Banking for US Persons Abroad: FATCA, FBAR, and Keeping Your Accounts Open

No other major country imposes the banking burden on its overseas citizens that the United States does. US citizenship-based taxation — unique among developed nations — means that an American living in Cyprus, the UAE, or Thailand is required to report their worldwide income to the IRS, file annual Foreign Bank Account Reports (FBAR) on any foreign accounts, and navigate a compliance framework that many international banks find too costly to support. The result: US persons are routinely denied bank accounts, investment accounts, and financial services that non-US nationals can access without difficulty.

This guide explains the key obligations, the practical banking challenges, and the strategies HNW US persons living internationally use to manage their financial affairs.

Citizenship-Based Taxation: The Foundation of the Problem

Most countries tax residents on income earned within the country or remitted to it. The United States taxes its citizens and permanent residents (green card holders) on worldwide income regardless of where they live. A US citizen who has lived in Singapore for 20 years, has no US-source income, and has not set foot in the US for a decade is still required to file a US tax return annually.

This has significant implications beyond the tax itself:

• Any interest, dividends, capital gains, rental income, or business profits earned anywhere in the world must be declared to the IRS
• Foreign pensions (including UK ISAs, which the IRS does not recognise as tax-exempt) are taxable by the US
• Foreign mutual funds and ETFs held outside the US are likely Passive Foreign Investment Companies (PFICs), subject to punitive tax treatment
• A US person earning income that has already been taxed locally must claim the Foreign Tax Credit (FTC) or Foreign Earned Income Exclusion (FEIE) to avoid double taxation

The result is that US persons living abroad face meaningful compliance costs — a specialist US expat tax accountant for a moderately complex return costs £2,000-£5,000 per year — and must constantly evaluate the US tax implications of normal financial decisions that non-US nationals make without concern.

FATCA: Why Many Banks Have Stopped Serving US Persons

The Foreign Account Tax Compliance Act (FATCA), signed into law in 2010 and progressively implemented from 2014, requires all non-US financial institutions to:

• Identify accounts held by US persons (or entities controlled by US persons)
• Report those accounts annually to the IRS (via the institution's domestic tax authority, under Intergovernmental Agreements)
• Withhold 30% of certain US-source payments made to non-compliant institutions

The compliance burden is significant. For a small Swiss private bank with a hundred US clients out of a thousand clients, the cost of maintaining FATCA compliance infrastructure may not be worth the revenue from those clients. The simpler commercial decision is to close US client accounts.

Since FATCA's implementation, hundreds of European and offshore banks have stopped accepting US person clients or have closed existing US person accounts. The problem is most acute in:

• Small and mid-size European private banks
• Offshore banks in Switzerland, Channel Islands, Isle of Man that lack large US-person customer bases
• Banks in jurisdictions that have signed IGAs on strict terms

Major global banks — HSBC, Citi, Barclays — maintain FATCA compliance infrastructure because the scale of their US-person client base makes it worthwhile.

FBAR: The Foreign Bank Account Reporting Obligation

Any US person (citizen, green card holder, or resident) who has a financial interest in or signatory authority over foreign accounts with an aggregate value exceeding $10,000 at any point during the calendar year must file a Foreign Bank Account Report (FinCEN Form 114) by 15 April each year (with extensions available to October).

FBAR is separate from the tax return. It is filed electronically with FinCEN (Financial Crimes Enforcement Network), not the IRS.

What must be reported: bank accounts, savings accounts, investment accounts (stocks, bonds held at a foreign broker), mutual fund accounts, pension accounts in some cases, and accounts where you have signatory authority (e.g., a company bank account you can sign on, even if you have no beneficial interest).

Penalties for non-compliance: these are severe and apply even for non-willful failures.

• Non-willful failure to file: up to $10,000 per violation (per account per year)
• Willful failure: the greater of $100,000 or 50% of the account balance, per violation per year; criminal prosecution possible

The IRS has run multiple voluntary disclosure programmes for FBAR non-filers, and there is a streamlined offshore procedure for non-wilful failures. However, the existence of these programmes does not reduce the risk for those who continue to fail to comply.

PFIC: Why US Persons Should Not Hold Non-US Funds

This is one of the most important and least understood aspects of US person investing abroad. A Passive Foreign Investment Company (PFIC) is any non-US corporation that meets either:

• 75% of gross income is passive (interest, dividends, rents, royalties, capital gains), or
• 50% of assets produce passive income

The practical result: virtually every non-US mutual fund, unit trust, SICAV, OEIC, ETF, or similar pooled investment vehicle qualifies as a PFIC.

The PFIC rules impose a punitive tax regime on gains and distributions from PFICs unless the investor makes one of two elections (QEF election or mark-to-market election) — both of which require co-operation from the fund manager (which most non-US funds will not provide) or complex annual calculations.

Without a valid election:

• Distributions are taxed at the highest ordinary income rate (37% in 2026)
• An interest charge is applied to defer tax back to the year the income was earned
• The effective tax rate on gains can exceed 50% in some scenarios

Practical implication: US persons living abroad should avoid non-US collective investment schemes. If they want diversified equity exposure, they should use US-domiciled ETFs (Vanguard, iShares US) or individual securities. This significantly limits the investment universe available from non-US brokers.

ISAs and SIPPs: US persons who are UK taxpayers should be aware that the IRS does not recognise the UK ISA as tax-exempt. Interest, dividends, and capital gains within an ISA must be reported to the IRS as normal income. The UK pension treatment (SIPP, defined contribution) is more complex — US-UK double tax treaty provisions may provide relief, but specific analysis is needed.

Where US Persons Can Bank Internationally

HSBC International (Jersey, Isle of Man, expat banking): maintains FATCA compliance and accepts US person clients for its international banking range. HSBC Expat Jersey is a workable solution for US expats needing an offshore account.

Citibank International Personal Banking: a global network with FATCA compliance infrastructure. Available in multiple jurisdictions, accepts US persons.

Charles Schwab International: provides investment accounts and banking services specifically designed for US persons abroad. The Schwab Global Account offers multi-currency capabilities for US investors.

Interactive Brokers: a US-regulated broker that accepts US persons in most jurisdictions. Offers accounts in multiple currencies. This is the standard solution for US expats who need investment accounts — Interactive Brokers is available and FATCA-compliant globally.

Local retail banks: in some jurisdictions, major local banks will accept US persons as clients, particularly where the local banking regulator has signed an IGA with the US and the bank has FATCA infrastructure. In the UAE, UK, and Singapore, major banks typically still accept US person clients.

UK high-street banks: most will accept US persons for standard current accounts. Barclays, HSBC, NatWest — all have US person clients. However, investment accounts and ISAs may be restricted (because the bank does not want to report on PFIC-adjacent products).

The Renunciation Calculation

A growing number of HNW US persons living abroad are renouncing their US citizenship or green card. The number of formal renunciations reported by the State Department has increased significantly since FATCA's implementation.

Key considerations:

Exit tax (expatriation tax): under IRC Section 877A, "covered expatriates" (US citizens or long-term residents who meet income, net worth, or compliance thresholds) are deemed to have sold all their assets at fair market value on the day before expatriation. The gain above a threshold (~$910,000 in 2026, adjusted annually) is subject to capital gains tax immediately.

Covered expatriate thresholds: net worth > $2m; average annual tax liability > ~$211,000 over the past five years (2026 figure, adjusted annually); or failure to certify five years of tax compliance.

Deferred compensation and pension accounts: special rules apply — distributable accounts trigger immediate tax; some pension arrangements have their own rules under treaty provisions.

Loss of US passport: renunciation means loss of US travel document. This is a practical consideration for clients who travel frequently to the United States.

Renunciation is irrevocable and should not be pursued without comprehensive US tax advice from a specialist (a US-qualified CPA or attorney experienced in expatriation). The compliance cost and tax exposure before expatriation can be significant.

How Global Investments Can Help

Global Investments works with internationally mobile clients across a range of backgrounds and nationalities. For US persons considering or managing international property investments, we work alongside US-qualified tax advisers and UK/international private banking contacts to ensure that banking arrangements are structured appropriately — accounts held where they are accessible, investment structures that avoid PFIC problems, and a clear picture of reporting obligations before committing to any investment.

If you are a US person considering international property acquisition or restructuring your banking arrangements, we strongly recommend engaging specialist US expat tax advice alongside our property and banking guidance. Contact us to discuss your situation and to be introduced to advisers with the relevant expertise.