Here are three ways to overcome an insidious trick and growing loss of freedom.
The trick is called extraterritorial jurisdiction.
This approach law enforcement first came into my awareness in the 1970s. They started using extraterritorial jurisdiction to turn global financial institutions into unwilling government agents. The initial case I observed was an attack on a Swiss Franc based mutual fund run by a conservative businessman (I recall his name was Harwood). Harwood had created a Swiss mutual fund denominated in Swiss francs. The fund was a good idea. The only problem was that the SEC objected to Americans investing in the fund. They told Harwood to cease and desist and turn over the funds to them. He declined so the SEC told the Swiss Bank to turn over the funds in the fund. The Swiss explained they had no legal authority to do so.
The SEC’s response was to get a US court order and seize funds held by the Swiss Bank in America. They used the US legal system to exert control in other territory outside the US. The idea has expanded since and to such a degree that now most banks outside the USA won’t accept (or even retain) US customers.
The fact that overseas banks are shedding US customers caused a friend to send this note after reading the message Bad Banking News.
Hi Gary, after reading about bad banks and how good Jyske Bank is, it ironic that I have been told that Jyske bank does not want my business any longer because of I presume FATCA regulations.
Here is my reply and a list of ways to grapple with the problems created by extraterritorial jurisdiction.
I wrote: It is shameful that we, the public, have let our leaders do this to us. I have had two 25 year + banking relationships Jyske and my London stock broker both closed my account in the last year.
The problem is worse. My children who were born in England, live in England (one is in Africa) have had many of their accounts closed… just because they inherited a US citizenship from me. My youngest daughter never lived, never schooled and has never worked in the US… yet she has to pay US tax. Many English banks will not allow her to have an account, even though she is also English.
This is because the US says that if an overseas bank accepts a client who is a US person, the bank must comply with various US laws, FACTA being one of them.
There are even more problems that this law enforcement tactic creates.
Many banks and brokers now restrict US non residents (such as Americans living in Ecuador) from having accounts or from buying certain types of securities such as mutual funds in the US. For example Wall Street Journal reported that “Fidelity Investments and other asset managers are telling U.S. clients who live outside the country that they can no longer buy or trade mutual funds in their brokerage accounts”. (1)
The big firms find the compliance too expensive and the number of overseas US clients too small. For example Fidelity’s change will affect about 50,000 accounts, or less than 0.3% of Fidelity’s 20 million accounts.
Americans abroad are being informed by many U.S. banks and brokerage firms that their accounts have been restricted or even closed simply because they live outside the U.S. Banks and brokers include Morgan Stanley, Fidelity, Merrill Lynch and Wells Fargo.
This can put Americans abroad between a rock and a hard spot. US banks won’t open accounts for them but neither will banks in the country where they live.
To make matters even worse, many US banks even restrict US customers with many types of transactions due to excessive federal regulations. This fear extends even to escrow agents who process real estate sales. The federal government has made so many financial transactions felonies that everyone is afraid to act except exactly by the book even if an action makes sense and the regulations do not.
This slow loss of our financial freedom has been taking place at least since the 1970s and is not likely to end soon due to the Pareto Principle, or 20/80 rule. 20% of the population have 80% of the money. These restrictions do not apply to the bulk of voters so no one in Congress will pay attention to a resolution, leaving Americans who live abroad having taxation without representation.
Here are a few steps you can take.
#1: Keep a US address and a US phone. Even though you may be resident elsewhere a US address and utility bill will help you open or keep numerous accounts. Have your mail forwarded.
#2: Use an overseas bank and broker who are willing to deal with all the compliance difficulties. ENR Asset Management in Canada who helps resident and non Americans bank in the US, Switzerland and Austria as well as buy and sell securities through these banks and brokers.
or contact Thomas Fischer at Thomas@enrasset.com
#3: If you have substantial assets (well into seven figures), many overseas banks and brokers that will not accept non resident Americans will open accounts for overseas companies and trusts owned by Americans. The reason for the substantial assets is that the cost of setting up and maintaining such structures is prohibitive for smaller amounts.
The use of extraterritorial jurisdiction is restricting the freedom of all Americans who live and/or bank and invest aboard. The trend is not likely to change soon so become aware of your options if you plan to fall into this category.
Gary
|
No comments:
Post a Comment
Thanks for commenting. Your comments are needed for helping to improve the discussion.