SHARE
COPY LINK
For members

LIVING IN SWITZERLAND

Why are Americans being turned away from Swiss banks?

If you are a US citizen living in Switzerland — and even if you have a Swiss passport as well — you know how difficult it is to open a bank account. This is why.

A large UBS logo placed on a window of a building
Because of the UBS scandal, Americans in Switzerland can't open an account. Photo by Fabrice Coffrini / AFP

Switzerland is a nation of bankers, but for Americans living here opening an account is a major headache.

Why are Swiss banks keeping US customers at bay?

The heavy-handed regulations are part of a wider US government effort to combat tax evasion.

The backlash has been building up since 2008, when Switzerland’s largest financial institution, UBS, helped wealthy Americans hide billions of dollars in undisclosed offshore accounts to evade taxes. 

In the aftermath of this major scandal, the US government has created a myriad of requirements for other nations to follow to ensure that no foreign account belonging to an American goes untaxed by Uncle Sam.

The most important among them is the Foreign Account Tax Compliance Act (FATCA), which was passed by Congress in 2010 and  went into effect on January 1st, 2014. It requires foreign banks to report to US tax authorities (IRS) all the assets that belong to US citizens – whether living in America or abroad.

Swiss banks are reluctantly complying with the rules because failure to do so can seriously impact their ability to do business in America.

What impact has all this had on US nationals in Switzerland?

“I’ve been ‘bank shopping’ here since I arrived eight months ago, but nobody wants to open an account for me once they find out I am American”, Terry, who is married to a French citizen and lives in the suburbs of Geneva, told The Local.

“I am seriously considering stashing my money under the mattress”, she said.

One reader, Sue*, got in touch with us to say that she eventually renounced her US citizenship in order to be able to have banking freedom in Switzerland.

Prior to that, she had “no financial independence” and was forced to rely on her husband.

“I was Swiss but had no rights, because I was also an American, to hold my own bank account without depositing very large amounts to purportedly justify the additional work by the bank to do all the necessary reporting to the U.S,” Sue said.

Sue said she was told she needed to deposit “a six figure sum” in order to have the account opened – and eventually decided to give up her US citizenship.

This scenario is all too familiar to another US citizen, Georges, from Vaud.

Unlike Terry, Georges is a so-called ‘accidental American’ — born in Switzerland of US parents. However, he had never lived in the United States and his links with the country are tenuous at best.

But since Georges had a US passport in addition to the Swiss one, banks saw him as a liability, until he, like tens of thousands of other Americans, decided to give up his citizenship.

As Terry and Georges’ experience shows, getting a Swiss bank to open an account for an American is a very complex process which often ends in failure.

Banks consider every candidate very carefully. Those who have lived in Switzerland a long time, have also a Swiss citizenship and, most importantly, are tax-compliant in the United States, can get a break.

However, an account will be open only under the condition that the customer will provide a copy of their US tax return and other financial statements filed with the IRS.

Which bank is best for Americans in Switzerland?

Other readers however have said that while it isn’t easy, Americans need to shop around to find the right account.

Several other American readers also told us UBS was the best option for Americans in Switzerland. While the fees were high, they would offer to open an account without a minimum deposit. 

Sofia told us there was just more paperwork for Americans.

“UBS does still have American clients (you have to visit in person at the main branch in your city and sign documents about FATCA compliance), Post Finance will also open accounts, and so do some of the cantonal banks. It’s far from impossible,” she said.

Bob told us that Credit Suisse would open accounts for Americans, provided you waive the right to bank privacy in order with IRS regulations.

“(Credit Suisse are) pretty good at getting the annual form sent to the US IRS right. Just waive the bank privacy, fill out a US W-9, and no problem being a US citizen if you have a CH residency permit. Private bankers are very responsive.”

Eric, from Lausanne, pointed to UBS’ special accounts for Americans as a reason to sign up.

“UBS – (has a) separate bank for Americans and also one of the only ones (to offer banking to Americans),” he said .

“They are expensive like every bank but do not have minimum requirements like some of the other banks. Also, if you have a partner that is not American they have to have a separate account for you”

Travel: Six ways to save money while visiting Switzerland

Jeremy* also told us that he was able to open an account with UBS once he received his Swiss residency documentation.

“I am an American and moved to Switzerland recently.  I did not have a problem opening an account once I received my B-permit.  This said, the FACTA requirements are an annoyance, requiring additional paperwork.”

Nick, an American who lives in Bern, however said he was turned down by UBS – along with Credit Suisse – who told him he would need to wait for over a year before he could open up an account.

“Local banks won’t touch Americans due to (American) regulations,” he said.

He went with Valiant because it was the “Only bank that would open an account for me.”

Are there any changes on the horizon?

There could be negotiations to improve the situation in the near future. In a resolution passed on July 5th, 2018, the European Union unanimously called on member states and the European Commission to go back to the negotiating table with the US government to change how FATCA is enforced. 

However, there doesn’t appear to be any movement on this just yet. 

Though not a member of the EU, Switzerland would likely be part of any deal, as the country has bilateral treaties with the Union.

What options do Americans have now? 

Unfortunately, only drastic ones.

One is to give up their US citizenship, but this can only be an option for people who are certain to never return to live in the US and who also have a Swiss nationality.

The other option is the one chosen by Terry — to stash the money under the mattress.

READ MORE: How to open a bank account in Switzerland

*Persons appearing with an asterisk had their names changed at their own request.

This report has been put together as a guide only and The Local has not received any juicy kickbacks from these banks, nor do we endorse one organisation over the other. 

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.
For members

OFFBEAT

Is Switzerland’s male-only mandatory military service ‘discriminatory’?

Under Swiss law, all men must serve at least one year in compulsory national service. But is this discriminatory?

Swiss military members walk across a road carrying guns
A new lawsuit seeks to challenge Switzerland's male-only military service requirement. Is this discriminatory? FABRICE COFFRINI / AFP

All men aged between the ages of 18 and 30 are required to complete compulsory military service in Switzerland. 

A lawsuit which worked its way through the Swiss courts has now ended up in the European Court of Human Rights, where the judges will decide if Switzerland’s male-only conscription requirement violates anti-discrimination rules. 

Switzerland’s NZZ newspaper wrote on Monday the case has “explosive potential” and has “what it takes to cause a tremor” to a policy which was first laid out in Switzerland’s 1848 and 1874 Federal Constitutions. 

What is Switzerland’s compulsory military service? 

Article 59 of the Federal Constitution of Switzerland says “Every man with Swiss citizenship is liable for military service. Alternative civilian service shall be provided for by law.”

Recruits must generally do 18 weeks of boot camp (longer in some cases). 

They are then required to spend several weeks in the army every year until they have completed a minimum 245 days of service.

Military service is compulsory for Swiss men aged 18 and over. Women can chose to do military service but this is rare.

What about national rather than military service? 

Introduced in 1996, this is an alternative to the army, originally intended for those who objected to military service on moral grounds. 

READ MORE: The Swiss army’s growing problem with civilian service

Service is longer there than in the army, from the age of 20 to 40. 

This must be for 340 days in total, longer than the military service requirement. 

What about foreigners and dual nationals? 

Once you become a Swiss citizen and are between the ages of 18 and 30, you can expect to be conscripted. 

READ MORE: Do naturalised Swiss citizens have to do military service?

In general, having another citizenship in addition to the Swiss one is not going to exempt you from military service in Switzerland.

However, there is one exception: the obligation to serve will be waved, provided you can show that you have fulfilled your military duties in your other home country.

If you are a Swiss (naturalised or not) who lives abroad, you are not required to serve in the military in Switzerland, though you can voluntarily enlist. 

How do Swiss people feel about military and national service? 

Generally, the obligation is viewed relatively positively, both by the general public and by those who take part in compulsory service. 

While several other European countries have gotten rid of mandatory service, a 2013 referendum which attempted to abolish conscription was rejected by 73 percent of Swiss voters. 

What is the court case and what does it say? 

Martin D. Küng, the lawyer from the Swiss canton of Bern who has driven the case through the courts, has a personal interest in its success. 

He was found unfit for service but is still required to pay an annual bill to the Swiss government, which was 1662CHF for the last year he was required to pay it. 

While the 36-year-old no longer has to pay the amount – the obligation only lasts between the ages of 18 and 30 – Küng is bring the case on principle. 

So far, Küng has had little success in the Swiss courts, with his appeal rejected by the cantonal administrative court and later by the Swiss Federal Supreme Court. 

Previous Supreme Court cases, when hearing objections to men-only military service, said that women are less suitable for conscription due to “physiological and biological differences”.

In Küng’s case, the judges avoided this justification, saying instead that the matter was a constitutional issue. 

‘No objective reason why only men have to do military service’

He has now appealed the decision to the European level. 

While men have previously tried and failed when taking their case to the Supreme Court, no Swiss man has ever brought the matter to the European Court of Human Rights. 

Küng told the NZZ that he considered the rule to be unjust and said the Supreme Court’s decision is based on political considerations. 

“I would have expected the Federal Supreme Court to have the courage to clearly state the obvious in my case and not to decide on political grounds,” Küng said. 

“There is no objective reason why only men have to do military service or pay replacement taxes. On average, women may not be as physically productive as men, but that is not a criterion for excluding them from compulsory military service. 

There are quite a few men who cannot keep up with women in terms of stamina. Gender is simply the wrong demarcation criterion for deciding on compulsory service. If so, then one would have to focus on physical performance.”

Is it likely to pass? 

Küng is optimistic that the Strasbourg court will find in his favour, pointing to a successful appeal by a German man who complained about a fire brigade tax, which was only imposed on men. 

“This question has not yet been conclusively answered by the court” Küng said. 

The impact of a decision in his favour could be considerable, with European law technically taking precedence over Swiss law.

It would set Switzerland on a collision course with the bloc, particularly given the popularity of the conscription provision. 

Küng clarified that political outcomes and repercussions don’t concern him. 

“My only concern is for a court to determine that the current regulation is legally wrong.”

SHOW COMMENTS