The "US Person" Problem
- Published: 12 April 2014
There are 6-7 million overseas American citizens living abroad.
New (FATCA) and old U.S. reporting requirements have had a number of significant, unintended consequences for these Americans overseas and their families:
- Banks inside and outside the United States are discriminating against US Persons. They are refusing to open accounts, closing existing accounts, or placing important restrictions on those accounts based on no other criteria than residency outside of, and a connection to, the United States.
- Working families living abroad are suffering not only banking problems, but also problems with family businesses, mortgages, and retirement savings. Among the hardest hit are American women abroad – retirees, workers, and stay-at-home mothers.
Here is a selection of the stories AARO, FAWCO, and other organizations have collected from Americans in countries around the world. For every story told here, there are thousands more...
A French/American couple in France
Letter from their French bank: "Madame S., You have asked to open a life insurance policy with your spouse at our bank. We regret to inform you that we cannot reply positively to your request. Mr. S. is an American citizen. Fortuneo bank does not offer life insurance policies to American nationals..."
Letter from their US bank: "Dear Mr. S., Thank you for choosing Fidelity Investments as your financial services provider. Unfortunately, because one or more of the addresses associated with your account(s) are located in a certain country (sic) outside the United States, we can no longer continue to provide investment services for your account(s) listed below. This change will take effect on July 1, 2013..."
An American woman in Mexico (retiree)
Seven days past her 70th birthday, a U.S. citizen (living in Mexico for almost a decade) got a phone call from her Financial Advisor at Merrill Lynch in New York saying that the bank was summarily closing the account she had held there for the past 30 years. The reason: the citizen has no U.S. address. Her Advisor went on to tell her that if, within 90 days, she couldn't tell Merrill Lynch where she was moving her account, and the bank would liquidate her holdings and write her a check... After numerous calls to banks in the U.S., she discovered that no one wanted to talk to her, much less handle her account.
A Lebanese/American couple in Dubai
"If the IRS is wondering why so many overseas Americans do not file taxes and FBARs, and now the new 8938, it's because they cannot find and/or cannot afford the professionals who could advise them. They do not want to face expatriation, yet that seems to be the only way to bank and do business overseas."
Her non-US (Lebanese) husband is a one-third owner of a family business. "Because he is Muslim, he wants to avoid Sharia inheritance law so that our three daughters and myself will inherit equally to our son. To do that through a holding company puts us (US citizens) into a situation that is fraught with tax liabilities and exposes the foreign company to US scrutiny which the two-thirds owners do not want. Solution: expatriate or sell out and give up inheriting the family business."
An American Military Veteran in Switzerland
Last year, when he needed to refinance his Swiss mortgage, "almost every bank that I contacted said that they would not refinance it for me because of FATCA. I would call the banks and say, 'I'm American and I'm interested in refinancing my mortgage,' and they'd say that since I'm American, they couldn't do it. Some said they would if I deposited at least $400,000, which I didn't have, while others had rejected my application in the past. Eventually, I refinanced with the same bank, which no longer accepts US clients, after renouncing US citizenship."
American Woman in France (stay-at-home mother)
A young woman moved to France with her new French husband. They now have 5 children and she is a stay-at-home mom. Each (Franco-American) child was given, at birth, a small savings account into which the French grandparents made small birthday gifts. The American mother was the adult signature on these accounts. She has had no income since she arrived in France, so only had to report the joint account maintained with her husband for household and her own personal expenses, together with the 5 children's savings accounts and a small investment account her mother had given her "in case of need".
Her husband refused her reporting of what he considered "family accounts". Together they decided to put the children's savings accounts and her [American] mother's gift in his name, leaving her totally financially dependent on him.
Two American women in Kenya
"As of the 1st of the year, most banks and all foreign exchange bureaus here can no longer accept checks drawn on US Banks. Note this only applies to US bank accounts! However, they will accept wire transfers from US banks. For Americans living in Kenya, this only works IF your bank in the US agrees to wire transfer to an account here. So far, I've been fortunate in that my bank in the US has allowed me to do on-line wire transfers to my bank account here; I gather that this could change anytime. However, I have a friend who is less fortunate: their 2 banks in Washington State have refused to send wire transfers to them in Kenya, even to their bank, and even though they maintain an address in the USA, where they reside 9 months of the year.
We must be able to access our funds in the USA and bring them here! As in many countries, government regulations for Retired Residents' Permits (visas) require that you have sufficient income/funds from outside of Kenya for your living expenses. One cannot pay every expense by credit card or withdraw from an ATM for major expenses like annual car insurance, property taxes or Residents' Permits."
"Mom & I have just received a letter from T. Rowe Price, our long-time investment broker in the USA, basically saying that due to new US regulations, they will no longer keep accounts for Americans with foreign addresses so they'll close our accounts, unless we have a residential address in the USA!"
An American Woman (retiree) and a Dutch/American couple in The Netherlands
"I moved to The Netherlands in 2000, at age 55. 95% of my income comes from the US, in terms of pension, social security and eventually, IRA's. I still have a bank account there [in the US], and a tiny investment in UBS. Somehow, I missed the info from TIAA-Cref and Columbia Management that I can no longer invest through them...[N]ow that I live here, I can take money out of those [US] accounts, but I can't re-invest them in those companies should I choose to. (I have been a customer with these two for around 35 years each.) After 22 years, UBS basically dumped me...and then I was told that the restrictions put on them by the US government basically makes it impossible (too expensive, I think), to service my account. While I have a couple of investments here, and have tried to look into others, once a company/bank knows that I am American (Dutch as well, though), they don't want to deal with me for the same reason.
Also, I know a Dutch couple, one of whom is American-Dutch, who have also experienced difficulty in finding investments over here because of US regulations and that the fact that one of them is American."
An American man living in France
"I had an IRA with Fidelity Investments and they told me I could no longer add money or buy shares or funds. They said I could keep the account, and sell (but not acquire) holdings, but could no longer manage it. So I transferred the account to Morgan Stanley where I am permitted to buy some stocks and funds but not all. It is very confusing and I feel I am at a competitive disadvantage in the investment marketplace because I no longer have the same freedom to buy and invest as other US citizens who do not live abroad!"