Foreign Bank Accounts and US citizens

[MrPeabody]

I had a Dutch bank account with Fortis, but Fortis recently merged with ABN-AMRO where my accounts were transfered. ABN-AMRO informed me that I am under a special category for US persons, and one of the implications is that I am not allowed to invest in any securities or investment products with them. I was allowed to do this with Fortis Bank. They informed me of this under a heading "US legislation and your products". So, apparently, the US is making legislation to restrict the flow of funds from the US and putting a lot of restrictions on US citizens which intimidates foreign banks.

[Think Different]

Yes, the US government is making it increasingly hard for US citizens to have overseas bank accounts, including those Americans who live and work there, legitimately. It's all about the US government having more control over you and your money. They hide behind the "Patriot Act" disguise, but it reality, it's about power and control of your money. If they suddenly have a budget shortfall, oops...you're money or account can simply be shut down and confiscated without warning. Most banks overseas are now so gun-shy of the bullying from the US government, that they'd rather just not do business with Americans at all. Another big argument for getting a second citizenship.

If you think about it, when it comes to money, taxes, congressional representation, etc. US expats are some of the most maligned and mistreated citizens the US has. And there are 7 million non-military US expats. That's a pretty significant number, if you ask me.

[ladislav]

Well, if you live or work in a foreign country then opening a bank account there is really no big deal. I have worked in Japan, Thailand, Kuwait and Oman and as soon as you get your work visa, just open the savings account. In the Philippines, if you are on a tourist visa and you get a letter from your landlord with a lease agreement that you are renting there, you can open an account at Banco de Oro. Also, of you stay there for over 59 days you have to apply for a temporary resident card and it is $50 and then they give it to you and you can open a bank account anywhere.
The restrictions are on mutual funds/stocks. What the US gov't is afraid of is different big wheeler dealers investing in foreign mutual funds and not paying taxes. But I do not think it would be aimed at some pitiful ESL teacher who wants a payroll/savings account. Also, if your total bank accounts overseas go above 10K at any time, you have to file a form with the US Dept. of Treasury. And then it is all above board.
The difficulty in most countries is for tourists who are just passing through.

[Rock]

This rejection of 'US persons' has been going on for several years. It gained a lot of momentum in 2008 when UBS was prosecuted by DOJ for helping Americans hide money offshore and evade taxes. Since then, many big European and Asian banks have been shunning US clients, requiring that they open accounts directly at the US branch, or heavily restricting the products and services they allow such clients to invest in. My Swiss bank actually kicked me out last year - gave me 6 months to liquidate my investments, transfer the funds elsewhere, and permanently close the accounts. As far as I know, no other first world citizens have to deal with this crap, yet. And their governments still don't tax worldwide income of their expat nationals like the US.

There are still many ways to get your money out and invest in non-US stocks, bonds, and funds. Many forex brokers these days offer such products and do not fall under the stringent regulations of banks in most countries. For exotic currency exposure such as Chinese Yuan, Thai Baht, or Brazilian Real, you can still open a commercial bank account in country and transfer your funds into local currency deposits or bank approved doestic investments.

One strategy is to divide your funds - those you wish to invest in the US - US based stocks, bonds, funds, derivatives, real estate, etc. and those you wish to invest overseas.

With the US stuff, you can do it through a domestic broker like Schwab and/or an options and futures company.

With the overseas stuff, find a good international FX broker like Singapore branch of Saxo and also look for on-the-ground opportunities country by country. Don't ever sign a W8-BEN, insist on the W-9 if they ask you to sign anything from IRS. So far, its totally legal to invest overseas through foreign instutions offering foreign products as long as you disclose such investments to Treasury and declare incomes + gains from them on your US taxes.

[keius]

Open an account in a country that doesn't bend over for the US gov't. China is ideal for that. I opened an account with a major Chinese bank couple years ago. All it took was my passport...on a 1 month travel visa. Interest rates for savings and cd's are insanely higher than US rates. Dumped a couple thousand greenbacks in....and got my atm card right away.

The one reservation i have is their security practices....they really are sorta lax. The things my wife (gf at the time) managed to do with my account were sorta nuts. All she needed was my bank book. She even closed one of my accounts once...while i was in the states...and my accounts only had my name on them.

I don't think big brother can monitor Chinese bank accounts

[globetrotter]

China. Russia. Brasil.

Nations that want to think for themselves.

[Rock]

Open an account in a country that doesn't bend over for the US gov't. China is ideal for that. I opened an account with a major Chinese bank couple years ago. All it took was my passport...on a 1 month travel visa. Interest rates for savings and cd's are insanely higher than US rates. Dumped a couple thousand greenbacks in....and got my atm card right away.

The one reservation i have is their security practices....they really are sorta lax. The things my wife (gf at the time) managed to do with my account were sorta nuts. All she needed was my bank book. She even closed one of my accounts once...while i was in the states...and my accounts only had my name on them.

I don't think big brother can monitor Chinese bank accounts

Please have a look at my thread on this topic: viewtopic.php?t=9031&highlight=

As I mentioned in the thread, if your wife is a PRC national, she can easily locate and sue for half should you two ever divorce. If she renounced her PRC citizenship to become an American, she still might be able to use her local contacts and knowledge to get her half. If you keep your funds in third party countries (outside of US or China), its much more difficult for her to go after them, especially if you live outside the US.

I'm a bit surprised at what you say about security practices. Which bank did you open your account with and in what city? With the two banks I dealt with - BOC and Communications, I found their practices to be quite strict - requiring to see my passport, a security codes and my signature just for minor transactions.

BTW, US interest rates have been ticking-up as of late. 30 yr. treasury yield is back up to almost 4.5%.

[keius]

I recall doing a 3 year cd with an interest rate of about 5%...2 years ago?
The rate was much better for longer terms. Can't really beat that

Anyway, when i was in China, the accounts were as much a test for her as it was for me to just have safe access to cash. If i got ripped, it'd only be a couple thousand US and i'd be better off.

Right now, i can trust her with everything, and she knows where all my assets are and how to get to them. I prefer it that way in case something happens to me. She could theoretically take everything and bail BUT like i said, we've got a great relationship ( minus the nagging ). If i didn't trust her, we wouldn't be married right now

As for which bank, I had accounts with bank of china and China ...construction or agriculture or something. I recall them being fanatical about paperwork and nitpicky when i first opened my account. I had wanted a joint account but they wouldn't allow it for some technical reason. AFTER it was opened, their practices were fairly lax. I think there might be differences depending on which city you deal in. And it was Taishan btw. After opening the accounts, i let her take care of everything concerning them. They never bothered verifying anything even once with her.

One thing that pisses me off concerning the banks....the incredible number of fake bills you get from ATM's in China (or cities i stayed at), compared to other counties that is....

[Rock]

I recall doing a 3 year cd with an interest rate of about 5%...2 years ago?
The rate was much better for longer terms. Can't really beat that

Anyway, when i was in China, the accounts were as much a test for her as it was for me to just have safe access to cash. If i got ripped, it'd only be a couple thousand US and i'd be better off.

Right now, i can trust her with everything, and she knows where all my assets are and how to get to them. I prefer it that way in case something happens to me. She could theoretically take everything and bail BUT like i said, we've got a great relationship ( minus the nagging ). If i didn't trust her, we wouldn't be married right now

As for which bank, I had accounts with bank of china and China ...construction or agriculture or something. I recall them being fanatical about paperwork and nitpicky when i first opened my account. I had wanted a joint account but they wouldn't allow it for some technical reason. AFTER it was opened, their practices were fairly lax. I think there might be differences depending on which city you deal in. And it was Taishan btw. After opening the accounts, i let her take care of everything concerning them. They never bothered verifying anything even once with her.

One thing that pisses me off concerning the banks....the incredible number of fake bills you get from ATM's in China (or cities i stayed at), compared to other counties that is....

1. I'm glad to hear another account of a westerner/ABC finding a girl from China that he can fully trust. I know of several guys with Chinese girls who also seem very trustworthy. I hope these girls never disappoint. As for the nagging, perhaps an enterprising Chinese who speaks fluent English and lives in an area of the States popular with such mixed couples should open a nag management class for the men, lol. Remember, the nagging is their way of showing love. Long term husbands usually develop coping methods to tune it out while calmly parroting reflexive phrases such as OK, yes, I understand, etc. Don't fall into the trap of nagging back at her. That is not being a man. You should only get visibly upset about very big things.

2. Interest rates change over time and Chinese PRC CD rates are set by Central Bank and uniform across all banks and financial institutions countrywide. A couple months ago, they were raised but not even close to the level (for 3 year) that you mention.

3. 2 years ago, you could have actually done much better yield wise than with Chinese CDs. Very safe A rated long corporate bonds such as Hutchison Whampoa in Hong Kong, DBS bank in Singapore, and Singtel also in Singapore had liquid issues with yield to maturities of 10-12%. Today these same bonds only yield around 5% as their prices skyrocketed last year. You could also have generated 15-18% South African Rand or Turkish Lira CDs just when these currencies were opportunistically depressed. Since then, the yields have collapsed into single digits and the currencies have appreciated around 50% against the US$. 2008/09 was actually a very great opportunity to make money in several non-US fixed income and CD markets.

[Contrarian Expatriate]

Well, if you live or work in a foreign country then opening a bank account there is really no big deal. I have worked in Japan, Thailand, Kuwait and Oman and as soon as you get your work visa, just open the savings account. In the Philippines, if you are on a tourist visa and you get a letter from your landlord with a lease agreement that you are renting there, you can open an account at Banco de Oro. Also, of you stay there for over 59 days you have to apply for a temporary resident card and it is $50 and then they give it to you and you can open a bank account anywhere.
The restrictions are on mutual funds/stocks. What the US gov't is afraid of is different big wheeler dealers investing in foreign mutual funds and not paying taxes. But I do not think it would be aimed at some pitiful ESL teacher who wants a payroll/savings account. Also, if your total bank accounts overseas go above 10K at any time, you have to file a form with the US Dept. of Treasury. And then it is all above board.
The difficulty in most countries is for tourists who are just passing through.

That is accurate, but in addition to the yearly reporting via the US Dept. of Treasury FBAR form (Foreign Bank Account Reporting), you must also check the appropriate box on your US tax return to declare that you have foreign bank accounts AND you must pay US and host country taxes on the interest income that your foreign account(s) generates.

I am sick and tired of the 1% interest rates in US banks and I am in the process of choosing banks that do not impose taxes on bank interest and those that offer US dollar accounts and offer CD's that pay upwards of 10% per year. That is a better rate of return than the US stock market (long term) and if all I have to do is file a yearly form, check boxes on my tax form, and pay 15% of my taxes to the IRS, I'm all over that!!!!!!

[Rock]

Well, if you live or work in a foreign country then opening a bank account there is really no big deal. I have worked in Japan, Thailand, Kuwait and Oman and as soon as you get your work visa, just open the savings account. In the Philippines, if you are on a tourist visa and you get a letter from your landlord with a lease agreement that you are renting there, you can open an account at Banco de Oro. Also, of you stay there for over 59 days you have to apply for a temporary resident card and it is $50 and then they give it to you and you can open a bank account anywhere.
The restrictions are on mutual funds/stocks. What the US gov't is afraid of is different big wheeler dealers investing in foreign mutual funds and not paying taxes. But I do not think it would be aimed at some pitiful ESL teacher who wants a payroll/savings account. Also, if your total bank accounts overseas go above 10K at any time, you have to file a form with the US Dept. of Treasury. And then it is all above board.
The difficulty in most countries is for tourists who are just passing through.

That is accurate, but in addition to the yearly reporting via the US Dept. of Treasury FBAR form (Foreign Bank Account Reporting), you must also check the appropriate box on your US tax return to declare that you have foreign bank accounts AND you must pay US and host country taxes on the interest income that your foreign account(s) generates.

I am sick and tired of the 1% interest rates in US banks and I am in the process of choosing banks that do not impose taxes on bank interest and those that offer US dollar accounts and offer CD's that pay upwards of 10% per year. That is a better rate of return than the US stock market (long term) and if all I have to do is file a yearly form, check boxes on my tax form, and pay 15% of my taxes to the IRS, I'm all over that!!!!!!

Host country taxes are usually not an issue. Even in cases you were taxed or had money with-held by the foreign government, IRS would give you full credit for that.

Where on the planet can you find a US$ denominated CD which pays anything close to 10%? You'd be very lucky to get 4-5% and it would have to be on something very long term. If you find something much better than that online, its almost surely a scam. Don't even think about putting money in Mexican banks unless you don't mind being involved indirectly with loans to drug cartels.

[Contrarian Expatriate]

Well, if you live or work in a foreign country then opening a bank account there is really no big deal. I have worked in Japan, Thailand, Kuwait and Oman and as soon as you get your work visa, just open the savings account. In the Philippines, if you are on a tourist visa and you get a letter from your landlord with a lease agreement that you are renting there, you can open an account at Banco de Oro. Also, of you stay there for over 59 days you have to apply for a temporary resident card and it is $50 and then they give it to you and you can open a bank account anywhere.
The restrictions are on mutual funds/stocks. What the US gov't is afraid of is different big wheeler dealers investing in foreign mutual funds and not paying taxes. But I do not think it would be aimed at some pitiful ESL teacher who wants a payroll/savings account. Also, if your total bank accounts overseas go above 10K at any time, you have to file a form with the US Dept. of Treasury. And then it is all above board.
The difficulty in most countries is for tourists who are just passing through.

That is accurate, but in addition to the yearly reporting via the US Dept. of Treasury FBAR form (Foreign Bank Account Reporting), you must also check the appropriate box on your US tax return to declare that you have foreign bank accounts AND you must pay US and host country taxes on the interest income that your foreign account(s) generates.

I am sick and tired of the 1% interest rates in US banks and I am in the process of choosing banks that do not impose taxes on bank interest and those that offer US dollar accounts and offer CD's that pay upwards of 10% per year. That is a better rate of return than the US stock market (long term) and if all I have to do is file a yearly form, check boxes on my tax form, and pay 15% of my taxes to the IRS, I'm all over that!!!!!!

Host country taxes are usually not an issue. Even in cases you were taxed or had money with-held by the foreign government, IRS would give you full credit for that.

Where on the planet can you find a US$ denominated CD which pays anything close to 10%? You'd be very lucky to get 4-5% and it would have to be on something very long term. If you find something much better than that online, its almost surely a scam. Don't even think about putting money in Mexican banks unless you don't mind being involved indirectly with loans to drug cartels.

There are several central European (Non-Euro Zone) and growth-oriented Asian countries that pay that much and Fitch, S&P, and Moody's rates them from B to BB+ which is a good bet if you ask me. If you get your accounts in the local currency, the rates increase to 13 and 14 percent. I do not like currency risk associated with that so I will get one in USD and one account in Euros. American banks have been in the BB rating zone a few times in the past few decades, not that our banks are worth using as a yardstick given their reckless mortgage behavior.

It takes a lot of research and familiarity with the country to have the confidence to bank there.

There are risks to consider in these places, but that's why the interest rate is comparatively high. I don't like my cash sitting idly on the sidelines in the US, so I will open two accounts abroad and just file my paperwork.

[Rock]

Well, if you live or work in a foreign country then opening a bank account there is really no big deal. I have worked in Japan, Thailand, Kuwait and Oman and as soon as you get your work visa, just open the savings account. In the Philippines, if you are on a tourist visa and you get a letter from your landlord with a lease agreement that you are renting there, you can open an account at Banco de Oro. Also, of you stay there for over 59 days you have to apply for a temporary resident card and it is $50 and then they give it to you and you can open a bank account anywhere.
The restrictions are on mutual funds/stocks. What the US gov't is afraid of is different big wheeler dealers investing in foreign mutual funds and not paying taxes. But I do not think it would be aimed at some pitiful ESL teacher who wants a payroll/savings account. Also, if your total bank accounts overseas go above 10K at any time, you have to file a form with the US Dept. of Treasury. And then it is all above board.
The difficulty in most countries is for tourists who are just passing through.

That is accurate, but in addition to the yearly reporting via the US Dept. of Treasury FBAR form (Foreign Bank Account Reporting), you must also check the appropriate box on your US tax return to declare that you have foreign bank accounts AND you must pay US and host country taxes on the interest income that your foreign account(s) generates.

I am sick and tired of the 1% interest rates in US banks and I am in the process of choosing banks that do not impose taxes on bank interest and those that offer US dollar accounts and offer CD's that pay upwards of 10% per year. That is a better rate of return than the US stock market (long term) and if all I have to do is file a yearly form, check boxes on my tax form, and pay 15% of my taxes to the IRS, I'm all over that!!!!!!

Host country taxes are usually not an issue. Even in cases you were taxed or had money with-held by the foreign government, IRS would give you full credit for that.

Where on the planet can you find a US$ denominated CD which pays anything close to 10%? You'd be very lucky to get 4-5% and it would have to be on something very long term. If you find something much better than that online, its almost surely a scam. Don't even think about putting money in Mexican banks unless you don't mind being involved indirectly with loans to drug cartels.

There are several central European (Non-Euro Zone) and growth-oriented Asian countries that pay that much and Fitch, S&P, and Moody's rates them from B to BB+ which is a good bet if you ask me. If you get your accounts in the local currency, the rates increase to 13 and 14 percent. I do not like currency risk associated with that so I will get one in USD and one account in Euros. American banks have been in the BB rating zone a few times in the past few decades, not that our banks are worth using as a yardstick given their reckless mortgage behavior.

It takes a lot of research and familiarity with the country to have the confidence to bank there.

There are risks to consider in these places, but that's why the interest rate is comparatively high. I don't like my cash sitting idly on the sidelines in the US, so I will open two accounts abroad and just file my paperwork.

1. I don't think there is currently any country in Asia offering USD CDs of any duration yielding over 4-5%. I'd be interested to find out which central European countries do that. Are you sure you don't mean CP (commercial paper) instead of CDs? Of course sovereign debt yields in Greece is well into teens now and pretty high for the other suspect Eurozone countries. But buying into that would be like buying Argentina a decade or so ago.

2. Also keep in mind BBB is the lowest so-called investment grade rating issued by S&P. Anything below that is junk status. You can get exposure to such lower rated corporate bonds (high yielding) via USD high yield bond funds, the most popular of which are traded on NYSE or other world stock markets. These are currently yielding around 8% and some of the risk is mitigated since they are well diversified within that asset class (no more than 2% or so in any one bond).

3. As far as local currency products are concerned, the only high yielders I'm aware of is South African Rand, Turkish Lira and to a lessor extent Brazilian Real. Fundamentals are favoring US$ strength now and these are volatile currencies so investing in any of them would be quite risky. A few years ago, Icelandic Krona was yielding high teens and as many expected, it collapsed under the weight of that burden and the high amount of leverage used by their central bank. Given the European situation and potential contagion risk, I would stay away from any currency west of Russia.

4. One of the best deals at the moment is to open a Chinese RMB account and buy guaranteed investment products at certain banks. You can easily get 5-5.5% yield on these and the Chinese Yuan should continue appreciating against USD even if it continues to strengthen against most other world currencies. China is battling inflation now and has jacked rates up. If you combine the yield and currency appreciation, you're likely to get 7-11% per annum in US$ terms on such investments.