Why are Americans being turned away from German banks?

American customers have reported having headaches with German banking as a growing number of banks decide to exclude US passport holders from opening an account.

The latest bank to withhold access to its financial products is Kontist, a specialist online bank for freelancers that has partnered with Solarisbank. According to recent media reports, in the past few weeks, the neo-bank has sent out letters to American customers to inform them that their accounts are due to be closed. 

One US citizen, who works as a freelancer in North-Rhine Westphalia, said the move amounted to "perfectly legal discrimination" on the part of the companies involved.

"I was informed by Kontist/Solarisbank just a couple days ago that my freelancer account will be closed with effect on October 31st, 2021," she told The Local.

"I understand the complexity of the situation, but am still amazed that German legislation does not better protect Americans living in Germany when it comes to such matters. Conducting our personal and business affairs will become increasingly difficult if this trend continues."

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Earlier in the year, Solarisbank froze the account of a Switzerland-based customer because they believed he may still have US citizenship, even though he had previously renounced it.

In a Tweet that has now been deleted, they informed him that, "for legal reasons", he would need to send proof of his loss of US nationality in order to continuing banking with them.

"#Compliance was originally not meant to harm consumers with #discrimination" the former American tweeted back. 

Though the situation was later resolved after the man sent the company proof that he had renounced his citizenship, the move points to a worrying trend for American expats, who feel they are being unfairly shut out of the banking system. 

What's behind this?

By the looks of things, it all dates back to a piece of American legislation that was passed way back in 2010. This legislation is the Foreign Account Tax Compliance Act, or FATCA for short, and it obliges foreign banks to report back to the U.S. tax office on any assets held in these accounts by U.S. taxpayers. 

As American Expat Finantial News Journal (AXFNJ) has reported, banks were given a 'grace period' until 2019 - which was subsequently extended to 2020 - in order to get their houses in order before the legislation came into force.

Michael Ambuehl (L), state secretary of the Swiss Finance Department, and Don S. Beyer (R), US ambassador to Switzerland, exchange documents after signing the FACTA agreement, in Bern, Switzerland, in 2013. Photo: picture alliance / dpa | Peter Schneider

However, it seems that most non-US banks (and even some US-based ones) are still keen to avoid the additional hassle and cost of having to constantly update American government officials about the financial activities of their customers - and since the government can levy hefty fines to companies who don't comply with FATCA, many banks seem to think it just isn't worth the risk.

That's certainly the case for Augsburger Aktienbank, a Bavarian bank that announced in late December 2020 that it would be closing its doors to all US citizens due to the regulatory burdens of FATCA. 

The move even prompted dual German-American citizens to petition the German parliament to intervene in the issue, but so far, it seems nothing has been done.

Asked for comment on the situation, a spokesperson confirmed to The Local: "At the moment, US citizens can no longer open an account with Kontist, which we regret.

"We are thus following the legal requirements of FATCA. This is therefore not an arbitrary decision or discrimination by German providers. If customers submit a Proof of Lost Nationality to us, we can request the reactivation of their account."

Is this allowed? 

At the moment, it appears that it is - at least, for anyone who doesn't hold EU citizenship. While European Union legislation dictates that banks must provide a basic account to any EU citizen who requests one, which should mean that dual US/German citizens are entitled to receive banking services.

According to the European Commission's website, its Directive on Payment Accounts "gives people in the EU the right to a basic payment account regardless of a person's place of residence or financial situation."

Aside from this, Germany appears not to have a specific legal framework that would prevent this type of thing - a situation that those who have bank accounts closed find astounding.

"I'll never get my head around the fact that my freelance business account is being closed solely on the basis of my American citizenship," the North-Rhine Westphalia-based freelancer told AXFNJ.

"The combination of a heavy-handed FATCA and current German legislation leaves me absolutely vulnerable to what is tantamount to perfectly legal discrimination, based on my nationality.

"The exact same thing could happen to my German private bank account at any time. How is this even remotely acceptable?" 

EC legislation appears to protect European citizens from being denied a bank account - but not necessarily Americas. Photo: picture alliance / dpa | Mauritz Antin

There could be negotiations to improve the situation in the near future. In a resolution passed on July 5th, 2018, the EU unanimously called on both member states and the European Commission to go back to the negotiating table with the US government to change how FATCA is enforced. Once again, though, there doesn't appear to be any movement on this just yet. 

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What options do Americans have now? 

One option, as described by the NRW-based freelancer, is for Americans to simply to go "bank shopping" and find a bank that will accept them. 

Another option, according to AXFNJ, is to open a State Department Federal Credit Union (SDFCU) checking account. These accounts are specifically designed to enable expats to access basic banking and mortgage facilities.