Why does Robinhood need my SSN

Why Does Robinhood Need SSN (Social Security Number)?

2022: why are Webull and Robinhood asking for SSN (Social Security Number), address, personal and employment info when opening a brokerage investing account? Is it safe to give Robinhood my SSN?

Why Does Robinhood Need SSN?

If you’ve ever opened a brokerage account, you may have felt like you had to go through a mild form of interrogation to open your account. Brokerage firms, such as Robinhood, are not trying to make your life difficult with their account opening process. We are going to explain the valid reasons why Robinhood asks for information such as your social security number and other sensitive information when opening an account with them.

Robinhood Regulators

Being in the financial, and specifically the investment, industry, Robinhood is heavily regulated in many ways. The main list of regulators that Robinhood is overseen by includes the Financial Industry Regulatory Authority (FINRA), the Securities and Exchange Commission (SEC), the Office of Foreign Assets Control (OFAC), the U.S. Financial Crimes Enforcement Network (FinCEN), the Internal Revenue Service (IRS) and state securities regulators. Each regulator plays a specific role in governing Robinhood and Robinhood has to carefully comply with the laws and rules of all the regulators.

RobinHood Needs SSN

Why Does Robinhood Ask for Your Social?

In short, Robinhood asks for your social security number because they have to. Each of Robinhood’s regulators, listed above, requires Robinhood to collect certain information from every person that opens an account with them or is added as an authorized person on an account, such as their social security number. There are a handful of purposes that Robinhood reports and uses your social security for, in response to each regulator.

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The first purpose of Robinhood asking for your social security number is to comply with the USA Patriot Act. The Patriot Act was originally established in 2001 - shortly after the horrible incidents of 9/11. The Act is essentially designed to help prevent terrorism in the U.S.

The Act also includes a strong emphasis on governing financial institutions to prevent financial crimes and terrorist financing. This is where Robinhood’s role in asking for your social comes into play. Robinhood having your social security number helps them comply with obligations they have under the Patriot Act such as reporting any type of suspected suspicious activity related to money laundering and verifying your identity.

Robinhood and Competitors

Know Your Customer

The second purpose of Robinhood asking for your social security number is to comply with a financial industry requirement called Know Your Customer (KYC). The KYC requirement is set by FINRA Rule 2090 and FinCEN regulations.

FINRA Rule 2090 obligates Robinhood to know the “essential facts” about all its customers as well as anybody that has the authority to act on behalf of a customer’s account. FinCEN regulations require Robinhood to verify the identity of its customers and also to maintain a certain type of profile about its customers. To comply with all the KYC requirements, it is essential for Robinhood to obtain your social security number.

Furthermore, the KYC requirement has a suitability component that requires Robinhood to know certain information about customers before making any investment recommendations to them. Robinhood doesn’t have any financial advisors or offer investors any paid investment advice. However, Robinhood needs to consider investment suitability when granting investors options trading privileges or a margin account so, this is another reason they ask for your social security number.

Webull vs Robinhood

Robinhood and Webull are very similar when it comes to pricing: they both don't charge any commissions. Robinhood has advantage for anyone who also wants savings account and debit card. Webull has more products and services: IRA accounts (traditional, ROTH, etc.), more cryptocurrencies, trading platform, virtual trading, as well as better website and app. Learn more in Webull and Robinhood comparison.

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OFAC Sanctions

The third purpose of Robinhood asking for your social security number is to comply with OFAC regulations. OFAC’s job is mainly to apply and enforce economic and trade sanctions against any country, organization, or person that could be considered a threat to U.S. foreign policy, the U.S. economy, or U.S. national security.

OFAC publishes a public list of persons, groups, companies, and organizations that all have their assets blocked from entering the U.S. and that U.S. persons and companies are generally prohibited from doing business with. As part of Robinhood’s due diligence when verifying a customer’s identity, they will most likely be using your social security number and name to cross-reference against the OFAC sanctions list.

SEC Requirements

The fourth purpose of Robinhood asking for your social security number is to comply with SEC requirements. Most people are familiar with the SEC and what they do. If you are not, the SEC polices the entire investment world and aims to protect investors as much as possible. The SEC requires Robinhood to collect and retain certain information from all its customers, including social security numbers.

IRS Tax Reporting

The fifth, and maybe the most obvious, purpose of Robinhood asking for your social security number is for IRS tax reporting. Robinhood is required by the IRS to provide its customers with their investment tax information and to provide the IRS with its customers investment tax information.

If you were ever thinking of trying to hide your investment gains or not report relevant tax information about your investments to the IRS, it’s not a good idea. As mentioned, Robinhood is required to report any realized investment gains, along with all other investment tax information, of its customers to the IRS. Robinhood also needs your social security number to verify with the IRS that you are not subject to any backup withholding.

Can I open Robinhood Account With an ITIN Number

Some brokers allow customers without a social security number to open accounts using an alternative number called an Individual Taxpayer Identification Number (ITIN). An ITIN is a replacement number used for some purposes instead of a social security number for people who are not eligible to obtain a social security number. Unfortunately, Robinhood doesn’t allow customers to open an account using an ITIN. You have to have a valid social security number, have a legal U.S. residential address, and be a U.S. citizen, U.S. permanent resident, or have a valid U.S. visa in order to open an account with Robinhood.

Why Does Robinhood Need SSN Conclusion

The financial industry is an extremely complex space with many watchdogs keeping an eye on things. You might be surprised by how many regulations Robinhood has to follow and how many regulators Robinhood is overseen by. In conclusion, you now know why Robinhood asks for your social security number and that they have good reasons for doing so.

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Updated on 5/13/2022.

About the Author
Paul Johnson is a Licensed Stockbroker with 7+ years of experience in the financial services industry. Paul enjoys teaching about investing and writing about financial topics. He is a husband and father of twin boys.