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Ban On US Investors Overseas From Buying Mutual Funds (VIP)
America is the only large economy to tax its citizens on everything they earn anywhere in the world. [The] new law requires banks, funds and other financial institutions around the world to report assets held by American clients or face a ruinous 30% withholding tax.
The law is also having unfortunate unintended consequences. The 7m Americans living abroad now wear a scarlet letter... Many have been rejected by foreign providers of banking services, insurance and mortgages because, given the amount of paperwork needed to satisfy Uncle Sam, American clients are simply too much hassle.
Note: This article is from the "Leaders" section of The Economist, which corresponds to an editorial commentary in "US English".
I hate watching videos, so I don't know the details, but the Patriot Act made it very hard for us expats to buy U.S. mutual funds, at least unless you have a U.S. address. Vanguard would not even let me open an account, and this is going back years.
Kind of makes sense, at least from a fighting moneylaundering point of view.
This is news to me. I knew about the bank regulations. HSBC used to have a good account setup for expats but I have heard that it has been dropped. I guess having a US address is the key.
I don't think this is about money laundering. The ability to control money laundering doesn't depend on where you are or what your address is, and there have been more effective restrictions in place for many years. The basic rule was about securities regulation and taxes. Its now about politics and the risk that Europe will retaliate for what the US is doing to their banks and their secrecy rules.
I was an expat for a long time and never had a problem, but I did have a US address. Funny though, if financial institutions are only paying attention to your address while HP wouldn't let me order a laptop a few years ago because my IP address was outside the US and I wanted to buy it from the US website with a US credit card (fraud risk), then something's wrong. Maybe this will change now or eventually, but its really a shame that a bunch of hard-working, tax paying individuals will be penalized because regulators can't keep up with the real world and politicians have never been above tit for tat.
Were not these new regulations some sort of retaliation against the "filthy rich" who decided to move their money offshore to avoid taxation? It seems to me this was a populist move by the 0bama admin. The ever growing apathy against wealthy people made it a no brainer for the dems. Of course, these rules end up broad based and target way beyond the original intent.
When I tried to open an account at Vanguard and they said they couldn't, the phone rep said it was because of the Patriot Act. Though of course he could have been misinformed.
Hopefully that was the case. In this day and age when most fund families conduct business and communications over the internet it should be a moot point. They all ask for a SS number which should clear up any notions that one is not a citizen.
Hopefully that was the case. In this day and age when most fund families conduct business and communications over the internet it should be a moot point. They all ask for a SS number which should clear up any notions that one is not a citizen.
Sure enough! But then, remember: the various fund families do not deal with you directly. It's through an intermediary they hire, like BNY Mellon or one of the others. If you ask them about something that's not on their own FAQ list, they're just clueless, and they GUESS at an answer for you. It's not just with funds and investing these days, but everywhere.
The law of unintended consequences!! Most organizations in the world both private and public find it difficult to punish those who break the rules without punishing all those who follow the rules or at least the intent of the rules.
I think most are. The trick is whether or not you have a US address. That would be the key for any future expats. A US address and a US bank account. I've had no issues with Schwab. Expat for six years now.
Edit: I should add that filing a tax return would be another factor.
Thanks JohnChisum, but it may just be a work around, as the FIDO policy states "As of August 1, 2014 customers residing outside the United States will not be allowed to purchase shares of mutual funds."
Comments
Excerpts from the article: Note: This article is from the "Leaders" section of The Economist, which corresponds to an editorial commentary in "US English".
Kind of makes sense, at least from a fighting moneylaundering point of view.
I was an expat for a long time and never had a problem, but I did have a US address. Funny though, if financial institutions are only paying attention to your address while HP wouldn't let me order a laptop a few years ago because my IP address was outside the US and I wanted to buy it from the US website with a US credit card (fraud risk), then something's wrong. Maybe this will change now or eventually, but its really a shame that a bunch of hard-working, tax paying individuals will be penalized because regulators can't keep up with the real world and politicians have never been above tit for tat.
Edit: I should add that filing a tax return would be another factor.
August 1, 2014 customers residing outside the United States will not be allowed to purchase shares of mutual funds."
http://personal.fidelity.com/accounts/services/FAQsforInvestors_Living_Outside_the_US.pdf