A little known fact among North Americans is that a growing number of their fellow citizens is getting a second passport and giving up their U. S. citizenship. Harper’s Magazine reported that in 2002 there were 403 people who chose to cease being citizens. The number has increased and last year, 2011, almost 1800 people severed their relationship with the U.S. according to a list published by the IRS. Some analysts think that figure is under-reported.

And yet, considering the population of the US and the fact that an estimated 3 million to 6 million U. S. citizens already live outside the U.S., this is not a spectacular figure. Many people with no intention of giving up citizenship already have residence and live in another country. But Gerald Celente, trends analyst, editor of The Trends Journal, predicts that this trend has only begun. He foresees a growing wave of people leaving the U.S. as time goes on and as opportunity appears to be going offshore. The same applies to our potential immigrants from the UK and other parts of the world. Are the people who are leaving poor, destitute folks? No, they are among the finest, most productive and intelligent citizens. Many are professionals or successful business people—stockbrokers, lawyers, teachers, engineers, medical personnel, IT professionals, publishers. It is my privilege to be personally acquainted with some of them who are already here.

Is it possible that the United States might put up barbed wire to keep their productive citizens at home? We don’t think so. But other actions that might be as effective. What about approaching the issue from the opposite direction—by gradually putting so many requirements on financial institutions regarding U. S. citizens that most cease to accept Americans as clients? In the case of Uruguay, several years ago the U.S. threatened that if Uruguay did not comply and ignore their bank secrecy laws, the U. S. would deny them access to U.S. banks and worse, would embargo the little nation. Embargo is, of course, an act of war. In other words, they would destroy this small country. Uruguay agreed to the demands, of course.

I was in Uruguay at the time and I reported on these events. In so doing, I looked for an article in English from the U.S. media to document these facts for English-speaking readers. I could not find a single U.S. news media source that reported that Uruguay had been threatened. All news items merely stated that Uruguay had agreed, and had been removed from the “gray” list. The reports were true–just left out some critical details. A reader would never question if there was more to that innocent story. Uruguay banks agreed–and almost all of them refused to accept U.S. citizens as clients. Some U.S. expats with bank accounts–even in Europe, were notified to remove their money because their accounts were being closed. These banks explained that the U.S. reporting requirements made serving U. S. citizens too costly for them.

Years ago, I used to wonder why more people didn’t leave Germany before WWII. After all, couldn’t they see the writing on the wall? Then I found out that they could leave–they just could not take their money. It is interesting that some saw what was coming and left early when it was easy. Argentina and Chile have large populations of descendants of the people who came here during that period. Others, who waited until it was otherwise too late, were creative enough to put their money into stocks, took possession of the certificates, burned them and left the country with nothing. And what did those creative people know? You can replace “lost” stock certificates.

Interesting that many Argentines of that era reported seeing German submarines beach in the shallow water off Argentina shores and their occupants come splashing ashore to take refuge here. It is possible at times to see one submarine still lying just off shore in the south. But many had no possibility of exit. It is difficult to take up residence in another country if you have no money.

Along the line of banks refusing accounts to Americans, a reader wrote me this past week to tell me that it is too late now, no bank will accept U.S. citizens. I was happy to write back that, while it is true that things are changing, there are many banks that still serve U. S. citizens. For example, the national bank, Banco Republica, in Uruguay, serves Americans. They do comply with U. S. reporting requirements. Well . . . ALL Uruguayan banks comply, of course! Only most just happen to have no US citizens to report on. Imagine that!

This is one reason for holding a second citizenship if possible. I once applied to a European bank for an account. They assured me that yes, they welcome U. S. citizens. So I filled out all the paperwork they sent, provided verified I.D., sent it all by courier and waited for my account to be opened. Two weeks later the bank representative phoned to tell me they were so sorry but they do not accept U. S. citizens any more. Then the caller added, “When you get your Argentina citizenship we hope that you will contact us again.”

A second citizenship provides options you do not have otherwise. For those who are wondering, a second citizenship does not affect your U. S. citizenship. In fact, if you want to give up your U. S. citizenship, you have to go through a whole procedure of filling out an application and being approved by U. S. government entities. You dare not do it for tax reasons. If you do, or if they assume that you do, the answer will be no.

Further, there is now talk of withholding one-third of unrealized gain on the value of what the expat owns as an “exit tax” if he or she elects to move assets to another country. President Obama recently suggested the exit tax be on anything over $600,000. So there may well be a cushion there–for now—if in fact it becomes law.

In fact, the Foreign Account Tax Compliance Act (FATCA) that begins to take effect January 1, 2013, will withhold one-third of the amount taken out of the country. As I understand this, it is a safeguard to be sure that all tax on the money has been paid. You are supposed to be able to get a refund when you file your income tax return if you did not owe the money. But here is the inconvenience of that. Suppose you come to Chile and decide to buy a vacation home for the price of $100,000. Once this takes effect, you will need $130,000 in order to complete the purchase since the bank will withhold $30,000 of the amount you send to Chile. But then if you take out $130,000 to buy the property, that changes the figure. You will need in the neighborhood of $140,000 in order to buy a $100,000 property. The date for this to take effect was originally January 1, 2013, but setting up the system to do the paperwork is so involved that the banks just may not be able to do it by then and so the actual procedure may be postponed until 2014. At this point I don’t think it has been decided.

Also, if you are dealing with a “compliant” bank, supposedly this rule does not apply. But there are complications. If the bank makes a mistake and does not withhold the amount when they should have, then the bank is responsible for the amount that should have been withheld. But . . . if the bank mistakenly withholds your money when they should not have, and it damages you financially, you cannot sue the bank for the damage. They are protected.

Please remember that we are not accountants here so if you are in a situation where this could affect you, we suggest to be sure that your accounting professional is familiar with these new laws and regulations and can advise you. We are striving to understand all of this ourselves, just as you may be. You can read official government information about FATCA at: http://www.irs.gov/businesses/corporations/article/0,,id=236667,00.html. We are not even certain that all the procedures and requirements have been decided yet. Our point here is just to be sure you are informed that regulations are becoming ever more cumbersome and onerous as time goes on.

We also notice the plan being put into law now is to withhold one-third until tax returns are filed. AND we notice that the proposed exit tax is also for one-third. Coincidence? I hope so. But I, along with the banks, do not get a warm fuzzy feeling from all this.

Add to this the fact that some countries have been raising requirements for residency and citizenship. It is not only people from the U S. who are emigrating here. People from the U.K. and even Spain are seeking refuge in South America. This is causing understandable concern among our governments here. They fear that a large influx of immigrants will put a strain on school systems, the medical system and other parts of the infrastructure. Plus they are concerned about too many immigrants changing the culture. Argentina raised their requirements a couple years ago and my Argentina attorney tells me he hears talk about doing it again. Uruguay recently changed some of their requirements as well. Previously you could gain permanent status by just showing up in the country to apply. Recently it was changed to require that the applicant be living in the country.

Gerald Celente is quoted as saying that you can forecast future trends by looking at current events. By that standard, current events seem to indicate that moving assets outside the United States is likely to become more difficult in the future than it is now. Second citizenship is still within reach of most people, but combined with the actions with banks, we think we see an emerging pattern of which it seems worthwhile to take note. Some financial advisers say that the first logical step would be to bank in more than one country, even if our plans are to remain in our home country. But since cash in any fiat currency is risky these days, storing precious metals in a facility outside your home country is another option.

And of course acquiring a vacation home or retreat in a place that you like is another option.