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FATCA requirements forcing foreign banks to close expat accounts
| Published: | 17 Jun at 6 PM |
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The upcoming launch of the USA’s controversial FATCA reporting requirements looks set to result in the closure of US expat accounts world wide.
For several months, reports have been coming in from various expat destinations about restrictions, difficulties and even account closures affecting US citizens living abroad, either in employment or as retirees. The latest and possibly the most damaging announcement came last week from Mexico’s major Banamex USA bank, informing all its US clients that their accounts are to be permanently closed.
Over a million US expats live in Mexico, and the bank’s services have been popular with permanent residents as well as snowbirds arriving to avoid North America’s freezing winters. The announcement has taken many expats by surprise, especially as they were given just two weeks to make alternative arrangements for their pension payments and other income.
Opening an expat account in a Mexican bank is almost impossible without actually being in the country, leaving many who visit for six months a year in a quandary. The bank gave no reason for the closures, and experts are advising those unable to find a solution that taking Mexican citizenship without renouncing US citizenship is the easiest way out.
However, if US citizenship is renounced, consuderable tax breaks become available and high net worth expats can avoid the US government’s worldwide taxation scheme entirely. Offshore trusts are another answer, set up to avoid FATCA reporting regulations, although these are also only available to high net worth individuals.
Mexico is not the only country preparing to distance itself from FATCA’s onerous reporting requirements. Swiss banks are already implementing closures, and at least one Thai bank is closing all US expat accounts, with customers of other banks also reporting difficulties. Germany, Holland, the Bank of Singapore and international HSBC branches are all divesting themselves of US expat customers and refusing new applications in order to avoid the need to report back to the IRS.
For several months, reports have been coming in from various expat destinations about restrictions, difficulties and even account closures affecting US citizens living abroad, either in employment or as retirees. The latest and possibly the most damaging announcement came last week from Mexico’s major Banamex USA bank, informing all its US clients that their accounts are to be permanently closed.
Over a million US expats live in Mexico, and the bank’s services have been popular with permanent residents as well as snowbirds arriving to avoid North America’s freezing winters. The announcement has taken many expats by surprise, especially as they were given just two weeks to make alternative arrangements for their pension payments and other income.
Opening an expat account in a Mexican bank is almost impossible without actually being in the country, leaving many who visit for six months a year in a quandary. The bank gave no reason for the closures, and experts are advising those unable to find a solution that taking Mexican citizenship without renouncing US citizenship is the easiest way out.
However, if US citizenship is renounced, consuderable tax breaks become available and high net worth expats can avoid the US government’s worldwide taxation scheme entirely. Offshore trusts are another answer, set up to avoid FATCA reporting regulations, although these are also only available to high net worth individuals.
Mexico is not the only country preparing to distance itself from FATCA’s onerous reporting requirements. Swiss banks are already implementing closures, and at least one Thai bank is closing all US expat accounts, with customers of other banks also reporting difficulties. Germany, Holland, the Bank of Singapore and international HSBC branches are all divesting themselves of US expat customers and refusing new applications in order to avoid the need to report back to the IRS.
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