Going offshore to escape the CFTC

Broker Discussion Forex Brokers
797

Absolutely you just file the form (which is just an information return and has no tax consequences) and separately include the foreign income in your tax returns. U.S, citizens are taxed on their world-wide income.

Now the foreign broker is probably not going to provide you with annual reports in a format useful for preparing your U.S. tax return, so there will be an added burden on you to do the bookkeeping. The tax treatment of forex is already a confusing mess even with U.S. brokers with the mark-to-market elections etc. In some cases some of the categories may vary depending on who the counter-party is etc.

There is going to be another issue as well starting in 2013 under the HIRE Act. The U.S. is trying to get foreign banks (as well as domestic ones) to sign up to report transfers of funds from the United States in order to catch tax evaders. In order to enforce this, there will be a 30% withholding tax on transfers outside the United States, except to foreign banks that have agreed to track the U.S. owner and report any further transfers. Now there are exceptions that may exempt this kind of account in some cases but I have not figured them out yet. We can worry about that in late 2012.

Also under the HIRE Act, “Effective generally for calendar years beginning 2011, U.S. individuals must report with their tax returns any interest in the following if the aggregate value of such assets exceeds $50,000: (i) foreign financial accounts (which includes interests in FFIs), and (ii) foreign issued stock, securities or derivatives with a foreign counterparty, in each case, unless held in an account maintained with a U.S. financial institution. This is in addition to the FBAR reporting of foreign bank and financial accounts.”

798

Thank you for filling in the details of my general sketch of the FBAR requirement (thank you, forgot the name) with such great information, comintel. That HIRE Act information is quite disturbing as well, so it’s good you brought that to our attention too. The CFTC may only have been the minor villain this whole time if that law is applied to foreign Forex accounts (and I see no reason why they wouldn’t apply it). Our federal government is apparently trying to shut all the barn doors to prevent us from having any freedom of capital overseas. It’s revolting. Are we really so far from our federal overlords holding our bodies prisoner in the country in a similar way to how they’re trying to imprison our finances?

This negative legislative development, the existing CFTC draconian regs, coupled with our massive indebtedness and political cowardice in DC - all of it makes me really pessimistic again about this country’s future. (And to think, not too long ago I advised others in this thread not to be highly distressed over these things.) If I see that we’re continuing down this path, I think I’m going to look to liquidate my US real estate and try to find refuge in a country that still believes in liberty. We’re truly witnessing the gradual, inexorable ascendancy of a fascist country where a superb constitutional republic used to stand.

799

I could not have said it better. I agree.

ES

800

Has anyone had personal experience, good or bad, with [B]Trading Point[/B] which is located in Cyprus? I am searching for an additional broker to add. I have been trading with [B]Forex FS[/B] out of Australia for several months and would like to diversify a bit. I have not had any issues with [B]Forex FS[/B] and would not hesitate to recommend them.

801

I opened an account with windsorbrokers(cyprus). Filled out an application and the next day had a funded account. Can’t rate their system stability yet but it seemed to me that people were more excited to have me as a customer at any account level than at vantagefx. All the vibes I got from vantagefx were bad. It took 3 e-mails to get a reply on one question and the very way I got notified of their “requirements for US residents” after I went through all this trouble was really unprofessional.

802

This negative legislative development, the existing CFTC draconian regs, coupled with our massive indebtedness and political cowardice in DC - all of it makes me really pessimistic again about this country’s future.

Well, do we all agree that the best policy is to go off shore completely and start an IBC or trust off shore? I had posted that a few months back and it seemed that most people thought that it was a somewhat radical idea back then, is it different now? If so, what has really changed? When I was young, I had a bumper sticker that said, “USA - Love it or leave it”. I never in my wildest dreams ever have thought that it would change so much that I would actually have to consider that advice for myself and family.

The loss of our freedoms has been steadily picking up pace and the government has become totalitarian and completely backwards from the country that I grew up in. I joined the Libertarian Party to work to slow down this change and Obama was elected on a platform of “Change that we can live with” or “have to live with”, or something like that. Today people are joining the Tea Party in droves, Ron Paul, the grandfather of Libertarian, is leading in several poles, Something has changed, but I can’t put my finger on it. Look at this thread, basically, how can we best get around the draconian measures of our government.

Is the US Virgin islands far enough or Belize or Panama? Where will they stop? Will it actually get to the place where Americans are not able to travel without a special travel permit? Or will we see protests for freedom here in the birthplace of liberty? Will we ever be free again?

For now, I stand by my earlier recommendation, why take a chance, get an off shore business or family trust and do it legal.
Bob

803

I had a similar experience with [B]Vantage FX[/B]. They accepted my application and created a trading account knowing full well I resided in the U.S. They followed up with 2 phone calls to answer questions I had. I completed all of their required documents, including banking information, and emailed them. I followed up, sending [B]Vantage FX[/B] 3 emails to confirm they received the documents. I never received any response.

804

Odds and Ends

1. E-Global/Forex4You (British Virgin Islands)

Codysurfer’s post has been overlooked. If anyone else has any additional info on this broker, please post it here.

In the meantime, I will move E-Global to page 3 of the List (brokers who will not do business with Americans).

2. VantageFX (Australia)

I will move VantageFX to page 3 of the List.

And I will move the entire List to the end of this thread, later tonight or tomorrow.

3. Dukascopy (Switzerland)

I don’t recall who said that, but it was not I.

In any case, the CFTC’s next attack on retail forex, coming in July, may prompt Dukascopy and others to dump U.S. account-holders.

We will need to carefully study the CFTC regs taking effect in July, as they may impact several of the “good” brokers currently on our List.

4. Reporting foreign financial accounts

Comintel’s information is correct.

By the way, FBAR (FUBAR would be a better name for it) stands for Foreign Bank Account Report. But, the IRS doesn’t use that designation anymore, because they are now casting a wider net, and requiring the reporting of, not just bank accounts, but all foreign financial accounts. That includes all types of brokerage accounts, forex and others.

5. On the IRS (Income Redistribution System)

Here are several facts regarding the unconstitutionality and illegality of the tax extortion system of the U.S.:

Federal income taxes are unconstitutional or a taxpayer has a constitutional right not to comply with the Federal tax laws for [any] of the following reasons:

(a) The First Amendment permits a taxpayer to refuse to pay taxes based on religious or moral beliefs.

(b) A taxpayer may withhold payment of taxes or the filing of a tax return until the Service or other government entity responds to a First Amendment petition for redress of grievances.

© Mandatory compliance with, or enforcement of, the tax laws invades a taxpayer’s right to privacy under the Fourth Amendment.

(d) The requirement to file a tax return is an unreasonable search and seizure contrary to the Fourth Amendment.

(e) Income taxation, tax withholding, or the assessment or collection of tax is a “taking” of property without due process of law or just compensation in violation of the Fifth Amendment.

(f) The Fifth Amendment privilege against self-incrimination grants taxpayers the right not to file returns or the right to withhold all financial information from the Service.

(g) The Ninth Amendment exempts those with religious or other objections to military spending from paying taxes to the extent the taxes will be used for military spending.

(h) Mandatory or compelled compliance with the internal revenue laws is a form of involuntary servitude prohibited by the Thirteenth Amendment.

(i) Individuals may not be taxed unless they are “citizens” within the meaning of the Fourteenth Amendment.

(j) The Sixteenth Amendment was not ratified, has no effect, contradicts the Constitution as originally ratified, lacks an enabling clause, or does not authorize a non-apportioned, direct income tax.

(k) Taxation of income attributed to a trust, which is a form of contract, violates the constitutional prohibition against impairment of contracts.

You might be surprised to know that this list was copied and pasted from an IRS publication —
IRS Notice 2010-33.

You probably will not be surprised to learn that the IRS says that asserting any of these rights constitutes a “frivolous tax return”, and is punishable by a fine of $5,000.

Involuntary servitude is alive and well in the United States of America.

808

Clint,

Below is an email I received from [B]Forex FS[/B]. Max leverage on currency trades is 1:200, metals 1:100.

[I]You will be pleased to know that there have been some recent updates with our software. You are now able to trade currency and metals on different leverages.

Your account leverage is set up as follows:

Currency - 1:200
Gold/Silver 1:100

The increments for metals have also been upgraded. Starting increment for metals is 0.10 and can be increased by 0.01 increments (0.10 – 0.11 – 0.12 etc)

Regards

Support
Forex Financial Services Pty Ltd[/I]

809

Thanks, Biker

I have updated the List to include the info you provided.

810

I asked and spoke with a rep. he said i would need to have $50,000.00 and a million dollars in assets (including the value of my home). The reasoning behind it was because of the way they interpreted the new rules. They said if I could prove that I have that sort of cash then this would not mean that I was a small investor that the CFYC is trying to protect. Needless to say, I am a small investor (for now).

811

What’s the deal with all chatter I’m hearing about Offshore brokers not accepting U.S customers after July? Didn’t we go through this last year? Argh!!

Will this apply to all foreign brokers? What about brokers on our list will all those stop accepting U.S Customers etc…? Any details would be great!

Is this a Final decision? Or is there still hope that some brokers may start allowing U.S customers again? When will we know?, what are we waiting for? etc…

Thanks

812

If you’re a lawyer, maybe you can sort it out. If you want to try, here are 4 links that you might want to study —

Investment Law Group - Foreign Banks Still Eligible Counterparties for Retail Forex Traders

Legislative Update: U.S. Banks and Retail Currency Trading | Aite Group Blog

Off-Exchange Forex Regulation - MarketsReformWiki

Perkins Coie - News / Publications - Financial Services Bulletin: The OCC and Treasury Propose Rules on Foreign Exchange Transactions, the CFTC Extends Comments Periods on Dodd-Frank Act Rulemaking, and the FDIC Issues a Report on Foreclosure Practic

[B]Whatever is about to hit the fan in July, expect it to stink.[/B]

It will apply in some fashion to [B]banks[/B] engaged in retail forex.

Will it affect [B]you[/B], if you trade with:

• CitiFX (the only U.S. bank currently offering retail FX trading) ?

• a foreign bank which has branches or offices in the U.S. ?

• a foreign bank which has no presence in the U.S. ?

• a foreign broker which is not licensed as a bank ?
? ? ? ? ? ? ? ? ? ?I have no idea. Maybe you can figure it out.

814

I traded with Citi earlier this year. They were anticipating some “changes” in the future. The latest CFTC rules (no hedging and FIFO) currently do not apply to them due to the fact they are regulated by the Federal Reserve.

815

Those excellent links show that

-the various agencies responsible for banks and brokers are attempting to harmonize their regulations under Dodd-Frank
-the regulations are still only under discussion and have not been finalized
-the banks are successfully lobbying for changes that exempt some of their business

So, as you note, a lot is still up in the air.

I would suggest that whether the U.S. regulators can regulate foreign brokers is sort of a meta question that will not really be resolved in black in white in regulations. They would like to regulate them. But they simply do not have jurisdiction over what takes place in other countries - that’s not something they can give to themselves or not - they simply do not have it.

They could regulate what U.S. citizens do and forbid them to open foreign accounts. But they do not want to be so blatant, at least so far. So instead they try to find aspects of the operations of foreign brokers that take place within the U.S. and regulate those.

Exactly how far they will go in that remains to be seen. But many foreign brokers will be scared off by the uncertainty. Some will not.

In any case, it certainly is not illegal for us to open accounts abroad. It’s just that it may get harder to find foreign brokers willing to take the risk of being sued and charged criminally under U.S. laws, as the foreign poker operators were. I think that those who stop accepting U.S. clients are over-reacting, but it is understandable.

This may drag on for years. The U.S. is probably never going to give a green light to foreign brokers. It’s just a question of how aggressively they will pursue them. I cannot see them going after individuals for opening accounts abroad.

What really started all this was all of the unstable tiny U.S. forex brokers advertising on TV and ripping people off. As long as that is killed off, the regulators will probably not worry about foreign brokers too much that do no adverting in the U.S. and the issue will lose the interest of regulators.

I do not think that the regulators care about people like you and me opening foreign brokerage accounts after our own investigation. But they also want to avoid leaving loopholes that might allow mass marketing of forex to resume in the U.S., from firms operating abroad.

816

Great analysis, comintel, as usual. Just wanted to point out that even though there are parallels, there’s also a substantial difference between the status of the foreign online poker companies and foreign forex brokers. In the case of the foreign poker companies, Americans were prohibited by act of Congress from gambling online. In response (according to my understanding) some major poker companies went offshore and found loopholes for Americans to continue playing on their sites. The poker sites didn’t have clean hands, and the Americans who played on them were breaking federal law. (As much as I disagree with the law and the recent heavy-handed enforcement action, it’s still the law.) In contrast, the only act of Congress pertaining to retail forex so far is Frank-Dodd (AFAIK), which called for the CFTC to establish regulations governing it. The CFTC did that, establishing the regulations we all know and hate on American forex brokers, but neither Frank-Dodd nor the CFTC explicitly prohibited Americans from moving to foreign forex brokers that are not regulated by the CFTC. To my knowledge people who want to use foreign forex brokers are violating no US regulations and certainly no US laws (as you point out).

817

Can we do a poll, and find out what offshore most of you guys are using? and who you’ve had a good experience with and what brokers you have not had a good experience and why? All of your input would be great! Thanks

818

I would find that information helpful also. I will post my experience about my current broker once my first withdrawal is processed. This will occur prior to the end of the week.

819

OFFSHORE BROKER -

Broker: [B]Forex Financial Services (Forex FS)[/B]
Country: Australia
Regulated: ASIC
Platform: MT4
Minimum Deposit: $500
Leverage: Currency - 1:200, Metals - 1:100
Minimum Lot: Currency - .01, Metals - .1
Hedging Permitted

I have been trading with [B]Forex FS[/B] for 3 months. My overall experience has been very favorable. Their customer service is one of the best I have encountered. The application process was relatively painless (they do require notarized identification). Wired funds were posted to my account within 2 business days. I have not encountered any platform problems. Spreads are average. Swap rates are higher than other U.S. brokers I’ve traded with. I have made one withdrawal which was completed within 12 hours. I submitted the withdrawal at 10PM central U.S. time and the funds were in my U.S. bank account before 9AM the following morning. A $25 wire fee was deducted from the withdrawal amount I requested.

If there is any other useful information I omitted, please inquire.

820

people who want to use foreign forex brokers are violating no US regulations and…

This may be true right now but after the new regs kick in requiring any broker accepting US clients to register with the US government regulatory groups, then by making application, you are inciting the commission of a criminal act, Participating in an unlawful act and aiding and contributing to the same. Will the regulatory groups prosecute? Doubtful at first, you’re too small unless they feel that prosecution of a few small fries would send a message to others, then they might, but more likely they will wait until they see how their bully tactics have worked.