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American Banks to Expat Clients: “We are shutting you down! You have 30 days to liquidate your portfolio!”

The Ultimatum

This threat is not a joke. It is becoming a reality for many US-expats living in Israel. Banks just do not want to have anything to do with non-residents anymore. And this in the end of the day leaves us with a feeling of uncertainty and also can have tax ramifications going forward.

As US expats, we are proud of the fact that we maintain this prized asset – US citizenship, even when relocating to a new locale. This gives us a sense of security and of course allows for easy access when traveling to and from the US, be it for pleasure or business.

However, being US taxpayers definitely complicates things, and we certainly pay a price for maintaining this “asset,” as the US is one of the only countries (the other being Eritrea) which taxes its citizens on income earned abroad.

Some expats like to maintain their investments and portfolios in US-based brokerage accounts. I discussed this in a previous post.

However, as the banking world (and especially US regulators) becomes more and more mired in compliance and regulation requirements, many US banks and brokerage platforms are becoming “enlightened.” What do I mean by that? They are taking a conservative approach specifically towards their US-taxpaying expat contingency. Many large firms are closing their doors to non-residents. I literally mean that they are telling their overseas clients to liquidate their portfolios and move their funds elsewhere.

In some instances, clients have complained of being locked out of their online accounts, when attempting to access them from a foreign IP address! Other clients are restricted from opening new accounts, while living abroad. There are many variations on what recourse clients are facing. The bottom line – a huge “not-welcome” sign is being hoisted by banks for non-residents.

Why? What is creating this policy change? How do we combat this trend?

In one word – Regulation. Expats are now perceived as a compliance headache/risk. For larger banks, who maintain large international investment banking and commercial activity, the risk of exposing these core businesses is not worth maintaining accounts on behalf of expats.

This new reality is pushing the expat community toward seeking alternative banking solutions and, unfortunately, the options have become more limited.

What are the overall ramifications?

There are a few things to think about here.  Firstly, the fact that you are left without knowing how to move forward. You may have a wealth manager taking care of your funds for a long period of time. This individual has built a relationship with you and you genuinely trust him/her.  Now you have to look elsewhere and “start from scratch”.

Secondly, you need to find another place to park your funds that is “friendly” towards non-residents.

And most importantly, you may be forced to liquidate your portfolio causing a major tax event! This is the most disturbing aspect and you must take this point seriously and reach out to a professional who can assist you.

Talk to the experts at Green Peak Advisors about how U.S. expats living in Israel can overcome the challenges of managing their investment portfolios in the US and Israel.