In the United States of America, there is a limit placed on the access of citizens and residents to trade the financial markets through a broker. Such limits are only removed if the citizen or resident has an ITIN (Individual Taxpayer Identification Number). However, the major challenge is that there are only a few brokers that accept ITIN as a valid means of identification. This further limits the available broker options that prospective investors resident in the US can choose from. In accordance with our research, there are currently only about 7 brokers that accept ITIN.
Brokers that accept ITIN for identification are brokers that offer financial services to US residents and citizens and accept their ITIN as a valid means of identification when they open trading accounts. The requirement for the ITIN only became compulsory decades back and since then, financial institutions have been required to accept it instead for identification. The acceptance of ITIN by brokers opens up benefits for both the broker and the trader, and then the government. For the broker, the client’s details can be easily verified and from the client’s end, the number of documents required for identification is reduced. The government also benefits by having a way to regulate the brokerage services.
Why is there an ITIN option for Identification?
The requirement for US citizens and residents to have an ITIN before they can operate trading accounts is guided by law. This law is set by the government to combat tax evasion, money laundering, terrorism funding, and also to keep accurate records and determine suitable investments. Brokers are required by this law to obtain personal information from registrants. Brokers that are licensed to operate in the US are required to go through rigorous processes before obtaining a license. They are also mandated to require US clients to provide their SSN (Social Security Number) or ITIN before live trading accounts can be opened. The ITIN is a primary form of identification in the US for all earners. It is linked to practically every information of a taxpayer and an individual can be immediately identified from his or her ITIN. Although the usual identification number required is the SSN, individuals who do not have permission to work in the US (for instance, a child under 25 years of an immigrant permanent resident) can request and obtain an ITIN which can then be used to open accounts with an online broker.
The 2001 US Patriot Act helps financial institutions to verify the identity of account holders, making it easy to prevent known criminals and barred individuals from opening such accounts.
Benefits of Using a Broker That Accepts ITIN
The following are the benefits:
- 1. Access to the markets for previously restricted regions: As other brokers are restricted from offering their brokerage services to clients in the US and the other regions and member states that are subject to its laws, it is a welcome relief to find brokers that accept ITIN and allow US citizens and residents to trade the financial markets.
- 2. Security of account: The ITIN is a recognized identification number which is usually the SSN (Social Security Number) that each taxpaying individual possesses. This I.D. number assures clients of the security of their accounts and details as no other person can easily assume such.
- 3. Security of funds: The brokers follow strong laws and are regulated by the appropriate body. They are bound to obey the financial laws of the US. These laws ensure that the brokers do the following (among other responsibilities):
a) Keep the regulatory body up-to-date with policies, terms, and conditions.
b) Provide and maintain a valid and reachable address and contact.
c) Ensure fair play in setting charges on deposits and withdrawals.
d) Provide multiple options for deposits and withdrawals. Methods such as credit and debit cards, e-Wallet, and cryptocurrencies are available.
e) Provide proof of capacity to handle brokerage services. To get this in context, consider that in other countries brokers are required to have between $100,000 and $500,000 in locked capital deposit but in the US, this amount is pegged at $20 million.
- 4. Clients can trade the financial market using their well-designed trading platforms (designed to a standard). Clients can also trade forex, stocks, and other instruments.
- 5. As the brokers only accept clients with ITIN, US citizens residing in other countries, and temporary residents in the US can open accounts with these brokers from anywhere in the world provided they have their ITIN.
Drawbacks of Using a brokerage account with ITIN
The drawbacks are:
- Only individuals with a valid ITIN can use the services of these brokers.
- Only US-based brokers and US exchange-listed financial products can be traded.
Choosing a Broker That Accepts ITIN
In accordance with our research, there are as of now only about 7 brokers that accept traders with ITIN. These seven brokers are fully licensed to operate and are regulated by the financial services laws of the United States of America. For an individual looking to open an account with any of these brokers, the options are limited. For example, if the trading terms and conditions of these brokers are not favourable to the client, there are fewer other options to select. This makes it important for clients to have brokers that offer the best trading conditions in the industry.
The seven brokers are:
1. Forex.com (No. 1 FX broker in the US*)
2. IG Group
3. ATC Brokers
4. Interactive brokers
6. TD Ameritrade
All trading involves risk. Only risk capital you’re prepared to lose.
*Based on client assets per the 2019 monthly Retail Forex Obligation reports published by the CFTC
These brokers offer competitive spreads, low deposit amounts and access to forex, stocks, ETFs, bonds and other trading instruments (the availability of trading instruments differ from a broker to broker). As regulated brokers, they are subject to regular and unscheduled appraisals to determine their compliance with the US financial laws; a move that ensures the best trading conditions for clients.