US millionaires shunned

GO AWAY, American millionaires. That's what some of the world's largest wealth-management firms are saying ahead of Washington's implementation of the Foreign Account Tax Compliance Act (Fatcta) which seeks to prevent tax evasion by Americans with offshore accounts.

HSBC Holdings plc, Deutsche Bank AG, Bank of Singapore and DBS Group Holdings all say they have turned away business.

"I don't open US accounts, period," said Su Shan Tan, head of private banking at Singapore-based DBS who described regulatory attitudes toward US clients as "draconian."

The 2010 law, to be phased in starting January 1, 2013, requires financial institutions based outside the US to obtain and report information about income and interest payments accrued to the accounts of American clients. It means additional compliance costs for banks and fewer investment options and advisers for all US citizens living abroad, which could affect their ability to generate returns.

The almost 400 pages of proposed rules issued by the US Internal Revenue Service in February create "unnecessary burdens and costs," the Institute of International Bankers and the European Banking Federation said in an April 30 letter to the IRS.The IRS plans to hold a hearing May 15 and could amend how and when some aspects of the rules are implemented. It can't rescind the law.

The government needs to be tougher on offshore tax crimes than it has been, said US Representative Richard Neal, a Masachusetts Democrat.

Fatca, introduced after Zurich-based UBS AG said in 2009 that it aided tax evasion by Americans and agreed to pay US$780 million (RM2.3 billion) to avoid prosecution, is helping to improve banking transparency, he said.

UBS, the world's biggest non-US private bank according to London-based industry tracker Scorpio Partnership Ltd, said in 2008 it would discontinue offshore accounts for US citizens. The firm now refers them to its wealth-management offices in the US, or to its Swiss Financial Advisers unit, which complies with US and Swiss regulations, said a spokesman for UBS.

The firm continues to provide Americans outside the US with services other than securities investments.

Bank of Singapore, the private-banking arm of Oversea-Chinese Banking Corp, ranked strongest in the world for the last two years by Bloomberg Markets magazine, has turned away millions of dollars from Americans because it doesn't want to deal with the regulatory hassle, according to chief executive officer Renato de Guzman.

"It's too complex, too challenging," de Guzman said in an interview. "You probably should have a dedicated team to handle them or to understand what can be done or what cannot be done."

At industry meetings he attends in Singapore, not accepting US clients is "quite a prevailing sentiment," de Guzman said.

"We have enough business in Asia, so we don't want to make our lives too difficult."

HSBC decided last July that it would no longer offer wealth-management services to Americans from locations outside their home country after tax authorities stepped up a probe of the London-based bank's US clients.

Americans would be "better served" by private bankers in the US, Goh Kong Aik, a spokesman for the firm in Singapore, said.

Deutsche Bank said it terminated securities accounts held abroad by people with US residency as of mid-2011. The action didn't include checking or savings accounts and didn't affect citizens living outside the US.

Spokesmen for Credit Suisse, France's BNP Paribas SA and Amsterdam-based ABN Amro Bank NV, also among the top 10 non-US global wealth managers, said their banks are studying the issue and haven't decided what to do with American account holders.

"Bank accounts, investment accounts, mortgages and insurance policies are being refused to American clients, and those with accounts are seeing them closed or have been threatened with closure," Marylouise Serrato, executive director of American Citizens Abroad, a Geneva-based organisation said.

US citizens who live in countries that aren't served by US banks may find themselves unable to bank at all, and implementation of the law in its current form could cause collateral damage to American businesses abroad, she said.

"Americans either will not be allowed to enter into international partnerships or live and work overseas, and will be replaced by foreign nationals who do not have these limitations," Serrato wrote. "The extensive reporting requirements of Fatca will be destructive to those who wish to do business internationally as well as to those Americans who are legitimately living and working overseas."

That view is shared by Richard L. Weisman, Hong Kong-based head of law firm Baker & McKenzie LLP's global tax practice.

"US expatriates already face severe US tax rules related to their non-US income and investments," Weisman said. "Fatca will increase the extent to which they are turned away by non-US financial institutions." Bloomberg