FinCEN, the FBAR, and the FATCA
A Legal Moment

Offshore Accounts?  Hiding Assets?  Who, Me? The FinCEN, the FBAR, and the FATCA.

   Many U.S. citizens or residents own bank and other financial accounts located outside the United States for perfectly legitimate reasons, but some may be unintentionally running afoul of "money laundering" laws -- and risking stiff penalties -- by not annually reporting those accounts when the value exceeds $10,000.

Oversight of foreign financial accounts:  FinCEN
   The Financial Crimes Enforcement Network (“FinCEN”) is a bureau of the U.S. Treasury Department that is tasked with collecting information for the purpose of combating money laundering and other financial crimes.  Established in 1990 under the authority given the Treasury Department by the Bank Secrecy Act, FinCEN collects information from U.S. persons who have financial interests in, or signature authority over, accounts with financial institutions located outside the United States. (Congress passed the Bank Secrecy Act (or Currency and Foreign Transactions Reporting Act) itself in 1970 as the first set of laws designed to fight money laundering.  The Bank Secrecy Act was amended in 2001 to incorporate the provisions of the USA PATRIOT Act.)
Reporting requirements:  FBAR
    The Bank Secrecy Act requires that a FinCEN Form 114, Report of Foreign Bank and Financial Accounts (“FBAR”), be filed with FinCEN if the aggregate maximum values of a U.S. person’s foreign financial accounts exceed $10,000.
Who must file the FBAR?
    A U.S. “person” (citizen, resident, entity, trust, or estate) must file an FBAR if that person has a financial interest in, or certain signature authority over, financial account(s) outside the U.S. and if the aggregate maximum value of such account(s) exceeds $10,000 at any time during the calendar year.
When is the FBAR due, and where is it filed?
    The FBAR is due April 15th of the year following the calendar year being reported, with a 6-month extension available.  (This is a fairly recent change; the deadline for filings for calendar years prior to 2016 was June 30, with no provision for extension.)  The FBAR is not filed with the filer’s Federal income tax return, but instead is filed with FinCEN.  As of 2013, FBARs must be filed electronically, and they are filed through the BSA E-Filing System.
What if I don’t file?
    If the FBAR is required and is not filed, significant civil penalties can result.  In 2003, FinCEN delegated enforcement authority over the FBAR to the IRS, which is responsible for investigating possible civil violations and assessing and collecting civil penalties.  “Willful” failure to file can also result in criminal penalties.
Is there more?  Maybe.   FATCA and IRS Form 8938
    In 2009, U.S. officials became aware of some foreign banks encouraging evasion of U.S. taxes, and in 2010 Congress passed the Foreign Account Tax Compliance Act (“FATCA”).  One of FATCA’s provisions requires foreign financial institutions to provide information about U.S. account holders to the IRS, and institutions began doing so in 2015.  FATCA also requires certain U.S. taxpayers who own foreign financial assets totaling more than the reporting threshold (at least $50,000, and it may be higher depending on filing status) to report information about the assets on IRS Form 8938, Statement of Specified Foreign Financial Assets, and file it with the taxpayer’s annual return.  This FATCA requirement is separate from the long-standing requirement to report foreign financial accounts to FinCEN on the FBAR.  Further, there may be a FATCA filing requirement even where there is no FBAR filing requirement (for example, if the foreign assets consist of foreign stock or securities not held in a financial account, foreign partnership interests, or foreign mutual or private equity funds).  Penalties for failure to file Form 8938 can be severe.
What should I do?
    If you think you may be subject to FBAR or Form 8938 filing requirements and need assistance, it is recommended that you seek advice from an experienced tax professional.  The FBAR and Form 8938 filings are informational only and do not increase your taxes, but a failure to file, if required, can result in significant penalties.
Note:  This article is intended to provide general background information only and does not address any particular foreign asset situation and applicability of the FBAR and/or IRS Form 8938 filing requirements.  There are a number of complexities regarding the FBAR and IRS Form 8938 filing requirements and penalties that are not addressed here.  You should consult your tax advisor with respect to your particular foreign asset situation.


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Gay Vinson is an attorney at Marshall, Roth & Gregory, PC. Her practice is concentrated in trust and estate planning and administration.
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