A Dutch financial arbitration body known as KiFiD has ruled that a local banking operation of Dutch financial services giant Aegon was within its rights to close the savings account of one of its clients who has dual American and Dutch citizenship, because it did so as part of a larger business decision to close the part of its Dutch business in which the account was held to all of its clients in that operation.
And while the client might have wished to continue to keep his savings with Aegon Bank, KiFiD said, the bank was also within its rights to choose not to accept any American citizen clients outside of the U.S. going forward, on the basis that, as a result of the 2010 U.S. tax evasion-prevention law known as FATCA, the bank may now decide that it would be "unreasonably onerous," for business reasons, to do otherwise.
This is not only because of the added compliance costs Aegon Bank would be obliged to take on, as a result of FATCA, but also because accepting American clients meant that it could face "high fines if it does not meet the strict requirements of the FATCA reporting obligations," according to an English translation of the nine-page KiFiD report.
“Foreign financial institutions” that enter into a FATCA agreement with the IRS (via intergovernmental agreements between the U.S. and these institutions' countries' governments) may, for example, "may be be required to withhold 30% on certain payments to foreign payees if such payees do not comply with FATCA,” according to the IRS.
This is why, as the American Expat Financial News Journal and other media organizations have reported over the last few years, growing numbers of banks and financial institutions outside of the U.S. are declining to accept any American expats as clients, even so-called “accidental” (or “unintentional”) Americans.
Accidental Americans are citizens of other countries whom the U.S. considers to be Americans, but whose links to the U.S. are distant and often are the result of having been born there to non-American parents, who returned to their native country where these U.S.-born children grew up.
Even U.S. banks often don't want American expat clients, according to the findings of a survey carried out towards the end of 2020 by the Association of Americans Resident Overseas.
KiFiD (The Klachteninstituut Financiele Dienstverlening, usually translated as "Key Financial Services Complaints Tribunal" or "Dutch Institute for Financial Disputes") is a Dutch body that banking and insurance industry customers go to if they have issues that need resolution, but would rather avoid having to go to court. In this instance, sources familiar with the case say, the ruling is final, as the Aegon client chose the "binding arbitration" option when filing their complaint with KiFiD, which means they cannot now appeal it.
In its ruling, KiFiD also ruled that Aegon did not have to compensate the client whose account it closed for "psychological damage suffered by the termination" of his account, or for the costs of giving up his U.S. citizenship, both of which the client had requested, as part of their complaint.
The KiFiD report doesn't provide any personal background about the dual U.S./Dutch citizen client of Aegon Bank who initiated the KiFiD arbitration case, such as whether he was an accidental American, or how much he had in his account at the time he was told that he had to close it.
Aegon NV thus far has declined to comment on the matter.
December ruling 'days before de Volksbank decision'
The KiFiD ruling was handed down on Dec. 21, but has received little media attention thus far, even though, as reported, another decision a few days later, involving a dual U.S./Dutch citizen who sought to challenge his bank's decision to close his accounts on the grounds that he was refusing to provide it with a U.S. Tax Identification Number, was widely covered by the Dutch and English press.
In that case, the plaintiff – a retired KLM pilot (and accidental American) named Ronald Ariës – won a qualified victory in his challenge of a lower court's ruling against him. According to Justice J. P. Verboom, Ariës was entitled to keep his two current accounts and single savings account even if he didn't provide de Volksbank with a TIN, as long as his total holdings never exceeded US$50,000.
The problem for banks and other financial institutions outside of the U.S., as both the cases mentioned above suggest, is that FATCA has made it costly as well as risky for them to accept or keep U.S. citizens as clients.
Even if their American clients are willing to provide these institutions with the U.S. TIN or Certificate of Loss of Nationality (CLN) the banks are obliged to obtain for each of their U.S. citizen account-holders, as part of the FATCA compliance regime, many say the costs of doing so coupled with the potential cost of being penalized for getting it wrong make it easier to not accept American clients at all.
At the same time, though, an EU law known as the Payment Accounts Directive requires EU banks to provide a basic bank account to any EU citizen who wishes to have one.
Aegon: more a financial products
and services provider than bank
As its website explains, Aegon NV is based in the Hague, in the Netherlands, and is a "diversified financial services group focused on providing investment, protection [as in insurance] and retirement solutions." Listed on Euronext and the New York Stock Exchange, it has some 30.4 million clients globally, and a major portion of its business in North America, where it goes by the name Transamerica, which was the name of an insurance and investment company it acquired there in 1999.
According to the KiFiD report, the un-named Aegon account-holder in question originally had held two accounts under the Aegon umbrella since 1996 : a savings account and an investment account. The investment account expired in 2011, but the account-holder retained the savings account.
Aegon closed that account on April 16, 2021, and transferred the balance into another bank, the name of which wasn't given.
Dutch commentators on the KiFiD decision suggested that the argument Aegon used in defending its decision to close the dual citizen's account – that it would be too expensive for it to attempt to accommodate American clients, given the costs involved in FATCA compliance – might make sense in the case of some banks, where profit margins are an issue.
Over time, though, they added, there could be a danger that no banks at all will be willing to accommodate American expats, unless they were willing to pay more than other nationalities for their accounts.
" It is a highly peculiar balancing of interests," wrote Ellen Timmer, a Dutch lawyer whose Dec. 30 blog on the Aegon/KiFiD case may be read by clicking here.
"It is striking that the interests of the bank outweigh that of the customer, who in this case apparently [already had] bank accounts elsewhere."
Ronald Ariës, the KLM pilot mentioned above, whom the Central Netherlands Court in Amersfoort last month said should be permitted to keep his accounts with de Volksbank, said he thought that KiFiD might be generally more sympathetic to financial institutions than the courts are.
Ariës said he was also interested in knowing whether the person who had brought the matter to KiFiD had more than US$50,000 in his Aegon account, an amount below which, the court in his case had said he would be permitted to keep in his de Volksbank account without having to provide the bank with a U.S. TIN or CLN.
Ariës, now 63, left the U.S. as a baby with his Dutch citizen parents to live the rest of his life in the Netherlands, and believes he shouldn’t be having to go to the trouble and expense of having to obtain such documentation at this stage in his life.
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