Why are Americans being turned away from Swiss banks?

Why are Americans being turned away from Swiss banks?
Because of the UBS scandal, AMericans in Switzerland can't open an account. Photo by Fabrice Coffrini / AFP
If you are a US citizen living in Switzerland — and even if you have a Swiss passport as well — you know how difficult it is to open a bank account. This is why.

Switzerland is a nation of bankers, but for Americans living here opening an account is a major headache.

“I’ve been ‘bank shopping’ here since I arrived eight months ago, but nobody wants to open an account for me once they find out I am American”, Terry, who is married to a French citizen and lives in the suburbs of Geneva, told The Local.

“I am seriously considering stashing my money under the mattress”, she said.

This scenario is all too familiar to another US citizen, Georges, from Vaud.

Unlike Terry, Georges is a so-called ‘accidental American’ — born in Switzerland of US parents. However, he had never lived in the United States and his links with the country are tenuous at best.

But since Georges had a US passport in addition to the Swiss one, banks saw him as a liability, until he, like tens of thousands of other Americans, decided to give up his citizenship.

Why are Swiss banks keeping US customers at bay?

The heavy-handed regulations are part of a wider US government effort to combat tax evasion.

The backlash has been building up since 2008, when Switzerland’s largest financial institution, UBS, helped wealthy Americans hide billions of dollars in undisclosed offshore accounts to evade taxes. 

In the aftermath of this major scandal, the US government has created a myriad of requirements for other nations to follow to ensure that no foreign account belonging to an American goes untaxed by Uncle Sam.

The most important among them is the Foreign Account Tax Compliance Act (FATCA), which was passed by Congress in 2010 and  went into effect on January 1st, 2014. It requires foreign banks to report to US tax authorities (IRS) all the assets that belong to US citizens – whether living in America or abroad.

Swiss banks are reluctantly complying with the rules because failure to do so can seriously impact their ability to do business in America.

What impact has all this had on US nationals in Switzerland?

As Terry and Georges’ experience shows, getting a Swiss bank to open an account for an American is a very complex process which often ends in failure.

Banks consider every candidate very carefully. Those who have lived in Switzerland a long time, have also a Swiss citizenship and, most importantly, are tax-compliant in the United States, can get a break.

However, an account will be open only under the condition that the customer will provide a copy of their US tax return and other financial statements filed with the IRS.

Are there any changes on the horizon?

There could be negotiations to improve the situation in the near future. In a resolution passed on July 5th, 2018, the European Union unanimously called on member states and the European Commission to go back to the negotiating table with the US government to change how FATCA is enforced. 

However, there doesn’t appear to be any movement on this just yet. 

Though not a member of the EU, Switzerland would likely be part of any deal, as the country has bilateral treaties with the Union.

What options do Americans have now? 

Unfortunately, only drastic ones.

One is to give up their US citizenship, but this can only be an option for people who are certain to never return to live in the US and who also have a Swiss nationality.

The other option is the one chosen by Terry — to stash the money under the mattress.

READ MORE: How to open a bank account in Switzerland

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