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US expats may be shut out of investing by FATCA demands
| Published: | 3 Jul at 6 PM |
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Three days after the US’s much-criticised Foreign Account Tax Compliance Act came into global force, Fidelity Investments announced that it will bar expat US citizens from trading in or buying its mutual funds.
A number of overseas banks have already begun notifying their USA expat clients that their accounts will have to be closed, and are no longer taking on new accounts from American citizens. Experts fear that the announcement by Fidelity will be the first of many such, effectively barring US citizens living overseas from a regulated investment environment.
Critics of FATCA have stated since it was passed into law in 2010 that the regulatory and legal burden on ordinary Americans living and retiring overseas is too high by far, especially as they are taxed in the USA on money earned abroad. Less focus was placed on the regulatory and ethical problems for potentially non-compliant overseas financial institutions which are now forcing firms to exclude both former and new American clients en mass.
Overseas banks which do business within the USA are hardest hit, as non-compliance will result in IRS fines of 30 per cent of all payments originating from US-based sources. As a result of the equally high costs of compliance, major players including HSBC and Deutsche Bank have already shed their US expat account-holders.
According to Georges Ugeux, founder and CEO of Gallileo Global Advisors and a US/Belgian dual citizen, the crackdown has created a risk-averse, poisonous atmosphere amongst lenders and investment firms alike. Ugeux added that the last thing banks need is endless questions from US regulators, and is expecting many other investment firms to follow Fidelity’s example.
A number of overseas banks have already begun notifying their USA expat clients that their accounts will have to be closed, and are no longer taking on new accounts from American citizens. Experts fear that the announcement by Fidelity will be the first of many such, effectively barring US citizens living overseas from a regulated investment environment.
Critics of FATCA have stated since it was passed into law in 2010 that the regulatory and legal burden on ordinary Americans living and retiring overseas is too high by far, especially as they are taxed in the USA on money earned abroad. Less focus was placed on the regulatory and ethical problems for potentially non-compliant overseas financial institutions which are now forcing firms to exclude both former and new American clients en mass.
Overseas banks which do business within the USA are hardest hit, as non-compliance will result in IRS fines of 30 per cent of all payments originating from US-based sources. As a result of the equally high costs of compliance, major players including HSBC and Deutsche Bank have already shed their US expat account-holders.
According to Georges Ugeux, founder and CEO of Gallileo Global Advisors and a US/Belgian dual citizen, the crackdown has created a risk-averse, poisonous atmosphere amongst lenders and investment firms alike. Ugeux added that the last thing banks need is endless questions from US regulators, and is expecting many other investment firms to follow Fidelity’s example.
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