Why is it so difficult for an American citizen to open a bank account in France?
Why are banks in France refusing to open accounts for Americans? One reason is because of the risks they face both in the U.S. and in France if they make a mistake. FATCA, the Foreign Account Tax Compliance Act, obliges banking establishments around the world to declare to the tax authorities of the United States any customer in France considered a US taxpayer. The impetus for the law was a crackdown on large Swiss banks in 2008 that were hiding money for wealthy Americans, who were not declaring for tax purposes their accounts.
So the banks must somehow find all the American citizens within their client base and then obtain their social security number. Keep in mind, that a large portion of the U.S. citizens in France are also French citizens. For those who received their U.S. citizenship due to being born in the U.S. (who are known as Accidental American) or because they had one parent who was a U.S. citizen, they may have never had a social security number. Some don’t speak English. Others don’t know how to get a social security number. But the banks are being forced to report on them.
The law in the United States did not immediately impact France. There had to be a separate bilateral agreement between France and the United States for the law to actually be imposed on French financial institutions, so the law didn’t take place in France until 2018.
So, why are banks in France worried? Because of the penalties for lack of compliance. If the banks fail to file with the U.S., they face overwhelming and existential fines. In essence, 30% of all their income they earn in the United States. As all banks invest in U.S. dollars and U.S. Treasury notes and bonds, this would be an enormous penalty, but it may be even worse, because the banks manage money for their clients in the United States and those accounts tend to be in the name of the bank, so they would be likely subject to those finds not only on their own portfolios, but on the portfolios of their clients.
And it is getting worse. French courts are fining banks who send their data to the United States in error. A recent case involved a small bank seeing Ottawa as the city of birth on a passport and confused this city in Canada, with a similarly named city in the U.S. The client sued the bank, and it was forced to pay 15,000€ and it must erase all the information sent to the U.S. at a penalty of 1,500€ per day.
A few more points. While the agreement required banks to report on U.S. citizens, it also required U.S. banks to report on French residents who open accounts in the United States. First note the difference. For Americans, banks must report on whether the account holder lives in the United States or in France (or anywhere else), but the French side asks only for data on French citizens who live in France, not French citizens who live in the United States. This goes to the issue of the American tax system which taxes its citizens on their global income, no matter where they live (something known as citizenship based taxation). And finally, the banks in the United States are closing accounts for Americans living in France, because American banks don’t want to comply with their side of the agreement.
The challenge for Americans in opening accounts has become clearer to Congress and a new bipartisan caucus has been established to better represent and understand the needs of Americans abroad. To date, however, there have been limited changes to the law with U.S. citizens increasingly finding access to banks and other financial services more challenging. On the other hand, there are increasingly new technologies such as blockchain and digital wallets which may enable U.S. citizens to find the services that they need.