3 Steps to Keep Your Money Safe While Abroad

My colleague just ran afoul of the American financial system’s most frustrating rule.

Owen, an American expat living and working in Europe, logged into his U.S. bank to find his accounts frozen. He’d lost access to his funds—without warning.

It’s not that the bank suddenly realized he was a gun runner, or laundering money for the mafia. Owen’s just a normal expat who was trying to move money around at a U.S. bank he’s used for more than a decade.

His crime: his primary address was not a physical residential address in the U.S. This address cannot be overseas, even if you’re a U.S. citizen. Nor can it be a P.O. box or any commercial mailbox such as those offered by UPS or Mail Boxes Etc. (what are known as Commercial Mail Receiving Agents).

This bizarre rule is part of the "know your customer," or KYC, regulations that all U.S. financial institutions must follow. Until recently, banks and brokerage firms weren’t very strict about this physical residential address rule.

"However, in the past couple of years, we’ve started noticing a trend where banks are running through all their bank accounts to verify that the physical addresses are really physical addresses," according to VPM, a provider of virtual mailboxes that expats and business owners are increasingly using. "In fact, we’ve seen a spike of queries regarding this… so it’s safe to say that banks are sweeping their accounts to check this."

Owen seemingly got caught up in a recent sweep. His U.S. address was listed as a commercial property, not a residential address.

The thing is, the bank never notified him. "Just froze my funds," he told me. "And my funds are still frozen because I don’t have any utilities in my name at that address, or any other address in the U.S.

"I’ve literally had that same address in the decade-plus I’ve been with them. Never been a problem before. When I think about it, it’s really a potential nightmare scenario for someone who has no other options. Imagine if all your life savings were in those accounts? Fortunately, I established accounts in Europe when I moved here. Otherwise I would be broke—unable to pay rent, unable to buy food."

This is a potential problem for anyone living and working overseas—or those considering moving abroad. Without a physical U.S. address, banks won’t give you access to your account. Nor will brokerages let you trade in your account, your 401(k), or your IRA.

Simply put: The U.S. financial system is not built for expats. With that in mind, here’s how to structure your financial life so you never lose access to funds…

Step 1: Link Your U.S. Accounts to a Residential Address

For expats who aren’t maintaining a permanent residence in the U.S., the most common workaround is to use a family member or friend’s address.

This strategy is all well and good, as long as you’re careful not to spill the beans…

Last year, I called brokerage giant Fidelity to manage an issue with my daughter’s college savings account and mistakenly mentioned that I lived in Prague. Within an hour my account was frozen and I had to spend the better part of a week convincing the firm’s compliance department that my registered address—my dad’s home in Florida—is my real address (it is for legal purposes).

If you don’t have a friend or family member who you trust receiving your financial mail, there’s an alternative…

The virtual mailbox company I mentioned above, VPM, can provide a physical non-commercial address. The company says it can be used for banking, credit cards, and taxes, as well as an address on your driver’s license.

Moreover, VPM will collect your mail, scan it into a database for you to access, then mail it to you piece-by-piece or in bulk anywhere in the world. Pricing begins at $20 per month for a starter account, which covers 25 pieces of mail per month (to avoid hitting that limit, I suggest opting for electronic correspondence when your various accounts offer the choice).

I signed up for the service as part of this story, and so far everything has worked as promised. I’ll report back with an update in a few months.

Step 2: Open a Local Bank Account in Your New Homeland

When you move overseas, you should establish a local bank account as soon as possible.

Often this will be necessary, since utilities companies tend to require local bank accounts, but you can also use your account as a place to store backup funds. This way, if your U.S. accounts are ever frozen, you can rely on your local bank. (That’s what saved Owen.)

How quickly you can open an account will depend on the country you’re moving to. In most cases, you will need a residence visa before a local bank will work with you. But as I wrote in my article in the June issue, I was able to open a bank account in Ireland with just my U.S. passport. So, the rules vary, and you should cross-check against both your bank and government websites.

Step 3: Use Non-Bank Financial Apps

Depending on the bank, international wire transfers can take up to five business days—unacceptably lethargic.

Into this void has stepped a new generation of non-banking money transfer and payment apps such as Wise and Revolut, which both provide multi-currency debit cards I use globally.

Wise and Revolut look and function much like regular bank accounts in that you can accept payments (such as your paycheck) and store money in a savings account. A key difference: you can move and store cash in multiple currencies. And with Wise, you can transfer funds between U.S. and foreign bank accounts within a day or two. Better yet, you’re paying international rates for those transfers—the same rates the world’s big banks pay.

Both firms are fully regulated in the U.S. and the jurisdictions they operate in overseas. And you don’t need to have a physical U.S. address to sign up for them. You’ll simply need a Social Security number, passport, or driver’s license, and proof of address from wherever in the world you’re living.

Are Wise and Revolut Covered by FDIC Insurance?

As Americans, we know our cash is insured up to $250,000 per account by the Federal Deposit Insurance Corp. If a U.S. bank collapses, or even the local branch of a foreign bank, we won’t lose a penny below that maximum.

But Wise and Revolut are not banks and are not directly covered by the FDIC. That means the money you hold in these accounts does not qualify for coverage… unless you keep it in each platform’s version of a savings account.

With Wise, that’s the app’s "Earn" service—an interest-earning account currently offering a 4.13% annual rate. This savings program is managed on behalf of Wise by J.P. Morgan, which means Wise’s U.S. customers benefit from what’s called "pass-through" FDIC coverage. Basically, the FDIC coverage at J.P. Morgan is passed on to its customers via Wise, as though your savings account was held directly at J.P. Morgan.

It’s similar with Revolut’s "Savings Vault." Funds are held at Metropolitan Commercial Bank, a well-capitalized and federally chartered New York bank. As such, money in a Revolut Savings Vault qualifies for FDIC pass-through coverage.

So, when using these apps, keep the majority of your funds in an Earn account or Savings Vault, and transfer spending money into each app’s main "current account" as necessary.

Are Wise and Revolut Subject to KYC?

Both services must adhere to KYC, which means you can still run afoul of compliance rules.

Case in point: A few years ago, when my wife and I were dating, I used Wise to send her money for a trip. The problem is, she lived in Crimea, then under international sanctions because of Russia’s 2014 invasion.

Wise canceled the transaction—understandably—but then froze my account for "routine compliance." I was told "it’s only going to take a couple days." More than a month later, I still had no access to my account.

That was problematic because my salary flowed into my U.S. bank, but my daily living expenses were all in the Czech Republic. I’d been using Wise as my conduit for moving dollars from my U.S. bank into my Czech bank.

With my Wise account frozen, my pipeline was closed, causing a huge financial worry given that rent and insurance payments were due. Luckily, I had enough cash locally that I could navigate the situation.

But the episode meant I developed a mantra that I regularly share with current and prospective expats: Create failsafes!

My Solution: Have Multiple Accounts… Everywhere

You never know what KYC alarm you could trip or why. And if you do trip an alarm, the first time you’ll know about it is when your credit card suddenly stops working, or your bank accounts are frozen, or your money-transfer app no longer lets you move cash around.

To that end, I have multiple backup accounts for banks, credit cards, and money-transfer apps.

If one of my U.S. banks freezes my account, I have three others in three different states.

If my Czech bank seizes up, I have a local backup, as well as that account I mentioned in Ireland, and now one in Portugal, where I recently relocated.

If Wise stops working, I have an account with a similar company called OFX. It’s slightly more expensive, but in a pinch, cost becomes secondary.

If my Revolut debit card is frozen, I have a card from Wise and another from N26 (the German version of Revolut that no longer serves U.S.-domiciled customers, but will work with Americans living abroad in certain countries).

Setting up all these accounts sounds like a headache, but it really isn’t. They’ve all been easy to open, and most have minimal or no maintenance fees. Be sure to look for these low-cost options.

When a financial firm locks your account and restricts access to your money, it’s the financial equivalent of losing access to oxygen. And it’s particularly problematic when you’re living overseas.

The solution is establishing multiple paths to your money in multiple locations. That way, you’ll always be able to reach some portion of your liquid assets… no matter what nonsensical regulation you inadvertently violate.