Americans abroad

Some local banks will not open accounts for Americans and we fear that the latest check-cashing difficulties are not unrelated. It’s difficult being an American abroad.

October 16, 2013 21:45
3 minute read.
Dollar bills.

Dollar bills 370. (photo credit: Steve Marcus / Reuters)


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Strange things are happening to Americans abroad and not just in Israel, although here the problem may be magnified owing to the existence of a proportionately large and veteran community of American olim, or expats as they are known in other countries.

Ever since Uncle Sam began going after money-launderers and financers of international terrorism, the lives of millions of Americans overseas have been made increasingly difficult.

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America’s fiscal woes have further encouraged official money-grab schemes and the populist hunt for tax cheats. Cheats indeed exist, but it is ordinary normative folks who are caught in the net. This is somewhat akin to the more-often-than-not ludicrous scrutiny Transportation Security Administration crews deal out at US airports to elderly nuns or wheelchair-bound travelers rather than to more likely suspects.

The mark is missed when a net is cast too wide and unwisely harasses sardines rather than apprehending the sharks.

One seemingly minor example of this is the inability of late to quickly cash American checks in Israel. This had been a speedy process at most money-change bureaus.

Yet the arrangement – which typically served retirees not savvy in hi-tech, students etc. – is no longer viable because American regulators have cracked down on a small credit union that handled most of these small, innocuous transactions.

It is not this particular credit union that draws interest but the suspicion that what should have been an insignificant event is but one detail in the bigger Foreign Account Tax Compliance Act picture.


Beginning in July 2014, FATCA will oblige non-US banks to disclose the accounts of American clients and in essence behave as American banks do vis-à-vis the US Internal Revenue Service. Despite the bureaucratic headaches involved, failure to comply would deprive local banks of any ability to do business in dollars. This sword hanging over them is coercive to say the least.

America is the only country – save for totalitarian Eritrea – that considers its citizens taxable worldwide even when they have been residing abroad for decades.

This legal oddity dates to the American Civil War but had never been implemented in earnest until the Obama administration resolved to go after so-called fat-cats (whom the FATCA acronym calls to mind).

This not only obliges nominal Americans, entirely outside the US system, (including mere Green Card permanent residency holders or “accidental Americans” born on US soil during their parents’ sabbatical there) to report from here (with the exceedingly expensive assistance of professional accountants and lawyers). They might also face hefty fines and legal travails for failure to have done so in the past.

It may well be that the regulators’ overzealousness to make sure that no minor credit union exceeds its authority is part and parcel of Washington’s frenetic and populist hunt after tax-cheats and money-launderers. The upshot is that rather than focus on true fat-cats with elaborate shell corporation constructs, it is the lives of ma and pa pensioners that will be disrupted with all the misguided keenness with which TSA officials focus on little old ladies.

There are no official statistics regarding how many Americans reside in Israel. Conservative estimates cite 250,000, and that might not include Green Card holders and assorted categories of dual nationals.

For a country with a total population of 8 million, that is a proportionally huge American population, many of whom have scant ties left with the US. Taxing them amounts to taxation without representation. Moreover, they are theoretically liable for tax on what is untaxed in Israel – such as inheritance, gifts and small rental incomes.

The trouble is that no government – Israel’s especially – and certainly no financial institution relishes taking on the US on behalf of a population of expats or of “accidental Americans.” This leaves these Americans effectively without representation both here and in the US, where hardly any politician has incentive to wage a battle with unpopular overtones against the backdrop of populist demagoguery.

Some local banks will not open accounts for Americans and we fear that the latest check-cashing difficulties are not unrelated. It’s difficult being an American abroad.

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