US citizens finding it difficult to open bank accounts
Some banks might even cease to provide banking to American residentsPublished Monday, February 18, 2013
Some banks might cease to provide banking services to their American customers, while others are reported to refuse new customers based on their American nationality.
Supposedly, the recently enacted Foreign Account Tax Compliance Act (Fatca) by the US government is the reason for banks to close its doors to US citizens.
Since January 1 this year, all foreign financial institutions must report or disclose financial accounts and investments, balances, receipts, and withdrawals held by US persons/taxpayers or held by foreign entities in which US persons/taxpayers hold an ownership interest directly to the US Inland Revenue Service (IRS).
When institutions fail to report or disclose information the consequences can be grave, one of the penalties being the withdrawal of US Dollar clearing rights in New York, a penalty feared by banks.
“For a bank which operates in the United Arab Emirates which has its currency linked to the US dollar this would be nothing short of catastrophic,” wrote a bank in a letter to its American account holders.
In the same letter, it implies that the recently enacted law might lead the bank to decide to cease operating bank accounts for US citizens: “While we await further clarification from the IRS regarding reporting requirements, it appears on the face, that these will be onerous and will involve substantial costs for [the] bank in terms of people, process and systems.
“The bank is currently reviewing its options – one of which is to cease banking for individuals who fall under Fatca regulations. We are hopeful that it will not be necessary to adopt this course of action but it will depend a great deal on the requirement placed on the bank in continuing to maintain accounts for individuals covered by Fatca.”
Meanwhile, US citizens are reported to have been refused by banks when they wanted to open a new bank account. A woman speaking on an online forum for expats living in the UAE said that she, being an American citizen, tried to open an account at a bank but was flatly refused without a reason being given.