I’m giving you all a heads up that if anyone has investment accounts in the US, you may find yourselves receiving a letter from your bank or financial institution as I did that you need to provide “acceptable proof” of a US legal and mailing address. If you can’t provide this proof, they will restrict your accounts to liquidating transactions only and they will be subject to closure. If they don’t hear from you by the specified date in the letter, they will liquidate your account and mail you a cheque for the proceeds to the address they have on file. They warn: “There may be tax consequences to you associated with a liquidation of investment assets in your account, so please plan accordingly.”
If you live in Canada your only option is obviously to liquidate the accounts.
Luckily I was already planning on transferring my IRA to an RRSP here in Canada, but this comes a bit of a shock. Even the US banks don’t want to deal with the FATCA headache!
Click the picture below to see the letter in full size. I have deleted any personal info.
So far, I’ve heard nothing from the two institutions in the US that I have inherited accounts from my parents. Do you think since they also have my Dad’s name on them, that somehow it makes a difference? Just curious. At any rate, a few days ago, I phoned one of them to try to arrange to close the account. Haven’t been able to get through to the other one yet. If I hear anything like that though, I’ll post it.
Any links or material that one could see in relation to this? A PDF file of the letter? Wonder if this is a response to what I call DATCA… The domestic version of FATCA…
Would like more info please…
I will scan the letter over the weekend and black out any personal info. Edit: The letter is now attached.
Thanks Zucchero, that would be really great.
Yep, this affected me too. I had an account they said I need an American address. Think about the lunacy of this:
1- It’s getting harder to open bank account in foreign countries;
2- It’s hard to have a US bank acount!
I can scream this till I’m blue in the face: “US” does not mix with “expat”.
zucchero81 I have asked ACA if they have any insight as to why this might be happening. Is this something new, the front edge of DATCA, or is it some unique policy of this financial institution? The letter posted doesn’t say or imply why. Have you tried calling them and ask for an explanation of why this is happening? I wonder what answer you would get.
As a US citizen resident in the US, I am not familiar with RRSP. Is this the Canadian equivalent to an IRA in the US? I suspect, but you will need to check it out, that if you close down a US IRA and “rollover” the proceeds into a Canadian account that the funds so transfered are considered as taxable income in the US.
With respect to US banks closing down accounts of US citizens living outside of the US who have no US address, I believe this has nothing to do with FATCA but instead is because of the “know your client” provisions of the Patriot Act. This Act does not make it illegal for US banks to have US citizen clients without US addresses, but it places an onus on US banks to know the sources and disposition of funds that flow through such accounts which imposes a risk on US banks they do not want to assume since they might be used to fund terrorist activities. As I recall some US banks are allowing US citizens living abroad to maintain such accounts providing they maintain a certain rather high balances such that it makes it financially viable for the banks to spend what it takes to be specifically knowledgable about the sources and dispositions of the funds flowing through such accounts.
I am personally aware of two retired US citizens who live abroad who have US accounts, one in Greece where he was born and where he returned after retirement. The other lives in Brazil. Neither have local accounts in those countries. Their social security and retirement checks are deposited in their US accounts. They access the funds in these accounts by using ATMs in those countries. But in order to do this they use the addresses of US relatives who are US residents as their “addresses of record” in the US. It is the US address to which their bank statements are sent and then are personally forwarded by these family members to their retired parents living abroad.
I hope this helps.
Hi Roger,
You’re right. But it only seems as though these “Patriot Act Rules” started getting enforced around 2009-now. I think that’s why there may have been some confusion with the FATCA.
It depends on the bank. Banks that are accustomed to dealing with military members tend to be the easiest to deal with. Most banks require that the person be a US citizen and have a US address. This can become a little tricky when we live overseas and don’t want to inconvenience people we know in America.
Mix this with the rules of the FATCA and foreign banks’ reluctance to open accounts for Americans, and it is a mess.
Thanks for the info, everyone. The letter only refers to my investment account, however. My checking account at the same bank is not affected. Even so, I will certainly be talking to my advisor this coming week about this. Seems odd to me that he didn’t even try to call and leave me a message.
To my knowledge, an RRSP functions in the same manner as an IRA, tax free contributions and growth within the account–taxed upon withdrawal from the account. I’ve never heard that a person could roll a IRA into RRSP. That would surprise me. Thus, IRA withdrawals to bring the funds to Canada would be subject to tax.
Hi Zucchero, in the interest of accuracy, perhaps you could consider changing the title from FATCA to “Know your Client”, for to my knowledge, Mr. Conklin is right on this point. That said, this is a very informative post and yet another illustration of how we US expats suffer from discrimination because of Federal laws.
Petros, my partner works for a very large investment firm and he says that financial institutions here in Canada can indeed convert an IRA to an RRSP. Normally a non-resident or non-citizen of the US gets hit with a 15% withholding tax that is then subject to a tax credit here in Canada. Because I am a citizen and the funds are being collapsed before 59 1/2 years of age, however, there would be a 10% penalty applicable. The 15% withholding tax doesn’t apply to me as I’m still a US citizen.
Good to know. Folks better take advantage of it before the US closes that loophole. Who do you pay the 10% to, the US government or to your plan?
I have had a checkings/savings account at a major US bank for many years, with all correspondence going to my Canadian address. They certainly have my SSN. So far I have not had any problems. From what you have said, I do not expect to hear anything from my bank. However if I do, this site will be the first place I post that incident.
This type of stuff seems to happen in waves.I remember a few years back the US imposed new regulations on its banks regarding accounts held by foreign diplomatic and consular employees stationed in the US. The banks response: simply close out the accounts of the people effected. One bank I believe Chase actually had a branch right in the United Nations headquarters that they prompty closed also.
The US gov gets that 10% automatically.
You are correct – this is related to the Patriot Act. I know a U.S. citizen living abroad who was unable to open a bank account in the U.S. – so I was told – because of an inability to meet requirements that the bank itself needed to satisfy U.S. reporting requirements which were the result of the Patriot Act.
As Ron Paul has said: The Patriot Act Is Not Patriotic.
“On September 11, 2011 Osama Bin Laden attacked the United States. Bin Laden orchestrated the most horrific terrorist act in history. As a result, under the leadership of Presidents Bush and Obama, the United States of America – “that great citadel of freedom and justice” – initiated laws, regulations and policies that has resulted in the destruction of the United States. In the words of A.C. Grayling:
“If the governments of liberal democracies incrementally reduce the liberties of their people, they will thereby achieve on the terrorists’ behalf what the terrorists wish, which is to harm the targeted society and undermine its institutions and traditions.” – pg. 263
– A.C. Grayling – Toward The Light of Liberty”
http://renounceuscitizenship.wordpress.com/renounce-us-citizenship/
foxladyhawk
The problem arises when you try to open a new account at some banks. Have heard no reports of banks closing accounts that are already open.
In other words, this is a problem prospectively.
Not everyone is affected in the same way as you, geeez. People with family in the US can provide a US address through their family ties. I have a friend who has lived her entire adult life in Canada maintaining a US address. As far as the IRS is concerned, she is a US resident. None of this affects her. Among my friends and acquaintances, the folks who are least affected by this are people who have years of compliance behind them.
Not everyone wants to, or has to, renounce. This isn’t fun for any of us, but there are people with viable options that do not include renouncing. It’s a bit like a chess game – the IRS makes a move, we make a counter-move.
It isn’t really hard to open a bank account in Canada. But it is going to be tougher to open one without telling the bank more about yourself than you did before. You can have accounts at US banks if you can provide a US address. Some people, I have discovered, have no problem doing this.
Great, now I can honestly say I’ve been directly affected by the Patriot Act. The US, with its climate of fear and paranoia, is going to end up isolating itself, diplomatically and financially, from the rest of the world.
Actually, renounceuscitizenship:
http://www.bloomberg.com/article/2011-12-23/aYoOcZ6NT3wo.html
According to this really RECENT court ruling, the US says IRAN was behind 9-11. Common! They have got to be crazy in that country. First it was Bin Laden, then Saddam Hussein, and now Iran. This is pure nonsense
renounceuscitizenship – and certainly for “investment accounts”. Seems like those are a definite no-no to have nowadays. Buy US savings bonds! What a joke…
Petros and zucchero81
I think this thread is an excellent example of the mission you all have been trying to undertake. Information sharing, that gets updated, refined, corrected in a civil manner without flame throwing charges leaving readers with misinformation of what is happening… Changing the thread title was the right thing to do. Good call.
I think it gives it a lot of cred with other lay readers who stumble upon it, and gives me more confidence to recommend it as resource for reporters. It is more information directed without partisanship rants (which I think is important), and the language remains civil, I do think the opinion makers and reporters will take note. It might take a while, but I keep watching your stat count, and it is doing pretty darn good for a first month considering the esoteric nature of the subject you are covering.
I did not want to move my US inheritance up here at the time I received it as the CDN dollar was worth more than USD. I phoned many banks, some that I had used previously in the past and nobody would even consider letting me open an account. They wouldn’t allow me to use my sister’s or brother’s address. They also said I would have to appear in person, which wasn’t possible then. This was November of 2010.
I was able to have my name and address simply added to the IRA and the annuity. I was actually perplexed by this later on as the bank holding the IRA would not open the new account for me either, even though they have my Canadian address and I had to make an unexpected trip two months later and did make an appearance at the bank.
I just received a letter informing me that US BANK is closing all accounts for foreign nationals. We have held a business checking account that we use for USD transactions since 2006. However an email arrived last week to inform us that US Bank is pulling out of international banking and from 28 June 2013 all accounts will be closed.
Now it makes it even harder to try and open an account in the US, everyone either wants an EIN or for me to walk into a branch, which is not going to happen.