In a move likely to prompt some bemusement in Switzerland, the US ambassador to the country has urged banks to be more accepting of US expat clients.

A report that the US ambassador to Switzerland wants more of the country’s banks to serve US clients, despite the fact that many firms shun US citizens due to compliance burdens, will prompt wry smiles in the Alpine state.

According to Bloomberg, which has obtained a copy of a message to bank executives sent by Susan LeVine, the diplomat is quoted as saying: “I invited the executives to meet with me so we can identify solutions together that will benefit Swiss banks and enable American citizens to do business.

“Some US persons who have lived in Switzerland and held accounts at a Swiss financial institution for decades have reported that they have received notices of account closure and that Swiss citizen family members have had their accounts closed because of their relationship to a US person,” the letter reportedly added.

Switzerland, home to 266 banks (source: Swiss Bankers Association), has like other non-US nations seen many of its financial institutions turn away expat US clients because of mounting compliance costs, driven in part by the advent of the US Foreign Account Taxation Compliance Act, or FATCA, signed into law in 2010. The act requires foreign financial institutions, ranging from banks to hedge funds, to provide data to show whether they serve US clients living abroad and failure to do so means an institution that deals with the US will be forced to pay a 30 per cent withholding tax. Banks such as HSBC and Deutsche Bank no longer serve expat US citizens. However, some firms, such as Royal Bank of Canada (which is registered with the Securities and Exchange Commission), make a point of continuing to do so. 

The comments from the ambassador will also cause some raised eyebrows in Switzerland given that the US has been among the countries that have imposed a clampdown on US citizens holding secret accounts there, pushing for the end of bank secrecy and transfer of account data. Such actions, whether fully justified or not, have made Swiss banks wary of onboarding US clients.

As the newswire report says, major banks such as UBS and Credit Suisse, as well as smaller firms such as Corner Banca, have brought in procedures for US citizens but the expat population in Switzerland, estimated at around 20,000, struggles to keep or open a bank account, the ambassador is quoted as having said.

At the heart of the problem is that the US is unusual among major economic powers in taxing citizens on a worldwide rather than territorial basis; one of the results of the problem is that several thousand Americans have, since FATCA became law, terminated their US nationality.

The situation has led to some interesting innovation. One firm that has arisen to serve US expats in Switzerland goes by the name of Where Americans Are Welcome, and is based in Brütten, Switzerland. In the UK, institutions such as London & Capital and Maseco, for example, make the point of catering to people with US connections.