FATCA Making It Harder to Get Money Out of the U.S.

Some people want to keep money outside the U.S. It's getting harder to do that now.

Some countries pass laws that forbid you to take money out of the country and keep it somewhere else. Argentina recently did that. The U.S. doesn't forbid your taking your money elsewhere. But here's an example of how they make it hard to do so anyway: FATCA.

FATCA stands for Foreign Account Tax Compliance Act. This law will be phased in over the next few years.

Banks world-wide have largely accepted the inevitability of Fatca, but they remain concerned about the complexity of the new rules, the difficulties and costs associated with ensuring compliance and the fact that important details aren't clear yet even though some rules related to the law take effect next year.

This law will accelerate a trend that started a few year back. Non-U.S. banks and financial institutions, facing increasing demands by the U.S. government to provide disclosure of accounts owned by U.S. citizens, have already begun to either refuse to open accounts for U.S. citizens or, in some cases, simply closed existing accounts of U.S. citizens. These banks simply don't want to deal with the U.S. government. (They've probably got enough to do dealing with their own governments!)

With FACTA, we will see  fewer and fewer banks accept U.S. citizens as clients. We will also see more and more existing accounts closed.

The effect will be that, while the U.S. government has not actually said you can't take money out of the country, they are creating conditions that make it virtually impossible to do so. Of course, if you're rich, you can still find banks - a dwindling number to be sure - who will take your money. But if you're just a regular schmo, it's going to become impossible, if it isn't already impossible.

While there certainly are instances of people trying to hide money or evade taxes, there are many reasons a U.S. citizen might want to have a bank or investment account in another country. The simplest example is someone who works overseas. 

(I was recently at a meeting with an attorney who wanted to close a foreign trust a family owned simply because of the increased reporting requirements as well as the scrutiny the IRS gives to these accounts. It didn't matter that the trust served a perfectly legitimate purpose in the family's estate plan. And there was certainly no attempt to hide the money or evade taxes.)

How about a situation where a U.S. citizen lives overseas and will be living in a foreign country for a while and wants to buy a home? FACTA will make it hard for that person to obtain a mortgage.

One of those Americans is John E. Roudabush, 37, who works for a U.S. medical-device company in Montreux, Switzerland, and is married to a French woman.

This summer, the couple wanted to buy a home and started looking for a mortgage. Credit Suisse, where the couple banks, turned them down, as did other Swiss banks, "though only a few openly cited my U.S. citizenship as the reason," Mr. Roudabush says.

The noose is tightening. Don't be surprised if more direct restrictions are placed on where you can keep your money.

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