For Americans living abroad, opening a bank account feels like being a 90 pound weakling in a Gladiator gauntlet. You can try hard and still fail. Not just once or twice, but in my case three times here in Italy.
Banking is one of the rare occasions when the complexities of living in Italy as an American expat, cannot be blamed on Italian bureaucracy. No, this special torment is American-made and felt by expats, students, and retirees living abroad.
There is a reason foreign banks do not want Americans’ money. FATCA. So what is FATCA and what should Americans know about it before moving abroad? What follows is a brief summary of FATCA facts. An explanation of how it affects Americans living abroad. My own painful story of trying, and failing to open a bank account in Italy. Plus, advice from my fellow expats eventually helped me open my first bank account in Italy.
What FATCA Tax Compliance Means in Banking
The Foreign Account Tax Compliance Act (FATCA) was initially introduced to target people who evade paying U.S. taxes by hiding assets in foreign banks. As a liberal Democratic frustrated by Billionaires like Warren Buffett paying fewer taxes than their secretaries I can see why FATCA came into being. As an American Expat living in Italy FATCA feels shortsighted.
Here is the flaw with FATCA for Americans living abroad. FATCA puts the responsibility of catching tax-dodging fat cats squarely on the shoulders of foreign banks. FATCA requires foreign financial institutions around the world (not just in Italy) to report all foreign assets held by their U.S. account holders.
Additionally, U.S. taxpayers with financial assets outside the United States must report assets to the IRS each year when filing taxes. What happens if foreign banks or American citizens don’t comply?
"If an institution does not comply, the U.S. will impose a 30% withholding tax on all its transactions concerning U.S. securities, including the proceeds of sale of securities. In addition, FATCA requires any foreign company not listed on a stock exchange or any foreign partnership which has 10% U.S. ownership to report to the IRS the names and tax I.D. number (TIN) of any U.S. owner. FATCA also requires U.S. citizens and green card holders who have foreign financial assets in excess of $50,000 (higher for those who are bona-fide residents abroad) to complete a new Form 8938 to be filed with the 1040 tax return, starting with fiscal year 2011." ACA - American Citizens Abroad
Foreign banks are disincentivized so heavily by FATCA that the risk of taking on an American client outweighs the reward. Especially in Italy where English is only spoken by 34% of the population. In short Italian banks would rather turn away our business than deal with the paperwork and possibility of fines.
So do Americans living abroad really need a foreign bank account? In short yes. Even though many Italians and in fact much of Italy still runs on cash, there are things you cannot do here without a European bank account, debit card, or credit card. Little things like you know… get paid, shop online, pay bills. In short, live in the modern world.
If you’ve ever dreamed of living in Italy, here’s what you can expect when trying to open a bank account as an American citizen.
Opening a Bank Account in Italy As an American
Because I sound like a six-year-old when I speak Italian, I needed help opening my first bank account in Italy. Thankfully I had help from my husband Paolo who was born and raised in Italy. Since we live in a small town in the Italian Alps, Paolo and I figured an online bank was our best bet. With Paolo’s help, I submitted all the paperwork and completed a virtual identification video call. One week later, a rejection letter arrived instead of my new IBAN (International Bank Account Number).
A second bank, a second try. The same result. Only this time, the bank claimed the paperwork we submitted (all three times) was never received. An infinite loop of avoidance that lasted weeks before we realized, these Italian banks were ghosting us because of FATCA.
Next, I tried reaching out to JP Morgan and Chase, and Bank of America. Both have partner banks in Europe. Both of which, declined to help. It was time to get personal. We tried our local bank in Italy. No, go.
It “wasn’t possible” to get an account bank account because despite being a local Italian citizen, I’m American too. They couldn’t and wouldn’t help me. The bank’s advice? Go to Paolo bank in Torino where he holds a long-standing account and try there.
We arrived five minutes early for our appointment. Twenty minutes later we were waved back to a banker’s desk.
Banker: "I have an appointment in 20 minutes, you'll have to come back another time." Paolo: Shocked "Wait, we have an appointment with you. How can you turn us away?" Banker: With no remorse, empathy, or eye contact said dismissively "I can't help you. You'll have to come back another day."
As the exchange grew louder and more rapid, my ability to follow the conversation in Italian faded. I just make out Paolo saying “This is not acceptable, you need to go get someone to fix this.”
Back to the lobby. Ten minutes later, a presumably more senior banker came out. We calmly explained my situation. Dual American Italian citizen in need of my first Italian bank account.
Banker II: "That takes time. As a new client, you'll have to make an appointment." Paolo: "I have been a client for years and I did make an appointment." Banker II: "Do you have your permesso di soggiorno (residence permit) with you today?" Me: Holding up my Italian passport in broken Italian I said "No, I'm an Italian citizen. I don't need a permesso di soggiorno. Here's my Italian passport." Banker II: "How can you sign the papers if you cannot speak Italian?" Paolo: "I'm here to help." Me: "He's my husband." Banker II: "We'll have to translate everything into English. That will take time. You'll have to come back later." Paolo: "We'll make another appointment." Banker II: "Why don't you just give your wife a pre-paid refillable credit card?"
At this point, Paolo and I both nearly lost it. Not only were we offended personally by being turned away after making an appointment, but the banker’s suggestion was infuriatingly sexist. We gathered what we could of our calm and dignity and walked out. So what’s an American living in Italy to do? Especially one that doesn’t have the help of a native Italian speaker?
Italian Banks Recommended by American Expats
My struggles to open a bank account in Italy are not unique. Posting just one plea for help on the Living in Italy Facebook Group yielded hundreds of comments. Many with similar struggles, stories of multiple attempts, and months of work to open a bank account. Fortunately, there were helpful suggestions in the mix as well. Here are some of the comments and advice that were shared.
"In Como we used Fineco. However all we could have was a debit card because we were not citizens. We were living in Como at the time we met with a banker and it took a month to accomplish." -- George "Being the only country (besides Eritrea) in the world to demand foreign banks to furnish account information on their citizens. I have friends who have given up US citizenship for this reason!" -- Toni "We’re in Lucca and it took us 3 tries with Intessa before we were successful. My husband was losing it and the situation was ridiculous but we need a brick and mortar bank besides the online ones." -- Suzanne "I am also a dual US/IT citizen. I bank with Unicredit, but they, and all the others, do not want to deal with the U.S. FATCA requirements." -- Toni "If all else fails, there’s Banca Posta."-- Judith
BancoPosta is a unit of the Italian Post Office that provides financial services including savings accounts, prepaid cards, investment, insurance, and payment services.
"I use Intessa Sanpaolo and have accounts in the USA and Italy. I think it depends upon who you talk to at any given bank branch, some people will be helpful, others will tell you your request is impossible (it's not). This is why online banking may be simpler, you only "speak" with the software and not a person who would rather be doing something else. Good luck." -- Tom "Hi, I am a dual citizen US/IT (IT first, only specified for experience and language proficiency. I am from Milan originally) I opened an account in the Marche region with FINECO because it was coming highly recommended by US living in Italy as efficient online banking. We had a TERRIBLE TIME! The clerk we worked with has NO experience with foreigners and messed up quite a few things. It took me 3 months to set up a “properly” working account. And I am still finding out things on the fly, as in, when I need something and cannot get it because I am non resident or because “we don’t do it” or, it is only for Italian citizens but since I’m dual, the clerk doesn’t know... every time I have to do a movement online, I receive an SMS on my Italian number to confirm identity. We will soon cancel this phone number and will have a US number. The clerk has no suggestions on how to confirm my identity in the future, she doesn’t know if I will receive SMS on my US number. Her suggestion was “well, try to go to the US and see if it works”.... It is a nightmare certainly due to the person we are dealing with... I had San Paolo for ages before moving to US and never had an issue. Long story short... when you open your bank account, whatever bank you choose, go to Milan! (or Rome, but from Torino, I guess Milan is easier) They are used to foreigners and know the procedures and requirements, have experience. They probably have answers! If you are dual, they probably will require your SSN in addition to your Codice Fiscale, to register you to the Agenzia delle Entrate (italian IRS)" -- Barbara "I love TransferWise, but something to be aware of is that it’s not a bank. You don’t benefit from deposit insurance anywhere, unlike, say, N26, which is a bank. I think the chances of TransferWise failing in a way that would lose you money are low, but it could happen, and I’d be wary of keeping a lot of money with them." -- Guan
Transferwise is a popular service in Europe that is a bit like PayPal and enables international wire transfers (with fees). Among the comments, there were several banks mentioned, but none as frequently as N26.
N26 Bank for American Citizens Living Abroad
N26 is a German neobank headquartered in Berlin. Neobanks offer online-only financial services. In other words, no brick and mortar location, no in-person tellers. N26 offers a free basic account with a Debit card. Premium accounts are available for a monthly fee. Here’s a video review of N26 from Italian American Vlogger Rafael Di Furia, who personally uses N26.
FATCA doesn’t just make living in Italy hard. It impacts Italian citizens with dual American citizenship as well. Italian American citizenship is also subject to FATCA if they return to live in Italy. The worst part is this affects not only banking but also investing. Italian investment firms are extremely hesitant to allow Italians, American citizens, to open investment accounts, or buy more products in pre-existing investment accounts.
Banking and investing are a major pain for American citizens living in Italy thanks to FATCA. As an adult, not having a bank account in the country you live in, simply doesn’t work. Yes, there are ways around some of the difficulties with services like BancoPosta and Transferwise, but isn’t one of the markers of adulthood having a banking and investment account?
In the end, it took me months and four tries to open a bank account in Italy. To date, I’m still waiting on a debit card and hoping it really gets sent this time. Which makes FATCA one of the primary things I wish I would have known about before moving to Italy. Would it have prevented me from moving to Italy? No, but knowing about it ahead of time just might have prevented my face from flushing red with humiliation and fury after that trip to the bank in Torino.
Combine the need to have a bank account with the difficulties of getting one and you’ve arrived at the reason for this post and my new series, Pros & Cons of Living in Italy. My next installment addresses one of the biggest hurdles Americans moving to Italy face within the first year of their arrival. A big challenge that a shocking number of expats only find out about AFTER they arrive in Italy.
If you’re thinking of moving to Italy, this is a major challenge you need to know about ahead of time! Subscribe to ALOR to get this and more stories of the Pros & Cons of Living in Italy.
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If you have any questions about the pros and cons of living in Italy, don’t be shy, add them to the comments below and I’ll work to address them in future posts.