterparty will usually be a large bank so the chances of a problem are minimal, but always check which counterparty will be used and make your own judgement of how safe they'll be.
Once the counterparty returns the foreign currency to the broker it's once again held in the segregated account before being sent to the final destination bank account you've specified.
Provided you stick to a well established FSA authorised and regulated foreign exchange broker I think the chances of anything going wrong are very slim. You might get more peace of mind using a bank, but the rates and charges will probably look grim by comparison.
Hope your sister enjoys the new house.
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