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Banks, Brokerages Closing U.S. Expats Accounts. How To Avoid It By Using VPN Service.


Banks, online brokers, and investment firms are suspending or closing accounts to Amerricans living abroad. How to avoid it by using VPN service.



U.S. Expats facing account closures can turn to VPN


All around the world United States Citizens who live abroad are receiving calls, emails, and texts from U.S. based financial institutions with disturbing notices about their assets. These investors are being told that their bank will no longer service clients abroad. Some banks are saying they can no longer service clients in a particular country or region, while others are informing investors their assets no longer meet the requirements for their account, or even that their accounts are now frozen. All because these investors are U.S. Citizens who happen to reside outside of the United States.

The kinds of restrictions being imposed by U.S. Banks are extremely varied, they include restrictions on the number and types of funds investors may choose, the imposition of new high minimum balances, movement of accounts to special international groups within the brokerage, and of course, arbitrary account closure. The last being the most common action taken by far according to affected expatriate investors. Institutions known to be closing expatriate accounts include Wells Fargo, Merrill Lynch, Morgan Stanley, USAA, Fidelity, UBS, and many more.


Why is this happening?


Though the U.S. Patriot Act of 2003 did enhance the Know Your Client rules (or KYC as it is known in the financial industry) imposing heightened litigation risk and penalties on financial institutions, not much changed until the passage of the FATCA (Foreign Account Tax Compliance Act) in 2010. This act's requirement that foreign banks report on U.S. Citizen's overseas accounts triggered a wave of expatriate account closures in foreign nations causing significant disruption. In 2014 The US Financial Crimes Enforcement Network strengthened the KYC rules again, making compliance for US institutions even more costly. That year the OECD introduced the Common Reporting Standard, adding their own set of restrictions and reporting requirements.

These changes have resulted in widespread heightened compliance among financial institutions inside and outside of the United States as all parties have realized they face significant challenges meeting the expectations of the new regulatory environment. These new compliance mandates, now collectively referred to as the Global Account Tax Compliance Act, have culminated in native US banks imposing restrictions on or out right closing expatriate accounts. US Citizens living abroad who faced closure of local accounts after 2010 may now also lose their remaining accounts back at home.


But what if expats want to keep their favorite mutual funds?


The privilege of United States Citizenship also comes with an added price, well known to expatriates, that U.S. taxes must be paid in addition to any taxes imposed overseas. This citizen based taxation is predicated on the idea that wherever a U.S. Citizen may live they are still residents for financial purposes and therefore subject to U.S. taxes. As a consequence it is entirely legitimate for a U.S. Citizen to use a U.S. address to open a financial account even if they are currently located elsewhere. Those who wish to retain financial accounts while abroad will definitely want to make sure their address on file is securely inside U.S. borders.

Unfortunately institutions can still detect when those accessing their website and viewing financial data are doing so from an overseas source. That's because every time a user logs in to check their investment performance the web browser he or she is using must route its electronic traffic through many other computers before it reaches its destination. This creates a perfect trail of breadcrumbs for anyone who might want to look and due diligence compels U.S. financial companies to do so. Thankfully there is the virtual private network.

Enter the VPN


Though perhaps best known as a way for movie buffs to access media content restricted in their home country Virtual Private Networks or VPN's as they're commonly known are a proven and effective way to shield a user's identity on the web. The VPN host allows subscribers to pass all traffic through secure servers which strip location information and replace it with something else. It's a bit like going into the Holland Tunnel in Manhattan and coming out the Broadway Tunnel in San Francisco. The better VPN services also encrypt this information, adding an extra layer of security to transactions, never unwanted when dealing with financial information. In fact many corporations use VPNs as a matter of course to allow remote workers secure access to sensitive company materials.

Using a VPN is actually very easy to do. A user only needs to sign up for a VPN service and then take care to install the software as directed on every device they plan to use to access financial information, especially mobile devices. There are many different VPN services to choose from including several free options but the free services tend to come with ads or pitifully low data limitations, sometimes both (you also probably don't want to access your financial information with free service). For safeguarding financial information a paid service that offers strong encryption is clearly the best choice. NordVPN in particular is an award winning service that offers military grade 256 bit encryption and servers that constantly jettison their logs so browser activity which could be retained for hours, days, or even months on other services disappears completely.

Given the many international regulatory changes rippling throughout the financial world, prudent U.S. expatriate investors should act before they too receive notice that their account has been modified or closed. These investors should seriously consider a secure VPN service like NordVPN in order to safeguard continued access to their hard earned assets.


Broker For International Investors


There are also brokerage firms that welcome U.S. expat investors. Take a look at our International Stock Brokers article.


Updated on 8/9/2017.



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