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Why Foreign Banks Are Shunning American Millionaires

New tax reporting rules prompt banks to shun U.S. customers
Why Foreign Banks Are Shunning American Millionaires
Illustration by Sam Island

Affluent Americans need not apply. That’s what some of the world’s largest wealth management firms are saying in anticipation of Washington’s implementation of the Foreign Account Tax Compliance Act, which seeks to prevent tax evasion by Americans with offshore accounts. HSBC Holdings, Deutsche Bank, Bank of Singapore, and DBS Group Holdings all say they have turned away business from U.S. clients. The attitude of American regulators is “Draconian,” says Su Shan Tan, head of private banking at Singapore-based DBS, Southeast Asia’s largest lender. “I don’t open U.S. accounts, period.”

The 2010 law, to be phased in starting on Jan. 1, 2013, will mean additional compliance costs for banks and fewer investment options for U.S. citizens living abroad. Known as Fatca, it requires financial institutions based outside the U.S. to obtain and report information about income and interest payments added to the accounts of American clients. The Internal Revenue Service held a hearing on the rules on May 15 and could change some aspects of the law.