Expats with bank accounts in Jersey but live elsewhere are facing a tax avoidance crack down which is likely to spread around the world.
Financial regulators on the Channel Island are forcing banks to identify their customers – which includes checking out their tax residence.
If they do not have an address on the island, then banks are moving to close their accounts.
The Jersey Financial Services Commission explained that measure is part of changing international standards to protect banks and other financial institutions from money-laundering and tax avoidance.
Director general John Harris said any moves to improve standards in the financial sector should be welcomed, even if they unintentionally cause problems for some customers.
Tax avoidance fears
The crackdown follows a major shift in the attitude to tax avoidance by governments worldwide.
Leading the charge is the US with the Foreign Account Tax Compliance Act (FATCA) which requires foreign financial institutions to report any bank accounts or investments controlled by US taxpayers.
The British government has also imposed similar stern rules on Crown Dependencies and Territories.
These include financial centres formerly viewed as tax havens, such as Jersey, Guernsey and the Isle of Man.
HM Revenue & Customs (HMRC) has already received detailed financial data about British taxpayers with accounts in Jersey as part of the new tax information sharing agreement.
This has led banks to undergo customer reviews to comply with tax laws.
HMRC has a voluntary disclosure scheme that allows anyone who has not declared offshore assets and income to bring their financial affairs up to date.
Banks shut accounts
HSBC Jersey has already sent letters to customers living off the island confirming their accounts will be shut unless they report to their branch with identification documents proving they are resident on the island.
HSBC has faced recent criticism over aiding tax evasion by British taxpayers in Switzerland.
“HSBC is checking the customer information on our files to make sure it is current and meets regulatory requirements to safeguard against fraud and money-laundering,” said a bank spokesman.
“We have closed several accounts where we have found customers do not meet those standards or where we have concerns about tax compliance. “
HSBC does offer expat bank accounts through a specialist service, but the spokesman made clear that none of these accounts are involved in the review.
Other banks are also looking at customer files, including the Royal Bank of Scotland and Barclays.