Well, it really IS beginning. Three weeks from tomorrow, FATCA begins. Apparently our compatriots in Mexico are about to be hit in a very big way.
None has been so far reaching as this notice sent to US citizens who have accounts at Banamex USA in Mexico this week, however.
Banamex USA’s parent, Banamex, is the second largest bank in Mexico and there are over 1 million US citizens living in Mexico, by far the largest amount of any country, and so this news will be felt over a very widespread area.
Notices have begun to be sent by Banamex USA, a bank operating in Mexico and used by many American expats in Mexico, to all US citizens notifying them that their accounts will be closed within 30 days.
Here, here and here you will find three separate online discussions surrounding Banamex USA’s summary closure of American’s accounts.
In most of the forums people know the reason why – FATCA – but in one of the forums in particular the people are not even aware of FATCA and its implications. This action by Banamex USA is, of course, because of FATCA, which has forced 77,000 banks in 70 countries to surrender all information on American customers to the Internal Revenue Service (IRS) or be extorted and possibly put out of business altogether.
Banamex USA, a subsidary of Citibank with its headquarters in Los Angeles, has sent letters to many US customers informing them that their accounts will be closed June 30. As one online commenter wrote:
“No more SS check deposits: no more linking of accounts to Banamex Mexico, no more credit card, no more ATM for free, no more nada.”
One customer was told that it was a “bank decision” with no reason given why. This move has left former account holders scrambling to find a bank that will let them open an account without their presence in Mexico, something likely impossible to find.
It does not appear that all accounts will be closed, but nobody knows Banamex USA’s strategy here, even banking insiders in the US who we have contacted who are confused about what is going on.
What’s for sure is this: Are you an American expatriate living abroad or an American currently thinking of moving abroad? This could and likely will happen to you.
cross-posted from Maple Sandbox
Also, this pattern illustrates the massively unfair effect of FATCA….those who were not born in the USA with dual can effectively fly under the radar..just lie on the forms and never breath a word about being a US citizen. Those born in the USA are marked for life even if they did not grow up there/spend time there. I am marked….my ex wife (also a dual but not born in the US) and my son can fly under, my daughter born in the US is also marked…all just accidents of birth so to speak with very different practical outcomes.
I saw that article too….
Maybe this will shake a few U.S. retirees out of their siesta?
On Sunday the Financial Times reported that Russian companies from now on are preparing to do business and sign contracts in Chinese Yuan and other Asian currencies. One of the reasons is a fear that the Western sanctions will exclude them access to the US$. A banker here told me that FATCA also plays a role in this switch. The Deutsche Bank in Russia reports that many accounts are being opened in Asian countries.
In other words more and more people are walking away from US$.
Wow. The first “here” link is to an 11 page thread on the lovely expat forum. I cannot believe how FATCA-clueless those American Homelanders living in Mexico are! It’s shocking. I wonder how many that are required to file FBARs have been. O.o
So Mr Stack, bank closures are just a myth, uh?
I wonder when the problem will be big enough that the administration will actually have to do something about it.
This has also been picked up by Republican Overseas. I wonder what is actually going to be done about it…
When is their lawsuit going to start. Do they have to wait until July 1st that the law actually goes into effect?
Interestingly enough, I get banner ads popping up on my computer when I visit youtube about that catastrophic law about to come into effect on July 1st. Interesting…
@The Mom
I tried to post a comment there, then noticed the discussion was closed.
I joined the other expat forum (http://www.gringos.com/forum/f99/banamex-usa-account-alert-19329/) and posted this:
“Greetings from Canada! We are just receiving this news today via Twitter. We are an organized group fighting the IGA signed by the CDN govt in order to implement FATCA in Canada. Am just thinking it might be good to try and connect our communities as hard times are coming. We have done a lot of research over the last two+ years and are available to help (volunteers). Very sorry to hear you are being impacted so directly and quickly.”
Hopefully we will get some response. Will send links later….after some sense of where they are at is known. đ
@The Mom
They are not alone in being clueless. I was totally in the dark a few months ago… I happen onto a web site… then I found out about this terrible thing. I thought the US was like everywhere else… u are not there… u just pay the taxes on things u have in that country only. People in other countries do not stay current with things like this.. I didn’t… I have lived in countries where even getting mobile signal was hard… Can’t blame them if they didn’t know… even some americans in the states are clueless about this mess
This doesn’t only affect American expats in Mexico, in the classic sense, who I suspect are the population who post on sites like gringos.com – there are lots and lots of Mexicans who have U.S. status for one reason or another, few of whom are particularly wealthy.
@noone
I don’t understand either about the Republicans… if they are going to file suit… why are they waiting until the last minute to raise funds on a web site that is not even up yet? I thought they wanted to file before Canada Day which would make sense to stop it in its tracks… after Canada day… US will have the info already.. what difference will the suit make.. illegal u say.. they can just said.. Umm.. we deleted it already… Psst… keep checking for them evaders… they won’t catch up… we are the secret gov’t…
I see at least one Russian bank is closing accounts for US persons:
http://www.sptimes.ru/story/40057
Summary:
VTB, Russian’s second-largest banking group, will cease service to Russia-based U.S. clients to avoid falling foul of FATCA, a U.S. tax avoidance law that comes into force on July 1.
…
“Banks are waiting,” Garegin Tosunyan, head of the Association of Russian Banks, told The St.Petersburg Times. “Lots have registered [with the IRS]. If lawmakers pass amendments, the banks will fulfill the FATCA requirements. If they do not, they will drop their U.S. clients.”
And if U.S. citizens do not like it, Tosunyan said, they can take their complaints to the U.S. government. “The situation is ridiculous, but Russia is not to blame,” he said, adding that Russian banks will cope more easily with the loss of U.S. clients than U.S. clients will without Russian banking services.
“Also, this pattern illustrates the massively unfair effect of FATCAâŚ.those who were not born in the USA with dual can effectively fly under the radar..just lie on the forms and never breath a word about being a US citizen.”
I also think that–for now and there is certainly a risk that this may change in the future–it would be easier to fly under the radar in Canada than in most other countries. Passports–which do usually show place of birth–aren’t typically used for identification in Canada like they are in many other countries. A driver’s license–which doesn’t show place of birth–is almost always good for ID in Canada. Even if proof of citizenship is required one can always provide a Canadian citizenship certificate which doesn’t show place of birth.
Of course it depends on whether the person is willing to describe themselves as Canadian only. I do not consider it to be “lying” for a Canadian citizen living in Canada who is not using their alleged US citizenship in any way to be “lying” to describe themselves as Canadian only. I believe it is a mistake to describe such an act as “lying” because it implies that the US government gets to determine what the “truth” is–and that shouldn’t be the case.
@Tricia,
I agree, we need to reach out to US tainted persons in Mexico and elsewhere in Central and South America. There are a lot of gringos down there who are about to get screwed by “America’s War on Expats.”
@Joe Blow @Broken man on a halifax pier
I have looked into Mexico and actually it is probably only tens of thousands of gringos but hundreds of thousands U.S. born dual nationals (whose average age is pre-teen, so let’s hope they are never affected by this). Still, because of the way that the Mexican afores and other Latin American old age pension systems now work, the Latin American U.S. persons might be good allies on PFIC/foreign trust issues since many are required by their national law to contribute to systems that may have both features (the National Taxpayer Advocate has raised Mexican afores as an issue).
Also on NAFTA issues they could be allies for Canada. Here is a note I made earlier:
In August 2012, the head of the Mexican public accountantâs association was arguing that FATCA violated Article 1202 of the North American Free Trade agreement by violating provisions guaranteeing most favoured nation treatment for all members and by violating provisions against discrimination in favour of local firms. His name is Jose Luis Fernandez, Comision Fiscal Internacional del Instituto Mexicano de Contadores Publicos (IMCP) (apologies to any Spanish speakers, my computer doesn’t do accents very easily).
Admittedly, I didn’t read the entirety of the expat forum thread, but I’m not convinced that the Banamex USA cancellation of accounts is due to FATCA. First, Banamex USA is a US bank, operating in the US. It’s parent company is Banamex in Mexico which is in turn owned by Citibank. The accounts that appear to be being closed are the US accounts of Mexican residents. We’ve know for some time that it is very difficult to have an account in the US if you are not resident in the US. While the US accounts are being closed (for some), I didn’t see any reference to the accounts in Mexico being closed.
Citibank has discriminated against Americans abroad for ages, long before FATCA, or even the PATRIOT Act. They’re just that way.
Steve makes a very good point that I’ve been trying to make for a long time – that FATCA will not accomplish what it is intended to do because so many USP’s will be allowed to fly under the radar. Good for them, but when a law is rendered to be ineffective in such a way doesn’t it make it a sham that so many (bona fine tax evaders alike) can fly under the radar? What makes things even worse, is that according to the new IRS commissioner, there isn’t enough funding to process the data the IRS will be receiving making it even more apparent that FATCA will fall short of its intended goal of catching offshore tax evaders.
I see it entirely possible that due to underfunding and the need to prioritize, the IRS will begin to separate and scrutinize the FATCA data based on residency. In other words, without additional funding, the IRS will separate minnows from whales in order to prove that the exercise is not an entire waste of time and resources, because surely turning over a bunch of expats and accidental Americans who owe no tax will be.
That’s “bonafide” tax evaders.
Good work reaching out the way you have, Trisha.
What’s true / what’s not. Here is something forwarded to me that appeared in publication “Gringo Gazette” in Cabo San Lucas:
I am retired in Mexico and have resisted banking here, but still the law will have huge effects on me as well. I process all income via US banks and taxes are not an issue for me (any more than for the rest of you), but just getting larger sums of money processed to Mexico is becoming a rapid growing problem. I can’t write a check on a US Bank anymore, the banks here will not process it–think rent, major doctor bills, vehicle purchases. Mexican response to this law will likely make life a lot tougher, and without reference to improving collection of US owed taxes. Yes $30+ wire-transfers will likely be possible, but difficult to individuals or smaller companies in Mexico. Honestly, I am proud of the Mexican banks for not bending over for the IRS regulations, but the results will be difficult. Yes, my country does seem to be at war with me in a sense.
Hi JohninAjijic
Welcome to Brock! Are you saying that Mexico has not/will not sign an IGA? I am a little behind in knowing which countries are doing what…….
That sounds like a real mess.I don’t think any country’s response will improve the collection of US owed taxes.That is the base reason at least, for why this is so stupid. The only thing that comes to mind but probably isn’t terribly practical (or doable?) is to credit card it or else give in and use the Mexican banks.
Do you have contact with other expats there? Can you tell us what the reaction is, if there is any organized effort to get the word out or take action? Do people there understand what is going on?
Tricia,
Mexico signed in April: http://www.treasury.gov/resource-center/tax-policy/treaties/Documents/FATCA-Agreement-Mexico-4-17-2014.pdf
@Calgary
I don’t understand then, what JohninAjijic means when he says he is proud of the Mexican banks for not bending over for the IRS regulations. ???
I don’t know; perhaps something like ‘don’t ask / don’t tell’ — doing the very least in their questioning?
It sounds to me as if JohninAjijic is simply saying that Mexican banks are divesting themselves of all things American and refusing to do USD transactions to avoid the 30% sanctions. That is just what banks need to do if they refuse to become FATCA compliant, irrespective of any IGA.
Good morning, sorry if my lack of clarity created more questions than it answered. I am just a fairly normal United States retiree in my area, former research engineer. I have been catching snippets of info myself from the internet on the impacts of the new regulations and come to your site seeking more understanding. There have been Draconian predictions over the past month on the internet but people are not talking much about it in my area. Most are older and appreciate that news is rarely as good or bad as first reported. I can only tell you that some individuals, companies, and banks are refusing US checks in payment starting in July. I am sure more hindrances to US commerce in the area will follow. It is incredibly arrogant for the US Federal government to try to insist on the level of cooperation they are demanding from non-US banks and push back is to be expected. Even “anonymously” I feel compelled to leave Mexican politics out of my discussion, I am a permanent guest in the country and have had to work hard to gain that status (recidencia permanente). I think most people here see too much benefit to living in the area to consider leaving for the US again, so workarounds will have to be found. Right now I am angling to pay rent on my leased home via a US account in Laredo TX that my rental agency holds, If that works then I have one less headache, but there are occasional large purchases that require complex demonstrations of residence status and a pot of money setting in the hands of a merchant in good faith–like buying a car or home. I am sure a dozen workarounds will be found for every occasion. Both the expats and the Mexican merchants are very enterprising and experienced with dealing with bureaucratic convolutions. I respect Mexican business people and if I were in their place I would comply with IRS regs only if I could not find other legal routes to accomplish my business goals. Beyond having called my Congressman and two Senators and speaking with the children who answer the phones for them, I don’t see much else I can do but find ways around these new inconveniences. Someone here was concerned about living on credit cards as a difficult route. You might be interested to consider that for daily living needs Mexico away from the major cities and shopping centers any way, operates a largely cash economy, though that continues to change. ATM withdrawals with debit cards meet this need alright still, A lot of my shopping needs are met at the local Walmart as well, food, pharmacy, clothing, and some electronics, with more big box stores available in Guadalajara (debit cards accepted). Many people do not have back accounts in Mexico and do just fine. Speaking to the US politics though, I very much resent the perpetual power creep in Washington that is justified on the basis of fighting terrorists, drug wars, or controlling distribution of medical services. These are all among the “push” reasons I found for immigrating to Mexico in my final years, and it scares me to see the Feds reaching out even here to make my life unpleasant and difficult again. I could spend an hour of your time citing “pull” reasons for living in Mexico–it is a great country with wonderful people. Like most Americans here, you couldn’t get me to leave with a pitchfork. I will try to keep you advised from an expat perspective here, but you will find as many perspectives as you find expats, so I am not sure that will be all that helpful.