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American Express Accused Of Forex Manipulation By WSJ

American Express (AMEX) has now joined the list of major global banks who have been accused of deliberate forex manipulation to increase their profits. AMEX is facing scrutiny as the Wall Street Journal (WSJ) recently revealed that it had engaged in bait-and-switch sales practices for more than a decade.

This allegation was specifically aimed at the company's forex department that supposedly drew in small business customers with offers of low conversion rates. After they have signed up, the department would quietly raise the rates so that they would get more revenue. This dubious practice reportedly ended earlier this year.

Small Businesses Duped To Meet Quotas

The growth of AMEX is currently resting on the shoulders of small businesses and these accusations could quite seriously damage its business. One-fourth of the company's revenue is from small and medium businesses. Though the forex business is not that large a part of the American Express, it is still a part of the suite of products that are offered to small businesses.

According to the WSJ report, the forex department targeted these small businesses because most of the time, they did not have employees dedicated to tracking forex transactions. Without attention from the customer, the higher charges would be able to go through. If a client did notice the higher rates and made a complaint, the department would blame technical issues and then lower the costs. Managers would tell employees to be vague about explaining payment arrangements to customers so that there would be no locked-in agreement for both sides.

The aim of the practice was to meet quotas and to create revenue. The department hoped to sign up as many customers as possible and to get as much money possible from them before they stopped being clients. Employees were told that client lifespan averaged at about three years and they were to milk them for as much as they can.

Furthermore, the WSJ report said salespeople who hit their quotas got a 15 percent monthly commission from the revenue that their clients generated. This went up to 25 percent if the annual target quotawas reached .

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AMEX To Proceed With Internal Review

AMEX has taken the charges made by the WSJ very seriously and has decided to hire an external consultant to carry out a detailed review. The bank has also refuted the charges stating that they believe their forex department was fully compliant with regulations.

In a statement, Marina Norville, spokeswoman for American Express said

We have training, control and compliance oversight and believe that our transactions are completed and reported in a fair and transparent manner at the rates which the client has authorized. We constantly reinforce the importance of acting in the best interest of our customers

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