What’s the irony here?
It’s an ironic problem. US expats are suffering because of legislation that was specifically aimed at US-domiciled citizens.
Facta and Finra’s ongoing initiatives were not originally aimed at regulating the affairs of US expats, but of rich US citizens hiding money abroad.
In that context, the onerous reporting obligations make perfect sense. Of course the IRS would want to know if a rich US citizen suddenly opened up a series of bank accounts abroad, because his/her motives might, on balance, be viewed as suspicious. But there’s nothing suspicious about a US expat opening a bank account abroad – because the guy’s already abroad! So where else is he going to open a bank account?
The US regulations simply don’t take this difference into account. Which leads to another irony. As a result of the regulation, the expat (whose interests the regulation exists theoretically to protect) can’t get hold of quality financial products abroad (because it’s too risky for companies to do business and fall foul of the regulation).
It’s also ironic that, with it taking 30 hours plus to fill out the IRS form recording a single investment in an index fund (for example), there is now effectively a hefty price tag attached to diversifying a portfolio properly because of the duplication of this form-filling for each purchase. The US government is effectively discouraging its expat investors from doing the right thing — with diversification being a key portfolio strategy option that we cannot, as investors, afford to be without.
