For corporations that operate globally and depend on deploying international assignees, foreign currency movements and costs of international assignments all have been impacted. In companies where decisions on the international assignment may have been left solely to the international HR/global mobility manager, now the CFO and/or treasurer—who always is closely watching the costs of the international assignment—are more involved and, in some cases, may have a greater impact on company policy than before.
Financial services always has been a forgotten component of the international assignment. Arranging for assistance with financial services almost never appears on the lists of tasks for the corporation or the international assignee to complete. The international assignee likely thinks that the company is sending him or her on this international assignment, so it will take care of all the financial needs and recommend or provide the best way to do this—just as they would handle other aspects of the international assignment, such as moving household goods.
The international assignee may not be fully aware of what financial services he or she will need during the international assignment and has not made adequate arrangements for financial services assistance to meet even the most basic needs during the assignment, for instance compensation and expense reimbursements, moving money across borders, and remote money management. In this case, the international assignee is solely dependent on the corporation for guidance.
If the company is unfamiliar with the most effective and efficient means to assist with financial services during an international assignment, it may seek out the assistance of a financial services provider that understands the challenges facing international assignees and can help the company:
-
control costs by knowing the actual, fixed cost of the international assignment (assuming the company reimburses the international assignee for any financial services-related expenses, such as ATM fees);
-
minimize or eliminate financial-related tasks completed by the international HR/global mobility specialist managing the international assignee (i.e., no need for involvement in the international assignee’s personal financial matters); and
-
ensure that the international assignee is productive and focused on business during the international assignment and is not burdened with additional financial concerns related to the international assignment such as, “how do I provide financial assistance to a family member still in my home country?” or, “how do I open a bank account in a foreign country?”
A global corporation’s decision maker should consider several key elements when managing the financial services component of an international assignment.
Choosing a Financial Services Provider
Choosing wisely is an understatement. It is not news that many financial services companies are in dire straits. Choosing a financial services provider is becoming increasingly difficult. Because of the economic crisis many financial services companies are returning to their core base of customer, such as mass affluent walk-in customers, and considering foreign nationals to be outside their normal customer profile. Many financial services companies have scaled back divisions catering directly to foreign nationals and have taken a stricter policy on providing financial services to foreign nationals.
It is essential that your financial services provider be part of an institution with not only a solid reputation, but also with a legacy and reputation for serving foreign nationals. A separate division with a dedicated, multilingual customer services and/or relationship management team is preferable.
Although budgets are strained, now may not be the best time to select a financial services provider whose service is based solely on discounted fees and other extraordinary enticements such as waiving all fees for the life of the account, or providing the initial deposit.
Also, be cautious of a financial services institution that does not offer an established service, but always will make an “exception” for your international assignees based on incidental factors like the local branch located next to your headquarters, or that many of your employees already bank with them. An exception is not an established service. An exception may not survive the next round of downsizing or business review scrutiny.
Account opening. Many corporations and international assignees think that most countries have global banks and that the branches operate the same in each country. However, banks often are subject to country-specific regulations and must adhere to strict restrictions on certain types of transactions. Therefore, many seemingly global banks do not operate on a global platform and overseas branches often act autonomously. As a result, the international assignee may not receive the same level of service to which he or she is accustomed and opening a bank account in a foreign country may not be a simple process.
Post-9/11, the documentation required for foreign nationals to open bank accounts has increased and varies from country to country and sometimes even from branch to branch. In most cases, the new host country bank will require at least a bank reference letter or bank statement from the international assignee’s previous bank, and also may require a letter from the new employer. Amid the assignee’s unpacking and settling in to a new home, these documents may not be readily available. In countries such as the United States, a bank account may be required in order to obtain other services, such as renting an apartment and activating utilities.
Account opening should be available via multiple channels, including online, e-mail, and fax. Pre-departure account opening in a timely manner also should be the cornerstone of any financial services provider’s process. This will ensure that the international assignee already has a way to receive compensation, move money, and begin to take care of home and host country financial obligations before they even arrive in their new host country, as well as to help avoid difficulties in managing financial services during the international assignment.
Products and services. Does the financial services company have appropriate products and services for the international assignment?
Type of account. Deposit accounts (checking and savings) for delivery of compensation; including salary, allowances, and reimbursements is essential.
ATM/debit card. For access to cash and convenience, international assignees also should choose to have an ATM and debit card with their account and have a basic knowledge of how each works.
ATM. Globally, ATMs may operate on different networks, so it may not always be easy to find one that accepts your ATM card. Also, for fraud prevention purposes, there usually is a daily limit on how much money one can withdraw from an ATM. Banks also set limits differently, with some using calendar day, and others using business day. For example, Friday, Saturday, and Sunday are separate calendar days, but generally count as only one business day. If an international assignee needs a substantial amount of cash for travel or sustains a medical emergency during the weekend, they might find themselves over their withdrawal limit, even if they had not taken out any money for two calendar days. Also, in some cases, the ATM may dispense the money and charge additional fees for “overdrawing” the daily ATM limit.
Debit cards. Debit cards can be used for purchases and transactions. Like ATM cards, debit cards also have POS (point of sale) daily limits. International assignees settling in to a new home country may find that existing daily limits may not be enough to meet their new living expenses. A bank usually will increase POS limits at a customer’s request. As debit cards usually are attached to a checking account, international assignees should be mindful of exchange rate volatility that could increase or decrease their purchasing power when using a debit card overseas. Also, banks may charge transaction fees that might make frequent transactions costly. For example, in Europe, it is customary for merchants to pass along the costs of using a debit card to the customer.
Credit. In most countries, having some type of credit is now a must.
A full range of products for an international assignee should, at a minimum, include a program that covers credit cards, mortgages, and auto procurement.
Before the credit crunch, foreign nationals without a credit history or limited credit history were considered high risk. Credit histories usually do not transfer across countries, and most banks do not even know how to interpret a foreign credit report, so an international assignee applying for credit may experience substantial difficulties.
During this economic crisis, financial institutions are reviewing their lending practices and credit policies looking for ways to minimize risk. As a result, corporations and international assignees will have to be flexible in the types of credit offerings available. All options always should be explored, including secured credit products where the customer is asked to put a “secured” amount of money down as collateral.
The best solution is to find a financial services provider that has a program that includes secured and unsecured credit products for international assignees without a local credit history. This should be part of any banking program and should be applied for pre-departure as well.
Wire transfers. Movement of money during an international assignment to take care of home and host country obligations is a key product/servicing offering. Most international assignees also require education in this area. Many assignees think that if they need a large sum of money, they can arrange for their personal banker in their home country to make arrangements to send money to them in their new host country or get a family member or friend to send them the money if needed.
Given increased security and fraud prevention methods, few banks accept telephone instructions because they cannot verify the identity of the caller and will not authorize a transfer unless they appear in person, or the limits may not be high enough to be valuable to the international assignee. The typical procedure is to go to a domestic branch, complete a funds transfer form, and show appropriate identification. Mailing requests for a funds transfer to the bank is not timely and efficient and presenting oneself in person obviously is not an option. Trusting financial services to a family member may not be the safest option, nor the fastest or cheapest. In addition, international assignees may not want to give a family member power of attorney to make transactions on their behalf during the international assignment.
In the current global economic crisis, where “flight to safety” is a top concern, wire transfer is another product/service where rate shopping and choosing a financial provider that gives this product/service for “free”—for example, unbelievably low exchange rate or no fees for sending wires—may not be the best alternative. There are other considerations, including whether the financial provider offers multiple distribution channels such as online, phone, e-mail, or fax, to give international assignees several options to move money. Also, does the financial services provider offer a safe and efficient means of moving money across borders? What security procedures do they use, such as a password or token? How long does it take for an outgoing wire transfer to be executed?
Repatriation
Most international assignees think that when they go on an international assignment they can close their home country financial relationships. However, most international assignees are never able to fully cut ties with their home country, especially financially. They may receive home-country payments from rental property or investments; or a family member in the home country still is relying on financial services assistance from the international assignee; or they may still need to pay taxes abroad.
As the global economic crisis affects banking guidelines and regulations, an international assignee who leaves the country for a substantial period of time without maintaining a banking relationship—including an active credit history—may experience difficulties when attempting to obtain a new banking relationship on repatriation. A financial provider always should encourage an international assignee to maintain a bank account in the home country while assisting with managing financial relationships in the host country.
Lisa R. Mitchell is vice president/manager, Wells Fargo, San Francisco, California. She can be reached at +1 415 396 1328 or lisa.r.mitchell@wellsfargo.com.