Overseas brokers for US citizens: legal or illegal? | Forex Factory

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Overseas brokers for US citizens: legal or illegal?

  • #1
  • First Post: Jan 23, 2017 12:07am Jan 23, 2017 12:07am
 I can't seem to get a straight answer to this question. As a US citizen, if I want to open a Forex account with an overseas broker, and assuming I pay all of my American taxes on my gains is this legal? Is there any law or statute or code that I would be breaking? Would the IRS have any problem with this? If anyone has any experience with this issue I would greatly love to hear your feedback.
If it were not so, I would have told you...
  • #2
  • Jan 23, 2017 2:57am Jan 23, 2017 2:57am
I have never seen it reported anywhere that any US regulatory body, including the IRS, has objected to any US Citizen operating a forex account.

I have never seen it reported that owning or operating a forex account with an overseas broker violates any federal statute - if anyone can provide any contrary evidence please post.

But what we **do** know is that the CFTC in the US attempts to close down any and all Forex Brokers who accept US traders unless they comply with CFTC regs, which the available US ones do (50:1 max leverage, etc etc)

So the issue isnt so much that its illegal for the trader, its just very difficult who will find a REPUTABLE non-US broker who will take you. There are a couple exceptions.

The workaround years ago was to just form a non-US corp and open a corp account, but maybe a year or 2 ago the brokers began to disallow this as well if the "beneficial owners" were US citizens. I assume due to pressure from the CFTC.

The whole situation is ridiculous, and hopefully Trump will be able to repeal Dodd-Frank, which was the legislation that destroyed the retail forex business for US traders
  • #3
  • Jan 23, 2017 4:19am Jan 23, 2017 4:19am
Quoting virgilcain
 I can't seem to get a straight answer to this question. As a US citizen, if I want to open a Forex account with an overseas broker, and assuming I pay all of my American taxes on my gains is this legal? Is there any law or statute or code that I would be breaking? Would the IRS have any problem with this? If anyone has any experience with this issue I would greatly love to hear your feedback.
http://forums.babypips.com/forex-bro...cape-cftc.html
  • #4
  • Jan 23, 2017 6:00am Jan 23, 2017 6:00am
Quoting virgilcain
 I can't seem to get a straight answer to this question. As a US citizen, if I want to open a Forex account with an overseas broker, and assuming I pay all of my American taxes on my gains is this legal? Is there any law or statute or code that I would be breaking? Would the IRS have any problem with this? If anyone has any experience with this issue I would greatly love to hear your feedback.
YEs brokers should be registered under their regulator NFA or CFTC. You are not allowed to trade with offshore or Non-US brokers because its impossible to track for US regulator on how brokers treat you (or they just want to prevent the leak of money abroad)
  • #5
  • Jan 23, 2017 9:11am Jan 23, 2017 9:11am
Quoting leebsurag
{quote} YEs brokers should be registered under their regulator NFA or CFTC. You are not allowed to trade with offshore or Non-US brokers because its impossible to track for US regulator on how brokers treat you (or they just want to prevent the leak of money abroad)
This is the kind of confusion I always run into. Perhaps a call to the cftc is needed?
If it were not so, I would have told you...
  • #6
  • Jan 23, 2017 9:24am Jan 23, 2017 9:24am
I just had a chat with finpro brokers, here it is.

Suzan9:12 am Hello. How may I help you?

Client9:12 am Do you accept us citizens?
ReadDelivered
Suzan9:12 am Hi there
Yes we do accept us clients

Client9:12 am sweet ReadDelivered

9:13 am what is the minimum deposit? ReadDelivered

Suzan9:13 am The minimum deposit for an ECN account is $200 while you can also start with $100 in STP and $5 in micro account
Client9:14 am Do you allow hedging? ReadDelivered

Suzan9:14 am Yes we do allow hedging as well

Client9:14 am What are your leverage levels? ReadDelivered

Suzan9:15 am The maximum leverage we offer is 400x however the bonus offer is not applicable in such case, with bonus offer, the maximum leverage available is 200x
Client9:15 am I see ReadDelivered
9:16 am What is the fastest recommended payment system for us residents? ReadDelivered
funding/withdrawals ReadDelivered

Suzan9:17 am All the payment modes are instant, you can go with any online transfer mode like skrill or neteller or can go with Credit/before card
You can also transfer funds via bank wire

Client9:18 am So I can use my debit card? ReadDelivered

Suzan9:18 am Yes you can use your debit card

Client9:18 am How long has this company been around? ReadDelivered

Suzan9:18 am We are in forex from 2012

Client9:20 am I see. You have been very helpful. Do you have a demo system as well? ReadDelivered
Nevermind, I see it. ReadDelivered

Suzan9:20 am Thanks for the feedback sir, yes we do have provide demo accounts as well
Client9:20 am OK thanks for your help. Think I will give it a try! ReadDelivered
Suzan9:20 am Sure, you are most welcome

9:21 am May I above your name, email address and phone number for the reference please
If it were not so, I would have told you...
  • #7
  • Jan 23, 2017 10:00am Jan 23, 2017 10:00am
Quoting virgilcain
{quote} This is the kind of confusion I always run into. Perhaps a call to the cftc is needed?
Doubt it will be of any help. Remember there is some law that prohibits trading with brokers outside of US.
Anyway you can trade third party account which based outside of US
  • #8
  • Jan 23, 2017 10:09am Jan 23, 2017 10:09am
Quoting leebsurag
{quote} Doubt it will be of any help. Remember there is some law that prohibits trading with brokers outside of US. Anyway you can trade third party account which based outside of US
This is far too important to speculate about some random, maybe law. We must have clarity on this! Does anyone know the answer? Is no one using off shore brokers for their financial benefits??
If it were not so, I would have told you...
  • #9
  • Jan 25, 2017 10:16am Jan 25, 2017 10:16am
Most of the Europe based brokers do not accept U.S. citizens in order to avoid legal complications.
I think the only exceptions is for clients that can be classified as professional ones. But they have to meet very strict requirements.
  • #10
  • Feb 1, 2017 1:58pm Feb 1, 2017 1:58pm
Quoting leebsurag
{quote} Doubt it will be of any help. Remember there is some law that prohibits trading with brokers outside of US. Anyway you can trade third party account which based outside of US
I guess the only law that restricts US traders from trading outside with any offshore broker is that it might reduce the tax which is being charged to them when they trade with the brokers inside the US.
  • #11
  • Feb 1, 2017 5:49pm Feb 1, 2017 5:49pm
Its illegal for a US resident to trade retail FX outside of the US unless the broker is registered with the CFTC.
The CFTC has been known to fine brokers.

What happens to the US resident who doesnt adhere . Im not sure about the implications
  • #12
  • Nov 9, 2018 8:05am Nov 9, 2018 8:05am
Where are the restrictions for US citizens coming from? From the Brokers only, or from their own government?
  • #13
  • Nov 10, 2018 10:46am Nov 10, 2018 10:46am
Quoting UlliC
Where are the restrictions for US citizens coming from? From the Brokers only, or from their own government?
The Dodd–Frank Wall Street Reform and Consumer Protection Act was signed into United States federal law back in July 2010 This is when most all U.S. retail traders had to move their accts back to U.S. regulated brokers & when our leverage was reduced to max 50/1 also it included the FIFO rule (First in first out) & no Hedging rule. Google Dod-Frank bill for more info.

G
Find The Pain Points On Your Chart & Trade Off Those Levels
  • #14
  • Nov 16, 2018 2:12am Nov 16, 2018 2:12am
Thank you GPips.
It looks like it was in response to the 2008 global financial crisis, and was initially proposed by the Obama administration. The Act established the Consumer Financial Protection Bureau (CFPB), which from its inception had "returned almost $13 billion to 30 million consumers and imposed about $600 million in civil penalties. Therefore, I doubt that it will be ever abrogated. What do you think, could it be revoked someday?
  • #15
  • Nov 22, 2018 9:30am Nov 22, 2018 9:30am
I know that a lot of US traders trade with non-US brokers, but the CTFC does, occasionally, go after such brokers for operating on US soil and sues them.

I haven’t heard about them going after the actual traders, however.
  • #16
  • Nov 23, 2018 1:36am Nov 23, 2018 1:36am
I have been told that the US traders could use SySec regulated Brokers if they are categorised as professionals
  • #17
  • Jun 6, 2020 9:26am Jun 6, 2020 9:26am
Quoting virgilcain
{quote} This is far too important to speculate about some random, maybe law. We must have clarity on this! Does anyone know the answer? Is no one using off shore brokers for their financial benefits??
Hey just found your post researching this, having trouble finding clear cut answer myself! I'm looking to trade on foreign crypto exchange that prohibits US users.
My legal concern was: would reporting that I hold assets in Binance be punishable by law or policy since Binance officially prohibits me from doing so?

The crypto lawyer I've spoken with said the laws on US users and foreign exchanges apply to the exchange themselves for AML, tax reporting, so it's just up to the exchange if they want to officially/legally comply or not - if they don't they prohibit US users. They said the NON-tax crypto or financial laws don't apply to US citizens. A crypto tax attorney told me that there are no known cases against a US tax payer who paid taxes and reported foreign holdings properly. Also a crypto tax site whose clients use a foreign exchange that prohibits US users who reported properly also have had no issues. So the message I've gotten thus far: as long as you pay your taxes and report foreign holdings, there should be no crime nor penalty. However, there could be a policy or law for your given state. That I'm still researching, but any further clarity would be GREATLY appreciated lol. What have you learned since?
  • #18
  • Dec 2, 2022 6:48pm Dec 2, 2022 6:48pm
I still have no answer. I'm going to try to talk to an accountant that specializes in this sort of thing in my state.
If it were not so, I would have told you...
  • #19
  • Dec 2, 2022 6:50pm Dec 2, 2022 6:50pm
Attached Image (click to enlarge)
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I found this
If it were not so, I would have told you...
  • #20
  • Dec 3, 2022 9:04pm Dec 3, 2022 9:04pm
kindly suggest a good broker for long term investing in currencies instead of daily trading , thank you
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