The source told International Adviser that in July last year Merrill Lynch notified Americans based abroad to close all accounts on the bank’s flagship platform by the beginning of this month.
“Merrill Lynch went through a specific exercise over the last 15 months or so notifying US expats that they needed to move their accounts off their platform by October 2016. We saw UK residents be affected by this but it is possible that it was part of a wider expat exercise.”
The source added that the firm has also seen other US heavyweights such as Fidelity and Morgan Stanley either moving people off their platforms or restricting the types of investments that can be held within the accounts.
“With the other brokers [Fidelity and Morgan Stanley], in a few instances we have seen taxable accounts for UK residents be closed but what we have seen to be more common is restrictions placed on further purchases of certain mutual funds for individuals living outside of the US (mutual fund companies have their own set of requirements).
“ETFs and individual shares seem to remain unaffected,” they said.
Fatca
Under Fatca regulations, US expats investing in foreign mutual funds pay huge taxes that don’t apply to US-domiciled funds.
Changes introduced to Foreign Account Tax Compliance Act (Fatca) in July 2014 require foreign financial institutions (FFIs) from around the world to report the finances of all their American clients – around six to eight million of whom live permanently abroad – to US tax authorities.
Merrill Lynch is the latest investment provider to pull its services from US expats due to the costs and complexities of complying with punishing reporting requirements.
It comes as on Thursday, the US ambassador to Switzerland, Suzan LeVine, sent a letter of complaint to a number of Swiss banks, blasting them for closing the accounts of US citizens and turning away new expat clients, according to reports by Swiss newspaper Handelszeitung.
The source described the trend as a “consistent problem for expats” over the last seven or eight years.
Generali in UAE
Earlier this month, the UAE unit of Italian insurer Generali confirmed that it was no longer accepting US clients for its savings and investments business.
“It’s simply too expensive (and potentially ruinous, in the event of an accidental breach of procedure) to have US clients,” Vince Truong, partner at Dubai-headquartered financial planners Holborn Assets told IA at the time.
Charles Schwab
Meanwhile, US brokerage Charles Schwab admitted it has told some of its clients that, going forward, they will only be able to liquidate investments in their accounts and not reinvest the proceeds.
A spokesperson for the company said the action has been taken to “comply with local regulations.”
Earlier this month Schwab confirmed to International Adviser that it had suspended US clients in the UAE from new trades, pending possible account closure.
Tom Zachystal, president of Individual Asset Management, a US registered investment adviser, wrote in in a recent piece for online publisher ExpatFocus that Schwab had sent letters to US citizens living in New Zealand, Dominican Republic, South Africa, and South Korea telling them about similar changes.
