An IBAN number is basically just a routing number. So an IBAN could very well point to correspondent accounts at a European bank that map back to accounts held in US banks.
There is also the question of âresponsible entityâ. Letâs take for example Interactive Brokers. You could be holding a bunch of EUR, as a US citizen. IB guarantees your funds are not co-mingled with other customer funds and that the money is held in segregated accounts at one or more banks. What banks are those? You have no idea. What country are they in? You donât know, and you donât care. Those segregated accounts all roll to master accounts, and the bank considers the master account because it doesnât really have a relationship with you and your segregated account. So is that european bank reporting your account to FINCEN? No, because itâs not really a real account and the bank has no direct relationship with you.
So I really imagine that on the whole Wise is probably right, and thereâs no reason to file a FBAR.
Iâve been on with wise this whole time to confirm, but I tend to agree with that line of thinking.
Itâs all just numbers in a ledger being moved around.
Hereâs one of their responses:
Mihaly: 3:58pm 2021-05-05
Where your money is depends on which country your Wise account address is in â if your account address in the UK, for example, we keep your money in Barclays, or other financial institutions in the EEA: How Wise keeps your money safe | Wise Help Centre
Yes the IBANs are just routing numbers. The question is really about where is the money located and in which currency. Wise is probably not hedging currency in all these accounts, so I suspect they really have the money somewhere in the local currency. It would make more sense that the Euros are kept in EU , not in the US, especially when they are using IBANs located in Belgium.
Wise is not at all transparent about their back-end process. This is probably intentional.
I suppose one question for these borderless accounts is where the money is held and does it really exist except in an electronic ledger. Sure, there are reserve requirements and such, but does the US government have reserve requirements for Euros? I donât know.
I searched again on Wise and couldnât find anything. But in the passage belong there is a âtellâ if you read between the lines that suggests to me that the Euros are held in a EU country and not in the US, This also conforms to what Wise told me last year that funds are held in the country of the currency.
Despite the Euro single market, some merchants wonât allow Direct Debits from Euro accounts in another country. For example, a Spanish gym might not accept your IBAN because itâs based in Belgium.
Merchants are required by EU law to accept IBANs from other members of the European Economic Area (EEA). So, if someone doesnât accept your IBAN, please let us know using this form .
Iâm not a CPA but I believe the IRS is often fine with people using average currency exchange rates for an entire year. So as long as you convert currency and buy soon after, you donât have to account for very short term currency changes. Just track dollars in vs dollars out and that should be enough to calculate your gain/loss.
@sjswarts I recently did a transfer (wanting both 1/ a âcleanâ wire of funds from my US bank account and 2/ low fx fees) where I ended up with a rate I was really happy by wiring USD and then converting (.31% diff from spot rate + correspondent bank fees with Bison) â better than what I couldâve gotten with Wise (.42%) and way better than from my US bank (1.2%).
I ended up using Schwab. I donât know what the diff was but it was low, but I mostly used them because I wanted to lock in the exchange rate then since it was headed up. I didnât want to wait until the funds were in Bison to do the conversion.
@anon16151502 I just now got the follow up email from my Wise help desk chat, that contradicts your assumption below FWIW. Since they are not a bank, maybe they donât have reserve requirements like a bank does?
Of course Iâll keep this email, plus my notes from the chat a year ago, and the recent chat in my arsenal as to why I didnât and wonât file a FBAR for those euros if the IRS comes knocking.
[quote=âanon16151502, post:24, topic:37325â]
if you read between the lines that suggests to me that the Euros are held in a EU country and not in the US, This also conforms to what Wise told me last year that funds are held in the country of the currency.[/quote]
Thanks for getting in touch with us earlier via chat.
Since you are a US-based customer, we store your money, regardless of currency denomination, in the US. The funds are overseen by state regulators, depending on the state you are in. Because you are a US-based customer with a US-based business, no FBAR is necessary.
Keep in mind that your WiseBorderless account is treated as an account in the country where your personal and in your case business address is. Wise is not a bank but a financial regulated electronic money institution.
Laura
Thanks for sharing. I wasnât giving my assumption though. Wise told me that Euros were maintained in Belgium. This seems to be a much more definitive statement they gave to you , and that is good to hear.
I was referring to the â⊠if you read between the lines that suggests to me that the Euros are held in a EU country and not in the US.â statement.
I meant you no offense as I thought it was your assumption and interpretation.
In any case, Wise isnât a bank, and funds are kept in the country where you have/had residence (tax domicile or otherwise) when you opened the account. I hope that helps someone who is trying to figure out whether or not reporting is necessary on their Euros (or other foreign currency) in account.
No offense taken. I did apparently make some wrong assumptions in general based on what Wise told me.
I will point out that for most GV applicants this makes only a trivial difference. They are still going to need to file the FBAR but with one less line item.
Hi, I am sending my law firm their initial fees (so a relatively small amount) and just planning to to use Schwab for it. I donât quite understand whatâs involved in the transfer process⊠could you please clarify regarding your comment about CGD ? How do I know if it is actually the correspondent bank or not, or is it always for all transfers going into Portugal. If its relevant, my law firm has an account at Novo Banco.
I donât quite follow. Do you have a Portuguese bank account, or are you wiring money from Schwab directly to your lawyers? My guidance is about wiring money from a bank in the USA to Bison Bank.
If I wanted to pay a vendor in Portugal and didnât have a Portuguese bank account yet, Iâd use TransferWise or something like that. International wire transfers are complicated and relatively expensive for small transfers. Youâll get dinged by intermediaries and bad exchange rates even if Schwab doesnât take any fees off the top. The economy of scale for international wire transfers works better when youâre transferring large amounts for the main investment, and SEF apparently prefers that approach when inquiring about the source of funds for the actual investment. I donât think they care how you pay your random bills and fees.
Hi ⊠I was attempting to transfer money to my Bison account with Chase this morning and although they had room to specify the Intermediary/Correspondent Bank, they were confused by the details our contact at Bison had provided. The folks at Bison have given us details for the CGD account ( referred to as Correspondent ) as well as an Intermediary Bank ( CITI ). Chaseâs standard form allows them to specify the first recipient bank and some instructions on how to forward this and the final beneficiary. Any clues as to what the right setup here is ?
Sympathies ⊠itâs not easy. The customer service people at big American banks assume it just works, and it doesnât. Another frequent and trustworthy poster got most of her test transfer bounced back to her originating account after 2 weeks in opaque limbo, minus around $100 in garbage fees. She was persistent with her Fidelity rep about going through the long form and specifying the correspondent bank, and it went through correctly on the second try.
I had the same challenge with Schwab. I solved it by first wiring the money to Fidelity, then wiring it from Fidelity to Bison. You will have to call Fidelity and be persistent on the phone, since theyâll try to convince you that the correspondent bank isnât necessary. If you push them, theyâll research it and discover that you really do. Iâve been through this twice now; it goes down the same way every time. It takes about 2 hours on the phone but theyâre generally pleasant and helpful.
I believe that Fidelity offers free accounts to any American citizen with a $1000 minimum. I am allowed to make 4 international wire transfers free every year, but that privilege may not be universal; YMMV.
You could try to be persistent with Chase but regardless of their âtoo big to failâ scale, Iâm not sure they understand how to deal with complex international wire transfers at all. Also they have pretty high fees for wire transfers, though you can slowly dribble money over to another American account for free using ACH transfers if you donât mind the time and effort.
It is weird that they donât have a more robust and reliable mechanism for moving large amounts of money around. Apparently SWIFT is about as sophisticated and modern as a fax machine.
Yeah I ended up doing a small transfer. Fees are a blip compared to the headache if things go wrong so was an easy decision. It seemed like everything would work out with the transfer without the special instructions as well because I literally had to sit down with the person making the transfer for me and put in all the information Bison sent in a 140 character text box. It seemed like this information was redundant and is also sitting in a database somewhere that these big banks and networks already have. Hopefully, failure and success with the test is indicative of future result.
Pretty much. People still READ the transfers in many cases I think.
Test transfers to test the path are always a good idea. I always do them for anything over a few hundred bucks.
For people in the US, the customer service reps the average person will face generally have little clue as to how wire transfers international even work, because average folks in the US rarely do wire transfers at all, and international ones even less. Trying to do it through my credit union starts with a âare you sure this isnât a nigerian fraud scam?â conversation and a faxed form. Iâve long since given up, and I keep an HSBC account in part because they have a portal for doing complex wire transfers that actually works.
There are people at Chase that understand wire transfers, Iâm quite sure. Chase is one of the big correspondent banks. The issue is getting through to one of those people.
I ended up using Interactive Brokers and transferring in EUR, which was trivial. I didnât even look at the USD instructions til now. Citi corporate to some Portuguese bank to Bison. Gah.
If you are sending USD, it should be as simple as a domestic wire and you can list a random bank as an intermediary. I have used JP Morgan in the past. I donât know how or even if they do a currency exchange in this case . If it is going to Bison bank USD account, then there would not even be any currency exchange at all I assume. I didnât do these exact steps so I may be off but this process should work in general. I have used it many times for international USD wires.
If you really need to use Chase, I would try transferring a small amount first. You can ask Chase to cover the fees charges by the corresponding bank if it doesnât go through. However, Chase may already have correct instructions for international transfers. What happened to us with Fidelity was because they sent the money via Caixa Central de CrĂ©dito Agricola MĂștuo and they should have sent it via Caixa Geral de DepĂłsitos. The garbage fee was charged by Caixa Central before the money credited back to our account.