Why US Citizens Can’t Open Offshore-Only Brokerage Accounts

It’s not easy to find an effective offshore forex broker as a United States citizen – in fact, it’s one of the (numerous) drawbacks of US citizenship. 

Many Americans who want to trade forex offshore quickly realise that the list of brokers willing to accept them is shrinking, thanks to various regulations imposed by the US government.

There are various roadblocks presented to US investors as a result of these regulations, and in this guide, the Nomad Capitalist team will explore why this is the case. We’ll also recommend five offshore forex brokers who are still accepting US clients.

As a company, we’ve helped thousands of investors and entrepreneurs build their dream offshore lives through our unique holistic plans, so reach out to us here.

Regulations that Restrict US Traders

The United States government has been on a global campaign of financial imperialism, seeking to impose its will on every foreign country and every foreign bank.

However, the Treasury’s Foreign Account Tax Compliance Act (FATCA)– also known as ‘a slammed door in the face for US persons’ –is not the only law making it hard for US citizens to bank and invest overseas. 

It seems every time you turn around, a new bank is turning away Americans. No sooner, for example, did we get word from one of our contacts that New Zealand trust bank Breder Suasso was willing to open accounts for offshore companies owned by US citizens than the bank said they had stopped doing so. 

In fact, our researchers who call banks and other institutions to check on their latest policies keep discovering banks that refuse to do business with US citizens. 

The good news is plenty of banks do accept Americans, but they’re not the banks you’d expect. 

Banking is tough, but there are a lot of other regulations that make it hard for Americans to invest offshore. Among the reasons for this is that your government thinks you’re stupid. 

Or at least they pretend they do.

Despite the fact that a full one-third of Dow components – the alleged ‘best of the best’ of the stock market – are losing money, the US government thinks Americans should be scared to invest outside of the United States. 

In a sign of the ultimate jingoism, the US government actually believes its citizens aren’t smart enough to navigate the allegedly shady offshore investment markets. 

It doesn’t matter that frontier and emerging markets have seen some amazing returns. At our Passport to Freedom conference, offshore banker Peter Zipper shared what many professional investors already know: most mutual funds are total dogs. 

US and Canadian markets are littered with crappy, underperforming mutual funds run by large companies. But even though opening an offshore bank account was one way to open yourself up to international investing options, US banks aren’t allowed to touch them. 

There are plenty of good mutual funds out of the reach of the average American, who is stuck with a bunch of garbage thanks to US government rules. 

But what about more ‘exotic’ investments, like forex? 

Sadly, offshore brokerage firms have become rather off-limits to those who want to open an offshore brokerage account. 

In Malaysia, forex companies advertise that one can start trading 40,000 ringgit in currency with less than US$100 to start. 

Asians, who have a traditional penchant for real estate investing and gold ownership, don’t see forex as some scary investment. 

While currency trading does have a higher rate of loss than equities investing, they seem to understand the risks and proceed accordingly. That laissez-faire attitude is not shared in Washington, and it makes life difficult for average investors. 

When it comes to anything ‘exotic’ or offshore, you can count on the US government to ring-fence its citizens into only investing in stuff they can control. And it’s no secret that many international forex brokers have regulations that restrict US traders. 

When the brain trust in Congress passed Dodd-Frank a few years ago, the idea was to regulate the financial system so that no poor soul could ever lose his shirt making a bad investment or taking out a mortgage he or she couldn’t afford. 

In their efforts to kowtow to the lowest common denominator, Congress created a slew of regulations that stop more sophisticated traders from going offshore.

That’s because Dodd-Frank requires any forex company wishing to do business with US citizens to be regulated by the Commodity Futures Trading Commission and the National Futures Association. 

As if being regulated by one Goliath agency wasn’t enough, the politicians decided two were better.

Say hello to regulation in the era of financial imperialism. Foreign forex brokers, not used to complying with regulations in a country they have no presence in, found it hard to comply with this law. 

And like many offshore banks, they have largely chosen to simply sit this one out. 

Even those that have continued to accept Americans have had to worsen the spreads and leverage requirements in order to compensate themselves for the risk of accepting those holding the world’s new toxic asset: US citizenship. 

We frequently discuss the fact that history tends to play itself out in this same fashion. Some government comes in, creates a poor monetary policy that leads to a disaster, points the finger at the free market and promises to ‘fix’ the problem they created… if only you’ll hand over your freedoms. 

And if only the evil fat cats at the top go along with severe restrictions on their wealth and freedom. 

While it’s true that the government does indeed believe you are an idiot requiring its help just to function on a daily basis, the government is also on a campaign to cut off your escape routes.

Top Four Offshore Forex Brokers Accepting US Clients

While it’s not always easy, it is possible to work with a good forex broker as a US citizen. Here are four of the best options.

Interactive Brokers

Interactive Brokers is a popular forex trading platform that’s available in more than 100 countries, including the United States. 

Trade foreign currencies on this platform, and you can expect low commissions and highly-rated customer service, as well as the ability to trade other assets in more than 150 markets.

Customers reviewing the platform frequently mention the intelligence of the technology within its advanced trading tools.     

Hugo’s Way

Hugo’s Way prides itself on offering a lightning-fast electronic communication network (ECN) and a leverage of 1:500, which is higher than many of its competitors. This could be alluring to experienced traders, although beginners are advised not to trade with such leverage without exercising proper risk management.

Members can make some extra cash by referring Hugo’s Way to their friends through its affiliate program.  

IG

IG is a leading trading group based on funds deposited. You can deal with more than 17,000 international markets with an IG account, including forex trading, even as a US citizen.

Its award-winning app makes it simple to make winning trades on the go. The IG Group is part of the FTSE 250 and has enjoyed a sterling reputation since launching in 1974. 

OspreyFX

OspreyFX has a list of 22 countries restricted from trading on its platform. Spain, Russia, Japan and Pakistan are among the companies on this blacklist, but US citizens are free to trade forex among other assets there. 

OspreyFX offers a super-fast ECN, 1:500 leverage and a reasonable affiliate program.  

Offshore Forex Brokers Accepting US Clients: FAQs

Alternatives to Finding an Offshore Brokerage Account  

As you can see, there are still some options for US citizens who want to trade using an offshore brokerage account. 

However, an increasing number of US citizens are growing tired of having to find a way around the restrictions that their government imposes on them.  

Politicians see the staggering numbers of Americans renouncing their citizenship, and they don’t like it. 

Guys like Chuck Schumer have openly railed against it. More and more US citizens are leaving forever because they’re tired of the restrictions imposed on them, whether those restrictions are related to travel, taxes or investing. 

If you’re an investor – someone with money – who believes you should have the right to invest where you please and take your own risks, then the United States is increasingly not a place for you.

Nomad Capitalist has helped thousands of investors and entrepreneurs ‘to ‘go where you’re treated best’, whether that’s investing offshore, moving overseas or renouncing their US citizenship and seeking an alternative citizenship elsewhere.