US Expats Relinquish Passports As FATCA Creates “Black Hole”

Natasha Taghavi

13 August 2013

Millions of US expats have given up their passports due to a “financial advice black hole” stemming from the Foreign Account Tax Compliance act, according to UK-based advisory group deVere.

The deVere Group follows official US figures revealing that the number of Americans renouncing their US citizenship has increased six-fold in the second quarter of 2013, compared to a year earlier, as Washington prepares to implement stricter asset reporting regulations under FATCA.

FATCA, dubbed by its critics as “the worst law most Americans have never heard of” and reportedly to come into effect on July 1, 2014, will require all non-US financial institutions in the world to disclose the financial activities of American clients directly to the Internal Revenue Service, or face hefty sanctions, the firm said in a statement.

According to Federal Register data, 1,131 people gave up their US passports at American embassies in the year to June. Only 189 US nationalities were renounced by expats the year prior. There are an estimated seven million American citizens residing outside the US.

“As the FATCA deadline draws closer a growing number of non-US banks and wealth managers have been shutting the door on Americans outside the US because servicing them in a ‘FATCA-compliant’ manner is deemed too onerous and too costly. As a result, more and more US expats are finding themselves abandoned in a financial advice black hole,” said Nigel Green, the deVere Group founder and chief executive.

“As ‘the FATCA era’ moves closer, I would expect the number of Americans giving up their US citizenship to soar – not only so as they can access financial advice and carry out day-to-day banking procedures in their country of residence, but also because there is a developing sense of frustration around the FATCA concept itself,” added Green.

Last month, deVere became the launch brokerage for a new life bond aimed at Germany’s expatriate market – a product which its issuer, STM life, says offers significant tax advantages and wealth planning opportunities for German residents.

A number of firms, such as Royal Bank of Canada and London & Capital, continue to provide expat US citizens in countries such as the UK with access to financial services as part of a specialist offering.