For American expatriates in Europe, one of the most fundamental financial decisions turns out to be one of the most challenging problems. Your banking services.
Should you open a new account in your European country of residence? Or keep your checking, savings and credit card account at your American bank? For a variety of reasons, American expats are getting hit with a double whammy. Often, neither option is available.
American banks have been squeamish about doing business with Americans abroad ever since the Sept. 11, 2001 Terror Attacks. The ensuing Patriot Act, which gave new guidelines to financial institutions regarding tracking terrorist financing, raised red flags for clients with foreign addresses, with suddenly abandoned U.S. addresses or U.S. addresses that were no more than P.O. boxes.
With the new wave of terrorism in Europe over the last few years, U.S. banks have been more skittish and more proactive. They’re telling you, “If you can’t show us a U.S. residential address, if you can’t show us proof that you’re not simply using your mother’s or sister’s address as a front, we’d rather close your account than take a chance.”
And on the European side of the ocean, the 2010 Foreign Account Tax Compliance Act (FATCA) was passed after many European banks, especially in Switzerland and Luxembourg, were allowing U.S. taxpayers to hide money. Now, all these foreign financial firms have to report balances above a certain amount to the IRS. Penalties for not doing so are severe, and so the banks are deciding it’s all not worth the hassle, the risk and the paperwork.
According to a 2014 Wall Street Journal article, “Expats Left Frustrated as Banks Cut Services Abroad” by reporter Laura Saunders:
Experts say a broad range of U.S. expats are affected, and that the wealthy and employees of multinational firms aren’t immune. ‘The financial institutions weigh how lucrative the relationship is against the possible compliance risks and burdens,’ said Jonathan Lachowitz, an adviser at White Lighthouse Investment Management, a firm based in Massachusetts and Switzerland. “Banks look at this from a liability perspective,” Martin Karges, a senior director at the New York business advisory firm BDO USA, told the Journal. “The less the bank has to report to the IRS, the less risk there is.”
Caught in the squeeze is you! So what can you do?
Google searches that include “bank” and “expat” usually produce HSBC at the top of the list. The international bank holding company based in London has a special arm called HSBC Expat, devoted to multi-national customers.
Its website states you can use its services if:
● You need to make international payments or have accounts in different currencies;
● You live outside your home country;
● You move regularly between different countries;
● You’re looking for an economically stable home for your money;
● You’re thinking of retiring abroad.”
Sounds perfect on the face of it, though there is a minimum of £60,000 ($86,000-$87,000, about 76,000 euros) or currency equivalent in deposits and/or investments.
Also, potentially troubling, is a list of serviced countries on the HSBC Expat website. It’s not clear whether or not this is meant to be an exhaustive list, but while France, Germany, Switzerland, Turkey, Russia and the United Kingdom are included – along with the Isle of Man, Malta and the Czech Republic – the Netherlands, Belgium, Luxembourg, Sweden, Norway, Denmark and Italy are among those countries not on the list.
Other European banks probably offer similar accommodations, but the problem is you’ll likely have to hunt and peck for them.
“It could vary, within the same bank, from location to location, city to city,” says Marylouise Serrato, executive director of the Washington, D.C.-based non-profit advocacy group, American Citizens Abroad. “We’ve heard of certain cases where that was no problem in Paris, but a problem with the same bank in Marseilles.”
Serrato is not even entirely sold on HSBC as a resource. She says HSBC was one of the first banks she heard where Americans were beginning to have problems opening accounts.
One of the FATCA requirements is that European banks were asked to agree to an exchange of data through an International Governmental Agreement (IGA) and there’s a directory of such banks on the U.S. Treasury Dept. website. In fact, Serrato says, “probably 95 percent of all European banks have signed on. But that doesn’t necessarily mean they offer services to Americans.”
So it’s the Wild West out there for American expats looking for a home for their money and a place from which to write a check.
But here are a couple of seemingly foolproof options
• American Citizens Abroad has developed a cooperative account, for its members residing abroad, with the U.S. State Department Federal Credit Union. Says the ACA website: “This is the same type of account used by Americans working at U.S. embassies, as well as many other people around the world. You can reside full-time or part-time abroad and still qualify. You don’t have to have an address in the U.S. You don’t have to be connected in any way with the Federal Government.”
All you have to have is an ACA membership. Fees for that range from $55 a year for seniors (over 65) to $170 “for those who can contribute a bit more on top of their membership,” to a one-time payment of $600 for a lifetime membership.
Then the ACA site will take you through the process of opening your FCU account.
“It won’t give you every kind of bank service,” says Serrato, “but it will provide the basics – checking, savings, an IRA, CDs, the ability to be a co-signer on your child’s student loan or parent’s mortgage back in the U.S.
“At the very least, it gives you a place to put your money if turned out by your U.S. bank and unwelcomed at a European bank.”
• Monese, the British financial institution with the mindset of a high-tech digital pioneer, has launched a new type of bank service aimed precisely at expats, through an app downloadable here.
All you need, in this digital age, is a photo of your passport, a photo of an approved document showing your permanent address and a selfie to verify your identity. Right now, Monese offers a VISA debit card, accounts in British pounds and euros (U.S. dollar accounts will be launched later this year) and the ability to transfer funds internationally.
Monese isn’t technically a bank, so it can’t lend money, offer credit or investment services or pay interest on deposits. It’s classified as an Electronic Money Institution by the UK’s financial regulator. That’s what enables it to offer accounts to people who normal banks might not accept.
As a financial institution, Monese is still subject to FATCA reporting. But there are no hindrances to U.S. citizens opening accounts with Monese, provided that they are residents of a European country when they apply. And while there are certain limits to Monese accounts, they effectively function as a normal checking account, so it’s enough to get you up and running when you arrive – if you don’t mind starting your international financial dealings with an app and a selfie.
Of course, that’s how the rest of the world is operating, anyway.