Global Banking Hesitation Toward U.S. Clients: Why Many Foreign Banks Balk at Serving U.S. Clients Due to FBAR/FATCA Complexity — and What Americans Can Do
2025-08-15 04:33:44
Learn why some foreign banks avoid U.S. clients and what Americans abroad can do to keep access to banking.
Why This Issue Matters Now
If you’re a U.S. citizen or green card holder living overseas, you might have run into an unexpected problem — some foreign banks simply don’t want your business. Even if you have a perfect credit record, the very fact that you’re a “U.S. person” can make account opening harder. This hesitation isn’t personal; it’s about the complexity and compliance burden caused by two major U.S. laws: FBAR (Foreign Bank Account Report) and FATCA (Foreign Account Tax Compliance Act).
In this article, we’ll break down what’s driving foreign banks to keep their distance, what it means for your finances, and practical steps you can take to secure and maintain your overseas banking options.
What Is FBAR and Why Does It Exist?
FBAR, officially known as FinCEN Form 114, is a reporting requirement for U.S. persons with over $10,000 in aggregate in foreign bank or financial accounts at any point during the year. It’s filed electronically through the Financial Crimes Enforcement Network (FinCEN), separate from your tax return.
The law exists to help the U.S. track offshore accounts and prevent tax evasion. But even for honest taxpayers, it adds an extra compliance step — one that foreign banks have to account for when serving American clients.
The FATCA Factor
While FBAR requires U.S. persons to report their accounts, FATCA flips the spotlight onto the banks themselves. Under FATCA, foreign financial institutions must report information about their U.S. clients directly to the IRS or face steep penalties on U.S.-source payments.
This creates a significant administrative and legal burden for banks, especially smaller institutions that don’t have the resources to maintain FATCA compliance systems. Some banks find it easier to avoid the problem altogether — by not opening accounts for U.S. citizens in the first place.
Who Is Considered a “U.S. Person” for FBAR/FATCA Purposes?
It’s not just passport holders. For FBAR and FATCA, a U.S. person can mean:
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U.S. citizens (including dual citizens)
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Green card holders
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Individuals who meet the substantial presence test
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Certain U.S.-based entities with foreign accounts
This wide net means many people are affected, often without realizing it until they try to open an account abroad.
Why Foreign Banks Sometimes Say “No” to Americans
Several factors drive the reluctance:
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Compliance Costs: FATCA reporting systems are expensive to implement.
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Risk Management: The penalties for non-compliance are severe, so avoiding U.S. clients is a way to reduce risk.
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Extra Due Diligence: Onboarding a U.S. client may require collecting additional forms (like IRS Form W-9) and conducting ongoing monitoring.
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Past Penalties: Some banks have faced multi-million-dollar fines for failing to comply with U.S. rules.
According to a 2022 OECD report, over 20% of smaller foreign financial institutions in certain regions have stopped accepting U.S. clients entirely due to these compliance pressures.
What This Means for Americans Abroad
For U.S. expats, FATCA and FBAR can cause real-world headaches:
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Limited choice of banks or account types
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Higher account fees to cover compliance costs
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Sudden account closures if a bank changes its policies
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Extra paperwork when moving money internationally
As one international tax advisor put it:
“The challenge isn’t that Americans are unwelcome; it’s that the regulatory burden makes it costly for banks to keep them.”
How to File FBAR and Stay Compliant
Even if banking options are limited, staying compliant with U.S. rules is non-negotiable. Here’s the basic FBAR filing process:
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Determine if you meet the $10,000 threshold. Add up all foreign accounts’ highest balances during the year.
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Gather account details: Bank name, address, account number, and maximum balance.
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File online through the BSA E-Filing System by April 15 (with an automatic extension to October 15).
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Keep records for at least 5 years in case of audit.
Full details are available on the official FinCEN FBAR filing page.
Common Mistakes That Trigger Issues
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Forgetting to include small or inactive accounts
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Assuming closed accounts don’t need reporting if they were over the threshold earlier in the year
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Misreporting balances due to currency conversion errors
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Overlooking non-bank assets like certain foreign pensions or investment accounts
Penalties and Risks
Failing to file FBAR can lead to non-willful penalties of up to $10,000 per violation, while willful violations can exceed $100,000 or 50% of the account balance.
Under FATCA, banks that fail to report may face 30% withholding on U.S.-source income, a big motivator behind their caution.
Practical Steps Americans Can Take
If you’re struggling to find banking options abroad:
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Look for larger banks that already have FATCA compliance systems.
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Consider international branches of U.S.-based banks.
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Maintain good records and be ready to provide documentation.
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Work with a tax professional experienced in expat issues to ensure your filings are correct.
Real-Life Example
Sarah, a dual U.S.-UK citizen living in Spain, applied to open an account with a local credit union. Once they learned she was a U.S. citizen, they declined. Instead, she opened an account with a major European bank that already had U.S. reporting processes in place — but she pays a small monthly fee to cover compliance costs.
FAQs
Do I need to file FBAR if my accounts never go over $10,000?
No. The filing requirement kicks in only when your total foreign accounts exceed $10,000 at any time during the year.
Can foreign banks close my account because I’m American?
Yes, in some cases — especially smaller banks that can’t handle FATCA compliance.
Does FBAR cover cryptocurrency wallets?
Not yet, but the Treasury has indicated it plans to include certain digital assets in the future.
How far back can the IRS check FBAR compliance?
The statute of limitations is generally 6 years for FBAR violations.
Key Takeaway
FBAR and FATCA were designed to promote transparency, but they’ve had unintended side effects — namely, making it harder for some Americans to bank abroad. While you can’t change the laws, you can understand the rules, choose banks strategically, and keep your compliance in order. With preparation and the right resources, you can still manage your finances globally without losing access to essential banking services.
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Visual Suggestions:
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Chart showing how FATCA compliance affects banks’ willingness to accept U.S. clients
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Step-by-step infographic of the FBAR filing process
M.Daniyal