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US institutions to expats: 'Take your retirement account elsewhere – now'

June 25, 2013

First American expatriates were told that their bank accounts weren’t welcome, either in the US or in their new countries of residence, because of the growing hassles and expense banks have to deal with when they have American citizens as clients.

Now, it is emerging, Americans’ tax-deferred retirement accounts – many of which were set up decades ago, and never touched since – are also increasingly unwanted by US financial institutions, unless these accounts are of significant size.

The reason, according to a US-based adviser who specialises in helping American expatriates, is because the companies that manage these Individual Retirement Accounts (IRAs), Keogh Accounts and 401(k) plans have become increasingly concerned about “know your customer (KYC) rules” that were first introduced in the US in 2003.

“The legal department of banks are looking at these rules and realising that it is impossible to ‘know’ your client if he or she lives outside the US,” says David Kuenzi, whose Madison, Wisconsin-based company, Thun Financial, has helped “scores” of expat Americans over the last few years move their US retirement accounts to new, US institutional custodians after they were told they had to.

However, he adds, “for big enough accounts – say, $500,000 or more – the US banks can, and will, go the distance to meet the KYC rules, and get to ‘know’ their customer. But not for less”.

Institutions that are reported to have been contacting clients who no longer live in the US and telling them they must move their retirement accounts elsewhere include Merrill Lynch, Morgan Stanley, PNC Bank, Vanguard and Fidelity.

American Citizens Abroad, a Geneva-based advocacy organisation, said it could not independently verify reports that expats had been asked to close or move retirement accounts, but said it could confirm hearing from some “who have been rejected for accounts or had limitations put on accounts held by Fidelity, Scottrade, Sharebuilder, ETrade and TD Ameritrade”.

The organisation has struggled to get much traction on the issue, it added, because American legislators “throw it back at the private banks/brokerage firms, and they in turn quote corporate policy”.

A spokesperson for the Washington-based Financial Industry Regulatory Authority (FINRA), which exists to oversee investor protection and market integrity in the US brokerage industry, said the organisation had not yet received “a whole lot in the way of complaints on this issue”, and could give no reason why this might be, unless the problem was not significant. Others said few expatriates may be aware that FINRA might be able to help them.

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The Pensioneer Trustee Company (Guernsey) Limited is licensed by the Guernsey Financial Services Commission under The Regulation of Fiduciaries, Administration Businesses and Company Directors, etc. (Bailiwick of Guernsey) Law, 2000 and subject to The Pension Licensees (Conduct of Business) & Domestic and International Pension Scheme and Gratuity Scheme Rules (No.2) 2017.