updated 2:57 PM CEST, Sep 21, 2023

AARO expat survey: '40% say they've had a U.S. bank refuse their business'

AARO expat survey: '40% say they've had a U.S. bank refuse their business' AARO 2020 Advocacy Survey Results

(...But FATCA not directly to blame)

For more than a decade, American expats have reported finding it difficult to obtain or maintain a non-U.S. bank account while living overseas, usually owing to the banks' reluctance to have to comply with the 2010 tax evasion-prevention law known as FATCA. But a new survey confirms something many have also been saying: That even U.S. banks often don't want U.S. expat clients either.

Has a US bank refused service And perhaps surprisingly, according to the survey's findings, FATCA isn't directly being blamed by the banks for this (see table, above), although indirectly, it is seen to have played a role.

According to the survey of more than 400 U.S. expats, carried out last October and November by the Association of Americans Resident Overseas (AARO), 135 respondents – or 40% of the 341 who answered the question – said they had had a U.S. bank refuse their business while living abroad.

One even reported receiving a check (for the amount in their account) without warning in the mail, while another said they had a U.S. bank close their account in spite of their having been with the bank for 25 years.

To make matters worse – and again, not a surprise to Americans who have been living overseas for a few years – investing and making use of U.S. brokerage accounts is also difficult if not impossible for such individuals.

According to the AARO survey results, 107 respondents (45% of the 238 who answered this question) who  reported having tried to open a U.S. investment account were refused, while 55% had no problem. 

But 112 respondents (41%), who did manage to obtain a brokerage account, found it either to be liquidated or restricted. 

"We were poison," said one survey respondent, while another said their bank "threw me out in 2018, and nobody would take up my investment account elsewhere."

Survey in aid of AARO's work

Doris Speer 3The results of the AARO survey, which may be viewed on the AARO website by clicking here, (where they headline reads "Outing the U.S. Banks"), are to be used by the Paris-based American organization to help it in its "advocacy efforts," according to Doris Speer. She's the AARO board member who carried out the survey, with input from other AARO executives.

Speer, pictured left, said some 440 expats were surveyed online, "of whom 337 were AARO members".

The respondents learned about the survey from a variety of places (including the AXFNJ), as well as AARO's website, Facebook and LinkedIn pages; and from various expat American groups, she added.

 Why the banks say they do it

While FATCA is almost always mentioned in any situation involving an American expatriate being refused a financial product or service – or at least, alongside the U.S. Tax Code – according to the expats AARO surveyed, the issue "most cited by far" (by 238 of the respondents, or 66% to be precise) was their lack of a U.S. mailing address, U.S. telephone number or tax identification number, typically someone's Social Security Number. (See table, below.)

Banks that have dumped us

The second-most cited reason given by the U.S. banks to those who took the AARO survey – for declining to have them as clients – was because they were "overseas" (32%) and/or "because of company policy" (25%). 

"FATCA is not the villain here, although the implementation of FATCA did have the unintended consequence of drawing attention to other compliance restrictions that were previously ignored," the AARO report notes, in a summary of its findings. 

"As one of you said, 'FATCA came into force, the world changed.' 

"But a U.S. bank rejects a U.S. expats U.S. account in order to reduce its legal and financial exposure due to banking laws in your country of residence, and U.S. money-laundering rules. 

"The banks are telling you the truth."

Furthermore, the AARO results summary goes on, American expats resident in Europe have to contend with two European regulations that "play a huge role" in the matter: These are the Alternative Investment Fund Managers Directive (AIFMD) and the Markets in Financial Instruments Directives (MiFID 1 and MiFID 2), both of which had been designed to ensure greater market transparency and investor protection, and both of which automatically apply to U.S.-based global asset managers who do business in Europe.

The bottom line in Europe as a result of these two directive packages, the AARO results summary concludes, is that "U.S. citizens residing in Europe are, for all practical purposes, excluded from acessibly-priced U.S.-based investment products," while the same is "likely true for Americans living elsewhere in the world" that have local laws similar to Europe's, as many have begun to do.

And if all that weren't enough, the AARO report continues, there has also been a "proliferation of anti-money laundering regulations", also known as "know your customer (KYC rules)" around the world, which have affected the U.S. personal and investment accounts of Americans "wherever they live in the world". 

Solutions, such as they are

The AARO report concludes with a summary of solutions that American expats typically turn to, such as the purchase of individual stocks and bonds, although it notes there are often difficulties. With respect to the banking issue, it suggests either trying to open an account "with a small, locally-operating U.S. institution, which may be more flexible" than the larger financial institutions, or with the State Department Federal Credit Union, which gives accounts to members of the American Citizens Abroad as well as numerous other (mostly U.S.-based) "Special Employee Groups". 

One solution the report urges its American expat readers who have fully moved overseas to "resist" would be to "use a family member or friend's address, lying to your bank or brokerage firm, or using an online 'street address' service.

As for what AARO thinks is needed, it says it is calling for changes in U.S. regulations "to require U.S. banks to provide services to overseas U.S. citizens, while satisfying their KYC requirements, in order to correct the injustice caused by U.S. financial institutions rejecting Americans on the sole basis of their overseas address." 

It adds: "AARO is always on the lookout for solutions, and will continue to educate our members of developments in this area."

To read and download the AARO report, click here.

To read and download another AARO report based on the same survey of expatriates towards the end of last year, which found "lack of representation in Congress" ranked high among expat Americans' concerns, alongside FATCA, banking/investment and retirement account issues, and issues having to do with tax generally, click here.

Also based on the same survey is an AARO report that found "more than a third" of those expat surveyed said they had at some point considered renouncing their citizenship, with those saying they've considered it most often citing "issues" having to do with U.S. brokerage accounts as well U.S. and local banking issues as their main reasons. For more information on that report, click here.

Founded 47 years ago

AARO was founded in 1973 by Phyllis Michaux and a group of other Americans resident in Paris, who were concerned about the way they thought (even then) that the U.S. government treated its citizens abroad.

Today the volunteer-run advocacy organization claims to have members in some 46 countries around the world, and combines research into issues that significantly affect the lives of overseas Americans – such as this latest survey – with keeping its members informed on these issues, while at the same time advocating on behalf of its members on such issues as taxation, citizenship, Social Security and Medicare.