If one owns or has authority over a foreign financial account, including a
bank account, brokerage account, mutual fund, unit trust or some other type of
financial account, he or she may be required to make an annual report of the
account to the Internal Revenue Service. Under the Bank Secrecy Act, each
United States person must file a Report of Foreign Bank and Financial Accounts
(FBAR) (Form TD F 90-22.1), if the person has a financial interest in or
signature authority (or other authority that is comparable to signature
authority) over one or more accounts in a foreign country and the aggregate
value of all foreign financial accounts exceeds $10,000 at any time during the
The Foreign Bank Account Reporting Compliance Guide is
required, because foreign financial institutions may not be subject to the
same reporting requirements as domestic financial institutions. The FBAR is a
tool to help the United States government identify persons who may be, in the
view of the IRS, using foreign bank accounts to circumvent United States law.
Investigators will use the FBARs to help them identify or trace funds used for
illicit purposes or to identify unreported income maintained or generated
Civil penalties for non-willful FBAR violations can be imposed up to an amount
of $10,000 per violation. For willful violations the penalty can be up to the
greater of $100,000 or 50 percent of the account balance, per violation.
Criminal penalties can result in fines of up to $500,000 and imprisonment of
up to 10 years and may be imposed in conjunction with the civil penalties.
This is an important new IRS compliance requirement with huge monetary civil
penalties at stake as well as potential criminal consequences. It has ongoing
compliance reporting requirements with enforcement teeth behind it and this
publication provides the necessary guidance.