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U.S. Brokerage firms close accounts for US expats


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Article in latest GR:    http://www.theguadalajarareporter.net/index.php/news/news/business/49534-us-brokerage-firms-close-accounts-for-us-expats

Has anyone had this happen to them?  I called my bank, Schwab, where I have an "international" account to ask them if they, too, were planning to drop US expat accounts.  When pressed, the person I talked to could not promise me more than "not now, I don't think so, I don't know..."  She would/could not give me a firm NO on this.  I find this more ominous for expats then the other recent developments from the US.

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https://thunfinancial.com/us-brokerage-accounts-american-expats-closed-2015/

Quote

The global financial regulatory landscape is dramatically changing. FATCA imposes significant new compliance burdens on non-U.S. financial institutions with U.S. clients.  As a result, many non-U.S. financial institutions now simply refuse to service U.S. persons. Unfortunately, U.S. financial institutions are following suit due to FATCA and other considerations. There have been stories about Morgan Stanley closing American expat accounts, Merrill Lynch placing restrictions on non-resident accounts, and other banks with similar new policies on expat accounts.

Among U.S. financial institutions, account restrictions differ between firms.  Some firms are closing all accounts for non-U.S. residents; while other firms are only restrict services available to Americans not resident in the U.S.  In other cases, firms require very high minimum account values for non-U.S residents who wish to remain clients.  Bans on purchasing U.S. mutual funds by non-residents, including Americans citizens, are now the norm. These new restrictions affect bank accounts, brokerage accounts, and retirement accounts (IRAs and 401ks).

Many commentators attribute these actions to FATCA and increased offshore tax enforcement efforts. However, there are numerous contributing factors in addition to FATCA. Enhanced Treasury Department enforcement of existing anti-money laundering regulations and know-your-client rules, evolving interpretation of the 2003 Patriot Act, and new European regulation of cross-border investments all play a role. These factors contribute to a heightened compliance burden faced by financial institutions providing retail investment services across borders.  Many U.S. institutions are following the lead of foreign banks in limiting perceived compliance and legal risk by simply refusing to provide retail financial services across borders.

FATCA was passed and signed in 2010 by you know who.  The current U.S government has pledged to repeal it or make it non applicable for permanent residents of foreign companies.  We shall see but in any case it doesn't look like that will have much bearing on this situation, which seems driven by other government actions as well.  But that change might persuade at least some foreign banks and brokerages to do business with U.S. Expats.

The only way around seems to be maintaining a legal U.S. address.

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1 hour ago, bournemouth said:

I noted that the person who wrote the article is also giving a talk on the subject at LCS and works for an investment company - there may be a tad of vested interest involved.

That may be true but expats are having all kinds of problems with banks and investment houses because of FATCA on both sides of the border.  Many banks worldwide will not even open a bank account for a US citizen anymore.  They just don't want the reporting paperwork so the easiest thing is to just not have any American accounts.

As far as any of my banks, investment brokers etc know, I live in a PO Box in Laredo.  I just "vacation in Mexico" a lot.  Been doing that for a decade.

 

 

 

 

 

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The wording in this article is unnecessarily inflammatory, possibly to get you to come to the "Info Session" and sign up.  This is also NOT new news and has been going on for years.  Not all brokerage companies take this attitude of dropping low balance, non-resident, clients because they don't want the hassle of Govt reporting when they already have relatively small margins of profits on these few clients.  Other brokers, such as TD Ameritrade, are happy to take you as a client with no hassle even if you have a Mexican address and no US (eg. Laredo or family) mailing address.

I have helped 2 people set up accts with TD Ameritrade in the last 3 weeks.  I also have a client who has just this month changed his address from US to Mexico and therefore changed his Schwab acct from US to International.  There may be other brokerage houses that also are happy to have Mexican resident US persons as their clients but I have not researched it because I have been extremely happy with TD Ameritrade. 

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9 hours ago, Yo1 said:

Good reason to never let your banking or investment entities know that you live in Mexico.

All very well if you have that all-important person who is willing to pretend you live at their address and take the trouble and responsibility of handling your mail for you.  B)

 

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14 hours ago, BrianInMexico said:

The wording in this article is unnecessarily inflammatory, possibly to get you to come to the "Info Session" and sign up.  This is also NOT new news and has been going on for years.  Not all brokerage companies take this attitude of dropping low balance, non-resident, clients because they don't want the hassle of Govt reporting when they already have relatively small margins of profits on these few clients.  Other brokers, such as TD Ameritrade, are happy to take you as a client with no hassle even if you have a Mexican address and no US (eg. Laredo or family) mailing address.

I have helped 2 people set up accts with TD Ameritrade in the last 3 weeks.  I also have a client who has just this month changed his address from US to Mexico and therefore changed his Schwab acct from US to International.  There may be other brokerage houses that also are happy to have Mexican resident US persons as their clients but I have not researched it because I have been extremely happy with TD Ameritrade. 

Do you have a set fee for this service.. Or do you charge a percentage of the clients assets ..?

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This is my worst nightmare.   My investments are with Merrill Lynch, and my only US bank plus Credit Card is with Wells Fargo.

No-one has yet answered the original question.

HAS ANYONE HAD THIS HAPPEN TO THEM?                                                     

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1 minute ago, Floradude said:

This is my worst nightmare.   My investments are with Merrill Lynch, and my only US bank plus Credit Card is with Wells Fargo.

No-one has yet answered the original question.

HAS ANYONE HAD THIS HAPPEN TO THEM?                                                     

I was dumped by Banamex USA; credit card gone as well.  If you search on here as well as Senor Google, there are some banks and credit unions which will accept Mexican addressed customers for new accounts and offer credit cards as well.  My investment account is aware that I live in Mexico.  It's possible to solve this. I would give you the information, but would prefer to keep it out of the "public domain".B)  Just persevere and you will succeed.  I did.

 

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2 hours ago, gringal said:

All very well if you have that all-important person who is willing to pretend you live at their address and take the trouble and responsibility of handling your mail for you.  B)

 

Never leave home without at least one. :)

 

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11 minutes ago, Hud said:

Never leave home without at least one. :)

 

Just set up a mail forwarder out of the states.  Sol & Luna, Handi Mail and iShop all provide that service for around $15 a month.  They all will accept packages also.

It is none of anyones business where you live.  The government do not own you, you own the government.

I tell the Mexicans where I live because I'm a guest in their country, but I no longer live in the US so it is not any of their business.  

 

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6 minutes ago, jrm30655 said:

Just set up a mail forwarder out of the states.  Sol & Luna, Handi Mail and iShop all provide that service for around $15 a month.  They all will accept packages also.

It is none of anyones business where you live.  The government do not own you, you own the government.

I tell the Mexicans where I live because I'm a guest in their country, but I no longer live in the US so it is not any of their business.  

 

Yes, we all are living in a P.O. Box  or "Apt."in Laredo.  The mail forwarding doesn't work to give you a valid U.S. address.  If you doubt that, try ordering stamps from the P.O.

I'm afraid they're onto that.

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20 minutes ago, jrm30655 said:

Just set up a mail forwarder out of the states.  Sol & Luna, Handi Mail and iShop all provide that service for around $15 a month.  They all will accept packages also.

It is none of anyones business where you live.  The government do not own you, you own the government.

I tell the Mexicans where I live because I'm a guest in their country, but I no longer live in the US so it is not any of their business.  

Banks and financial institutions are using software to identify CMRA's (Commercial Mail Receiving Agencies) such as these Laredo forwarders.  

Partly it is due to their compliance with the Know Your Customer part of the Patriot Act; banks are subject to huge fines under this.  Banks also want to know every credit card customer's physical address so if they need to start collection actions against the customer, they can serve court papers (CMRA's cannot be served court documents). 

Explanation of KYC here:  https://fin.plaid.com/articles/kyc-basics

There are separate rules for brokerage funds that do not allow non-US residents (including US citizens) to trade stocks.  Here's a link to a company that provides financial institutions with software that flags CMRA addresses...they aren't the only one, there are many and you can even buy the USPS mailing lists that show CRMAs.  https://terrapintech.com/proactive-compliance/

Here's a WSJ article about brokerage accounts for US citizens living outside the US http://blogs.wsj.com/expat/2015/09/20/american-expats-scramble-to-keep-u-s-investment-accounts/  I am showing the entire article below as often WSJ will cut off access to non-subscribers.

American Expats Scramble to Keep U.S. Investment Accounts

 
By 
PEGGY CREVELING
Sep 20, 2015 10:00 pm ET
BN-KH946_broker_G_20150915173612.jpg
ISTOCK PHOTO

U.S. citizens living overseas have faced increasing difficulty in maintaining U.S. brokerage accounts for their investments. Most recently, a major U.S. broker sent a mass mailing to account holders announcing an upcoming amendment of its account agreement to include changes to its procedures for customers residing outside the U.S.  This has left many American expats wondering why their broker is making changes, how it determines if they’re living overseas, if their account may soon be closed and whether their cash deposits are still safe.

Given the rapidly changing regulatory environment governing cross-border investing, it’s wise for overseas Americans to stay up-to-date on broker account policies and preferably to hold their accounts with those that welcome overseas Americans. To help clarify the issues, below Peggy and Chad Creveling of Creveling & Creveling Private Wealth Advisory answer some of the questions they’ve been receiving:

Q:  I reside outside the U.S. and my U.S. broker is changing the agreement which governs my U.S. brokerage account. One change is that cash in my account will no longer be swept into a money market fund. Why? Will I continue to earn interest and is my cash safe?

A:  Cash money market funds are a form of a mutual fund. To avoid breaking international laws and regulations prohibiting selling unregistered mutual funds cross-borders, U.S. brokers have been restricting their overseas customers from purchasing U.S. domestic mutual and money market funds. Instead of a money market fund, your broker will hold your cash in a cash account. Depending on policies you may still receive interest on the balance (although current rates are very low). Your cash should be safe: accounts held at U.S. incorporated brokers generally are insured with the Securities Investor Protection Corporation (SIPC) for a maximum coverage of $500,000, including a cash sublimit of $250,000.  Your broker may have also purchased additional protection separately.

Q: The new agreement includes a clause regarding how they will treat my account if I’m “Residing Outside the United States.” I use a U.S. mailing address on my brokerage account, so does this new clause apply to me?

A:  It depends. By itself, a mailing address does not determine where you reside. Where you reside is where you physically live.  A U.S. brokerage firm may ask:  Do you spend more than six months of the year outside the U.S.? Do you qualify as a non-U.S. resident for U.S. income tax purposes? If you answer yes to either question your broker may consider you to be residing outside the U.S. However, for convenience a U.S. financial institution may allow a U.S. mailing address even if it considers you to be residing outside the U.S.

Q:  The new account agreement says what my broker will do “if we determine that you live outside the United States.” How would my broker determine that I reside overseas?

A:  On existing accounts, a financial institution may determine that you live outside the U.S. if you tell them directly, or if the post office discloses that it is forwarding your mail overseas..  A new account applicant may be asked to provide proof of residence in the form of a utility bill, driver’s license, bank statement, mortgage statement or rental agreement.

Q:  What happens if my U.S. broker “determines” that I live outside the U.S.?

A:  It will depend on the U.S. broker’s policies as well as which country you are resident in.  U.S. firms such as Charles Schwab and Interactive Brokers are set up to work with U.S. customers overseas. These firms will open new accounts for U.S. nonresidents, as long the laws in the resident country and the U.S. permit.  Others will allow you to keep your existing account but will not open new accounts. In more restrictive cases some U.S. brokers have asked their overseas customers to close existing accounts. Additionally, some non-U.S. residents have reported that they cannot access their U.S. brokerage account when they try to log in from a foreign IP address.

Q:  Can my U.S. broker close my U.S. brokerage account just because they determine that I live overseas?

A:  U.S. brokerage account agreements may state that they can close your account “at any time, for any reason, and without prior notice.”  To date many U.S. nonresidents have reported having their U.S. broker accounts closed. Even if your U.S. broker is currently accepting U.S. nonresidents, this could change in the future. For example account agreements may state blanket phrases such as “if you or another individual associated with your account resides outside the U.S., we may at any time in our sole discretion terminate that relationship, or modify your rights to access any or all account features, products or services.” Therefore it’s important to stay abreast of your broker’s policies. As noted above some U.S. brokers have specifically set up to work with U.S. expatriates. If you’re concerned about your account being closed consider moving to one of these.

Q:  Does it matter which foreign country I live in?

A: Most U.S. brokers maintain lists of countries where they will allow non-U.S. residents to open accounts or to maintain existing accounts. Which countries are permitted appears to depend on the laws of the relevant country and the U.S., as well as how the broker has structured its international business. In some cases permitted country lists are publicly available or you may need to call to ask for current policy.

 

 

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Despite all the bleak info in my last post, there remain options. 

For banking, the State Department Federal Credit Union will allow a Mexican address on their accounts.  However they do not waive ATM fees outside their US network.  SDFCU will also allow you to use a CMRA address.

For investments, when I spoke to Chas. Schwab a few months ago, they have an International plan for expats, other US citizens living outside the US.  

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Has anyone answered the question(s) "Has this happened to you ?" Or  "Have you had a letter from your Bank/Broker".  And by "You" I mean personally not a financial advisor saying "I have clients who this has happened to".

i don't have any banking or investments in the US but have asked a few friends who do have financial dealings in some of the banks mentioned and so far they have not heard anything from their banks.. 

It seems to me this is a lot scaremongering by financial advisors trying to drum up business ... 

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1 hour ago, Bisbee Gal said:

Despite all the bleak info in my last post, there remain options. 

For banking, the State Department Federal Credit Union will allow a Mexican address on their accounts.  However they do not waive ATM fees outside their US network.  SDFCU will also allow you to use a CMRA address.

For investments, when I spoke to Chas. Schwab a few months ago, they have an International plan for expats, other US citizens living outside the US.  

So, things are looking up.  I heard that the State Dept. Federal Credit Union also offers very low interest on their credit cards if you make a substantial deposit in the savings account.  Worth looking into.

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Gringa....I too was dropped by Banamex, USA back in June (I think it was) two years ago.  We had one month to make other arrangements.

I guess the answer to my question is that so far, among those reading this website, no-one (including myself) has been notified by their bank or investment company that their accounts are being dropped, frozen, or otherwise screwed.

No news is good news.....I hope.   Both Merrill Lynch and Wells Fargo are well aware that I live in Mexico full time since 2003.

 

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26 minutes ago, Floradude said:

How does one apply to the State Dept. Federal Credit Union?

I am assuming you do not have to work for the State Dept.

What I would like is a checking account and a credit card.

Got to www.sdfcu.org  

Hit the green Join button.

You will go to the Become a Member page.  One choice is Become a Member  or Overseas Applicant.  I applied several months ago using my US address.  Their site says you cannot apply online if you live overseas; you have to call them.  

In any case you need to belong to an associated group....there's a drop down menu on the next page.....there are a lot of associated organizations...maybe you belong to one???    I did not, so I joined the American Consumer Council because it had the cheapest membership fee ($15 USD for lifetime).  

BTW...I had a lot of q.'s for SDFCU and I emailed them and they are very quick to answer.  

You have to open a savings account first....you only need to 5 bucks in it, I think.  Then you can open a checking account (after their approval).  I also got a cc from them.  

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I'm also wondering - no one has actually had their bank accounts closed or threatened to be closed?

Also wondering, would it be more profitable for these banks/investment firms to drop a lot of customers who live out of country than to simply open a Compliance Department to take care of the new rules?  Isn't that what the very wealthy are supposed to be doing?  Creating jobs??

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6 hours ago, ezpz said:

I'm also wondering - no one has actually had their bank accounts closed or threatened to be closed?

Also wondering, would it be more profitable for these banks/investment firms to drop a lot of customers who live out of country than to simply open a Compliance Department to take care of the new rules?  Isn't that what the very wealthy are supposed to be doing?  Creating jobs??

This thread was started by someone whose Capitol One 360 account was closed   http://www.chapala.com/webboard/index.php?/topic/63154-capital-one-360/#comment-498911

 

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Yesterday, Monday, a friend who is with Schwab International made two calls to her contact at their office in Florida.  In between the calls she faxed him the article in the Guadalajara Reporter.

The Schwab International office in Florida told her that the article was 'nothing new.'   They also said that since I have a full time Mexican address I would be welcome into a brokerage account with Schwab International.

If what they said was true why then would the Guadalajara Reporter publish that story and get many of us worried?    I intend to do nothing.  If Merrill Lynch should at some point in time decide to 'dump'  me then I will transfer my funds to Schwab International.   

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