As a result of increased pressure from United States tax authorities HSBC have disclosed that they plan to close the accounts of wealthy U.S. citizens who have offshore accounts.
In a letter sent this month to the thousands of their customers, HSBC revealed that they will be terminating “private banking services to U.S. persons and certain trusts and non-operating companies connected to U.S. persons,” the Wall Street Journal reported. A spokesperson for the bank told the newspaper that American citizens “will be better served by our private banking teams in the United States.”
The news will almost certainly be of shock to some of the hundreds of bank customers who have accounts overseas that total as much as $100 million USD.
According to reports from the U.S. HSBC’s actions are motivated by an underlying objective to avoid hefty fines from U.S. authorities for facilitating tax avoidance for U.S. citizens: “HSBC is ending the practice of serving wealthy American residents from locations outside the U.S. as a way of cooperating with the U.S. and avoiding the fate of rivals that were fined or threatened with prosecution for assisting tax scofflaws,” the Wall Street Journal reported.
Other banks, however, are appearing to view the matter very differently. RBC Wealth Management has said it still regards the expat U.S. citizen market as a valuable one to be strategically targeted: “Recent legislative changes have meant that a number of global wealth managers are reconsidering their servicing of U.S. clients from non-U.S. platforms. While some baulk at the additional legislative burden and are exiting the market, RBC Wealth Management not only remains committed to the market, but we see this as a terrific opportunity to gain market share for our London-based business,” Ralph Awrey, managing director, business development for North America told The Family Wealth Report.
Last week the U.S. Inland Revenue revealed that they would be allowing financial institutions a further six months to comply with the laws pertaining to offshore tax evasion. According to their schedule of compliance institutions now have until June 2013 to agree a procedure for cooperation with the IRS.
The IRS is ultimately planning on implementing clear rules that oblige non-U.S. financial institutions to disclose details of any bank accounts belonging to U.S. clients they are held with them. This will ultimately entail that it will be the responsibility of the banks to disclose clients who are withholding tax from U.S. authorities.