FBAR which stands for Foreign Bank and Financial Accounts Report is an annual report that provides the U.S. government with information regarding certain foreign financial accounts. This may sound a lot like FATCA, CRS, BEPS and the rest of the financial transparency acronyms that have been flying around. However, it is a different transparency regime with potential civil and criminal penalties if your employees fail to file.
What Is FBAR?
FBAR is part of the U.S. Bank Secrecy Act. It has been around since 1970 with responsibility for the program assigned to the U.S. Financial Crimes Enforcement Network (FinCEN) which is a bureau of the U.S. Department of the Treasury. FinCEN’s goal is to safeguard the financial system from illicit use and combat money laundering and promote national security.
Along the way, FinCEN delegated some enforcement authority regarding FBAR to the Internal Revenue Service (IRS). The IRS is responsible for investigating possible FBAR civil violations, assessing and collecting civil FBAR penalties, and issuing FBAR administrative rulings.
FBAR has become more widely known as offshore accounts have been discovered through government investigations and the U.S. financial account transparency regime named “FATCA.” As financial institutions comply with FATCA, the U.S. government is in a great position to compare FATCA information against filed FBARs.
Who Must File?
U.S. persons are required to file an FBAR if:
the U.S. person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
the aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year reported.
For purposes of FBAR, a U.S. Person includes U.S. citizens and U.S. residents.
[Note: The company may also need to file for employees if the employees have signature authority over their employer’s foreign financial accounts. There are certain exceptions to this requirement.]
What Is a Foreign Financial Account?
A foreign financial account under FBAR includes:
A securities, brokerage, savings, demand, checking, deposit, time deposit, or other account maintained with a financial institution.
A commodity futures or options account, an insurance policy with a cash value (such as a whole life insurance policy), an annuity policy with a cash value, and shares in a mutual fund or similar pooled fund (i.e., a fund that is available to the general public with a regular net asset value determination and regular redemptions).
What If Your Employee Doesn’t File?
If the U.S. government determines an employee has not filed a required FBAR, she may face civil and criminal penalties.
It is important to act quickly given the deadline to file for year end 2016 is October 16, 2017.
Human Resources should consider:
Providing ex-pats training about potential U.S. tax filings prior to transfer.
Adding language to ex-pat employment contracts to include individual tax assistance with home country and local tax filings.
Providing training to employees with signature authority over the company’s non-U.S. foreign financial accounts so they understand that their personal information may be reported to the U.S. government.
If you would like further guidance regarding FBAR training or management over general legal issues facing your non-U.S. subsidiaries, please contact me at firstname.lastname@example.org. For additional information, please go to my website: https://www.elizabethmcmorrowlaw.com/international-legal-operations
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