Your Guide to Banking Abroad
6 min read
By Stewart Koesten
The number of Americans living abroad has been increasing for years. Some cite political or societal reasons for relocating, but most are seeking a lower cost of living, affordable healthcare or a better quality of life. Still others go for career and educational opportunities or a desire to experience a different culture.
Whatever the motivation for leaving the U.S., moving to another country comes with financial challenges, most notably securing a bank account in a foreign country before relocating. For those with permanent or part-time residency status in another country, opening a local bank account is a straightforward way to manage cash flow, facilitate currency exchanges and ensure access to funds.
Even Americans without residency status abroad can benefit from a bank account in another country. For example when traveling frequently or for lengthy periods of time, a local bank account makes it easier to withdraw cash in local currency, often at lower fees than international bank cards or ATMs. It provides an easier method to move money between the U.S. and another country, as well. A bank account can also help with diversification of global holdings by possibly reducing risks that come with holding all funds in one currency. Some see this as a safer way to manage funds when living overseas.
While possible, the process of opening a bank account for non-residents who lack a local address can be more complicated. Fortunately, it just requires some research, preparation, and awareness of potential challenges.
Non-Resident Bank Accounts in Another Country
International banks are cautious about whom they allow to open accounts. For example, banks must follow strict anti-money laundering (AML) regulations and ensure their accounts are legitimate. Banks must report suspicious activity, such as deposits from customers without significant ties to the country.
To meet these standards, foreign banks often require proof of residence as a crucial part of the account-opening process. Without a local address you may face significant barriers, such as:
- Lengthy documentation requirements: You may need to provide extensive paperwork to prove your identity, financial status and source of deposits and income.
- Higher risk of rejection
American banks have similar identification and verification procedures, such as submitting a driver’s license and proof of residence with a utility bill or other forms of identification, to ensure they comply with AML laws and know the source of their clients’ deposits.
The Role of FATCA
U.S. regulations further complicate the process of opening bank accounts abroad. In 2010, the federal government enacted the Foreign Account Tax Compliance Act (FATCA), which requires foreign banks to report accounts held by U.S. citizens. This law mandates that foreign financial institutions disclose certain information to tax authorities.
Aimed at curbing tax evasion, these regulations also made it more difficult for Americans to open foreign bank accounts because overseas banks are reluctant to deal with the reporting requirements. Consequently, some banks may choose not to serve American clients at all.
Local Banking Policies and Culture
In addition to the regulatory environment, local banking policies and cultural factors contribute to whether a non-resident can open a bank account abroad. Countries may offer only limited banking services to non-residents, such as basic savings accounts, but not the ability to access loans or credit cards. Language barriers can also be an issue in countries where bank employees only speak their native tongue, making communication difficult. Another consideration is the cost. Non-residents may face higher fees for maintaining accounts or conducting transactions, which can make traditional banking abroad less appealing.
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How to Open a Bank Account Abroad as a Non-Resident
Despite the challenges, there are still ways to open a bank account abroad if you do not have a local residence. First and foremost, do some research. Not all overseas banks refuse to do business with Americans. Here are three tips to help navigate the process:
1. Prepare Your Documents
You may have to visit the bank in person because not all banks offer online applications. Either way, make sure to have the following documents ready before beginning the application process:
- A valid passport: Banks universally accept passports as proof of identity.
- Proof of a local address: Banks might accept utility bills or lease agreements to confirm residence, though this can be difficult for non-residents. There are alternative methods that might help establish a local address:
- Mail forwarding services: A company that offers virtual mailboxes or forwarding services can provide you with a local address, though not all banks will accept this as a valid address.
- Family or friends: With permission, you can use the address of a relative or friend living in the country where you wish to open an account, though you want to make sure you are not violating any rules.
- Leasing property: Renting a small apartment or vacation home in your chosen country can provide you with a legitimate local address, though this may not be financially feasible for everyone. Keep in mind that each bank will have its own qualification requirements pertaining to the length of a lease.
- Embassies and consulates: Embassies may help citizens who need to open bank accounts.
- Tax Identification Number (TIN): Countries may require you to provide a local tax ID or its equivalent.
2. Consider International Banks:
There are international banks with a broader reach and which are more accustomed to working with non-resident clients. Popular global banks with international services include:
- HSBC (Hong Kong and global branches)
- Barclays (United Kingdom)
- Santander (Spain and Latin America)
- Deutsche Bank (Germany)
Typically, these banks are better equipped to manage foreign clients and may offer more services to non-resident account holders. If you prefer, there are American banks and other financial institutions like Citibank or Charles Schwab that operate internationally as well.
3. Look Into Financial Technology Options:
Financial technology (fintech) companies like Revolut and Wise (formerly TransferWise) offer an alternative to traditional banks for handling money internationally. These entities provide services such as:
- International money transfers with transparent fees and competitive exchange rates.
- Multi-currency accounts that allow you to hold balances in multiple currencies.
- Debit cards that allow you to make payments and withdraw cash from ATMs globally.
- Low fees for a range of financial services, including recurring international payments.
Using a fintech company can be a good solution for managing currency exchanges and overseeing global transactions.
Conclusion
Opening a bank account abroad as a non-resident is possible but may be challenging. Understanding local banking regulations, preparing the correct documents, and exploring alternative options like international banks or fintech services will make it smoother to manage your financial affairs while living outside of the U.S.
Until you have established a residential address in the country of choice, do your research and seek guidance from professionals who specialize in cross-border services to help you achieve your objectives.
About the author: Stewart Koesten, MSFS, CFP, CIMA, CERT, GFP (USA)
Stewart Koesten is the chairman and senior wealth adviser of Aspyre Wealth Partners, a fee-only RIA specializing in financial planning. With nearly four decades of wealth management experience, Koesten serves American citizens who are planning to retire or work abroad, and American expats planning to return to the U.S. He has extensive knowledge about citizenship and residence-for-investment programs and leverages a vast network of international professionals to deliver comprehensive global financial planning needs.
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