Swiss expats caught in middle of US tax conflict

Nearly 76,000 Swiss expats live in the United States Keystone

Switzerland’s banks no longer want American clients but now Swiss citizens living in the United States are finding it hard to keep accounts back home.

Rules and regulations have become more complicated, and fees have gone up as financial institutions pass on the extra costs to their customers.

Swiss expatriates are increasingly irritated by their dealings with banks in their homeland and are venting their frustrations online.

“I have been living in the United States for the past four years and at the end of last year, the Zurich cantonal bank told me all my accounts were being shut down,” said one expat in a forum on swisscommunity.org, the platform for the Swiss abroad. “Now what? How will my clients pay me now?”

“I can no longer make payments via internet. And opening an account with a US or a Swiss bank is next to impossible,” pointed out another. “You have to fill out pages and pages of paperwork and it’s too expensive because you have to pay for every single transaction.”

Another expat in Argentina complained of being discriminated against: “US pressure has led to restrictions for all customers of Swiss banks living abroad, for political and economic reasons.”

Emotional issue

Expatriates are seeing their banking options shrink and are becoming more and more frustrated, according to Martin Naville, chief executive of the Swiss-American Chamber of Commerce.

“It’s scandalous and I understand why the issue is so emotional,” he told swissinfo.ch.

Naville points out that bank accounts for assets are different to current accounts used by clients who have family or an apartment, mortgage or club subscription in Switzerland, for example.

“A current account is useless if you want to avoid tax,” he added. “By closing these accounts, banks are penalising innocent clients and being overly cautious.”

For the Organisation of the Swiss Abroad (OSA), rising bank fees are also a problem.

“We are receiving more and more complaints from people who cannot find somewhere to deposit their money at reasonable conditions,” said Sarah Mastantuoni, head  of the OSA legal service.

The first difficulties appeared when UBS was forced to close its offshore activities in the US. Tensions increased earlier this month when Switzerland’s oldest private bank, Wegelin, was indicted by the US Justice Department for aiding tax fraud.

Raiffeisen, a retail bank mostly active in Switzerland, recently announced the closure of all accounts belonging to US residents.

Alain Girardin, head of Raiffeisen’s operations for French-speaking Switzerland, said that out of “3.5 million clients, 0.01 per cent were based in the US and had close personal ties to Switzerland.”

One rule for all

According to the Swiss Bankers Association, administrative requirements have significantly increased for expatriates. Since the 2001 terrorist attacks, new regulations concerning terrorism, foreign dictatorships and money laundering have been introduced, multiplying the paperwork needed for each account.

The ongoing tax conflict has added to the problems.

“Administrative requirements have increased in all countries that have declared war on tax fraud and are trying to recover money everywhere it has been stashed. Public opinion has changed, and the person who commits fraud is no longer a hero, but a criminal like any other,” said SBA spokeswoman Rebecca Garcia.  

“It’s a real problem for the Swiss living in the US, but there is nothing we can do. After four months residence, they are considered like ordinary US citizens.”

No quick fix

The Swiss government has alerted the American authorities to the problem, but there is little it can do to change matters.

“The decision to keep a client remains with the bank. The administrative requirements to stay clear of trouble with the US tax services cost so much that many institutions prefer not to take someone’s deposit,” said finance ministry spokesman Roland Meier.

The one alternative open to expats is Swiss Post’s PostFinance payment service, but it also has the same requirements and fees as a bank.

“Clients must be able to prove they have paid any taxes due on the funds they want to transfer,” explained PostFinance spokesman Alex Josty. Although he declined to provide figures, Josty said there had not been a notable increase of Swiss customers living in the US.

For Naville, there are no easy solutions.

“There are some banks that provide a limited and specific service for students or workers who only spend two or three years in the US,” he said.

Another option could be to use the address of a close friend or relative in Switzerland to open an account and ask them to manage it, but doing this could land those involved in legal hot water, noted Naville.

Opening a Swiss bank account

There are nearly 400 banks in Switzerland, the three main ones being UBS, Credit Suisse and Raiffeisen.

Any adult or company based in Switzerland or abroad may open a Swiss bank account. However, the legislation of the country of origin must be respected and banks may refuse customers.

The bank must also check the customer’s identity with an official document, for example a passport. It is possible to apply for account by mail, but impossible via internet.

The bank can demand a document stating the origin of any assets being deposited, such as proof of purchase, banking references, etc.

The procedure to open a numbered account is the same as for any other account.

Source: Swiss Bankers Association

(Translated from French by Scott Capper)