Section 16. Report of Foreign Bank and Financial Accounts (FBAR)

4.26.16 Report of Foreign Bank and Financial Accounts (FBAR)

Manual Transmittal

Purpose

(1) This transmits revised text of IRM 4.26.16, Bank Secrecy Act, Report of Foreign Bank and Financial Accounts (FBAR).

Material Changes

(1) The text incorporates the new due date and automatic extension of FBAR reports beginning with calendar year 2016. The new due date is mandated by the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, Public Law 114-41. FinCEN granted filers failing to meet the new due date an automatic extension.

(2) SBSE-04-1119-0057, Change to FBAR Filing Verification Submission Process, is incorporated. This guidance provides an update on the process by which IRS accepts requests for verification that the government received a filed FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR).

(3) SBSE-04-1120-0076, Interim Guidance on the IRS Authority Previously Delegated through Treasury Directive 15-41, is incorporated. This guidance is a reissuance of interim guidance SBSE-04-0919-0046, Interim Guidance on the IRS Authority Previously Delegated through Treasury Directive 15-41, which conveys the authority of the IRS to take actions that were previously noted in the IRM as delegated through Treasury Directive (TD) 15-41.

(4) Penalty amounts have been changed to reflect annual inflationary adjustments in accordance with the Federal Civil Penalties Inflation Adjustment Act of 1990, 28 USC 2461 note (FCPIA Act), as further amended by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015.

(5) Regulations state that the penalties covered by the FCPIA Act should be adjusted annually due to inflation. Due to this requirement, actual amounts for covered penalties have been removed. A link to the penalty adjustment and table, 31 CFR 1010.821, is provided.

(6) IRM 4.26.16.1, FBAR Overview, deleted.

(7) IRM 4.26.16.1, New subsection, Program Scope and Objectives.

(8) IRM 4.26.16.1.1, New subsection, Background.

(9) IRM 4.26.16.1.2, New subsection, Authority.

(10) IRM 4.26.16.1.3, New subsection, Responsibilities.

(11) IRM 4.26.16.1.4, New subsection, Program Management and Reviews.

(12) IRM 4.26.16.1.5, New subsection, Acronyms.

(13) IRM 4.26.16.1.6, New subsection, Terms.

(14) IRM 4.26.16.1.7, New subsection, Related Resources.

(15) IRM 4.26.16.2, FBAR Authorities, deleted.

(16) IRM 4.26.16.2.1, FBAR Statutory Authority, deleted and moved to IRM 4.26.16.1.2.

(17) IRM 4.26.16.2.2, FBAR Regulatory Authority, deleted and moved to IRM 4.26.16.1.2.

(18) IRM 4.26.16.3, FBAR Filing Criteria, moved to IRM 4.26.16.2.

(19) IRM 4.26.16.3.1, United States Person, moved to IRM 4.26.16.2.1.

(20) IRM 4.26.16.3.1.1, U.S. Citizen, moved to IRM 4.26.16.2.1.1.

(21) IRM 4.26.16.3.1.2, U.S. Resident, moved to IRM 4.26.16.2.1.2.

(22) IRM 4.26.16.3.1.3, U.S. Entity, moved to IRM 4.26.16.2.1.3.

(23) IRM 4.26.16.3.2, Financial Account, moved to IRM 4.26.16.2.2.

(24) IRM 4.26.16.3.2.1, Financial Account Exceptions, moved to IRM 4.26.16.2.2.1.

(25) IRM 4.26.16.3.2.2, Account Valuation, moved to IRM 4.26.16.2.2.2.

(26) IRM 4.26.16.3.3, Financial Interest, moved to IRM 4.26.16.2.3.

(27) IRM 4.26.16.3.4, Signature or Other Authority Over an Account, moved to IRM 4.26.16.2.4.

(28) IRM 4.26.16.3.4.1, Signature Authority Exceptions, moved to IRM 4.26.16.2.4.1.

(29) IRM 4.26.16.3.4.2, Extended Due Dates for Certain Individuals Who Only Had Signature Authority, moved to IRM 4.26.16.2.4.2.

(30) IRM 4.26.16.3.5, Foreign Country, moved to IRM 4.26.16.2.5.

(31) IRM 4.26.16.3.6, Aggregate Value Over $10,000, moved to IRM 4.26.16.2.6.

(32) IRM 4.26.16.4, FBAR Filing Procedures, moved to IRM 4.26.16.3.

(33) IRM 4.26.16.4.1, General FBAR Filing, moved to IRM 4.26.16.3.1.

(34) IRM 4.26.16.4.2, FBAR Filing Help, moved to IRM 4.26.16.3.2.

(35) IRM 4.26.16.4.3, FBAR Filing Exceptions, moved to IRM 4.26.16.3.3.

(36) IRM 4.26.16.4.4, FBAR Filing by Married Couples, moved to IRM 4.26.16.3.4.

(37) IRM 4.26.16.4.5, Electronic FBAR Filing by a Third Party, moved to IRM 4.26.16.3.5.

(38) IRM 4.26.16.4.6, FBAR Filing for Financial Interest in 25 or More Accounts, moved to IRM 4.26.16.3.6.

(39) IRM 4.26.16.4.7, FBAR Filing for Signature Authority for 25 or More Accounts, renamed FBAR Filing for Signature or Other Authority for 25 or More Accounts, and moved to IRM 4.26.16.3.7.

(40) IRM 4.26.16.4.8, FBAR Filing for U.S. Persons Residing and Employed Outside the United States, moved to IRM 4.26.16.3.8.

(41) IRM 4.26.16.4.9, Filing A Consolidated FBAR, moved to IRM 4.26.16.3.9.

(42) IRM 4.26.16.4.10, No FBAR Filing Extension renamed FBAR Filing Extension, moved to IRM 4.26.16.3.10.

(43) IRM 4.26.16.4.11, Delinquent FBAR Filing Procedures, moved to IRM 4.26.16.3.11.

(44) IRM 4.26.16.4.12, Amending a Filed FBAR, moved to IRM 4.26.16.3.12.

(45) IRM 4.26.16.4.13, FBAR Filing Verification, moved to IRM 4.26.16.3.13.

(46) IRM 4.26.16.5, FBAR Recordkeeping, moved to IRM 4.26.16.4.

(47) IRM 4.26.16.5.1, FBAR Recordkeeping for Filers Having 25 or More Accounts, moved to IRM 4.26.16.4.1.

(48) IRM 4.26.16.6, FBAR Penalties, moved to IRM 4.26.16.5.

(49) IRM 4.26.16.6.1, FBAR Penalty Authority, moved to IRM 4.26.16.5.1.

(50) IRM 4.26.16.6.2, FBAR Penalty Structure, moved to IRM 4.26.16.5.2.

(51) IRM 4.26.16.6.3, BSA Negligence Penalties, moved to IRM 4.26.16.5.3.

(52) IRM 4.26.16.6.3.1, Negligence Defined, moved to IRM 4.26.16.5.3.1.

(53) IRM 4.26.16.6.3.2, BSA Simple Negligence Penalty, moved to IRM 4.26.16.5.3.2.

(54) IRM 4.26.16.6.3.3, BSA Simple Negligence Penalty Amount, moved to IRM 4.26.16.5.3.3.

(55) IRM 4.26.16.6.3.4, BSA Pattern of Negligence Penalty, moved to IRM 4.26.16.5.3.4.

(56) IRM 4.26.16.6.3.5, BSA Pattern of Negligence Penalty Amount, moved to IRM 4.26.16.5.3.5.

(57) IRM 4.26.16.6.4, Penalty for Non-Willful FBAR Violations, moved to IRM 4.26.16.5.4.

(58) IRM 4.26.16.6.4.1, Penalty for Non-Willful Violations - Calculation, moved to IRM 4.26.16.5.4.1.

(59) IRM 4.26.16.6.5, Penalty for Willful FBAR Violations, moved to IRM 4.26.16.5.5.

(60) IRM 4.26.16.6.5.1, Willful FBAR Violations – Defining Willfulness, moved to IRM 4.26.16.5.5.1.

(61) IRM 4.26.16.6.5.2, Willful FBAR Violations – Evidence, moved to IRM 4.26.16.5.5.2.

(62) IRM 4.26.16.6.5.3, Penalty for Willful FBAR Violations – Calculation, moved to IRM 4.26.16.5.5.3.

(63) IRM 4.26.16.6.6, Mitigation, deleted.

(64) IRM 4.26.16.6.6.1, Mitigation Threshold Conditions, deleted.

(65) IRM 4.26.16.6.7, FBAR Penalties - Examiner Discretion, moved to IRM 4.26.16.5.2.1.

(66) IRM 4.26.16.6.8, Managerial Involvement and Approval of FBAR Penalties, moved to IRM 4.26.16.5.6.

(67) Exhibit 4.26.16-1, New Exhibit, Acronyms.

(68) Exhibit 4.26.16-1, FBAR Penalty Mitigation Guidelines for Violations Occurring After October 22, 2004, moved to Exhibit 4.26.16-2.

(69) Exhibit 4.26.16-2, Money Transmitter FBAR Filing Requirements, moved to Exhibit 4.26.16-3.

(70) Exhibit 4.26.16-3, IRS Notice 2009-62, deleted.

(71) Exhibit 4.26.16-4, IRS Notice 2010-23, deleted.

(72) Exhibit 4.26.16-5, FinCEN Notice 2011-1, deleted.

(73) Exhibit 4.26.16-6, FinCEN Notice 2011-2, deleted.

(74) Exhibit 4.26.16-7, FinCEN Notice 2012-1, deleted.

(75) Exhibit 4.26.16-8, FinCEN Notice 2012-2, deleted.

(76) Exhibit 4.26.16-9, FinCEN Notice 2013-1, deleted.

(77) Exhibit 4.26.16-10, FinCEN Notice 2014-1, deleted.

Effect on Other Documents

This supersedes IRM 4.26.16 dated November 6, 2015. This section should be read together with IRM 4.26.17, Report of Foreign Bank and Financial Accounts (FBAR) Procedures, for a complete understanding of FBAR law and procedures. This IRM incorporates the guidance found in SBSE-04-1119-0057, Change to FBAR Filing Verification Submission Process, and SBSE-04-1120-0076, Interim Guidance on the IRS Authority Previously Delegated through Treasury Directive 15-41.

Audience

IRS employees in all operating divisions responsible for ensuring compliance with the reporting and recordkeeping requirements of the Report of Foreign Bank and Financial Accounts (FBAR).

Effective Date

Kellie L. McCann
Acting Director, Specialty Examination Policy
Small Business/Self-Employed

Program Scope and Objectives

1. Purpose . This IRM contains information relating to the Report of Foreign Bank and Financial Accounts (FBAR).

• Objectives – inform and educate examiners of procedures for FBAR reporting, filing and recordkeeping; provide information regarding penalty assessment and computation.
• Revenue agents and their managers are responsible for adhering to the content of this IRM.
• Employees will perform examinations of FBARs and determine compliance.

Background

1. The requirement to report and keep records of foreign bank and financial accounts was added to the United States Code (USC) in 1970 as part of the "Currency and Foreign Transactions Reporting Act of 1970" , which came to be known as the "Bank Secrecy Act" or "BSA" . These anti-money laundering provisions, as amended, were codified at 31 USC 5311 - 5332, excluding 31 USC 5315.
2. The Report of Foreign Bank and Financial Accounts (FBAR) is required by the BSA. The statutory and regulatory authority for the reporting and recordkeeping requirements for foreign bank and financial accounts are in Title 31 Section 5314 of the United States Code and the related regulations under 31 CFR 1010.306, Filing of Reports, 31 CFR 1010.350, Reports of Foreign Financial Accounts, and 31 CFR 1010.420, Records to be Made and Retained by Persons Having Financial Interests in Foreign Financial Accounts. The Secretary of the Treasury delegated the authority to administer civil compliance with Title II of the BSA to the Director, Financial Crimes Enforcement Network (FinCEN). FinCEN redelegated to the IRS the authority to interpret the law, examine for compliance, and enforce penalties for violations of the FBAR requirements. Each business operating division (BOD) within the IRS works its own FBAR cases.
3. The Surface Transportation and Veterans Health Care Choice Improvement Act of 2014, Public Law 114-41, required the Secretary to modify the applicable regulations to change the due date for FBARs due for calendar year 2016 and subsequent years to April 15th. FinCEN announced the due date change on its website and granted filers failing to meet the FBAR annual due date of April 15th an automatic extension to October 15th each year. FinCEN also announced that when the FBAR due date falls on a Saturday, Sunday, or legal holiday, the due date is delayed until the next business day.

Authority

1. The statutory authority for the FBAR is 31 USC 5314, Records and Reports on Foreign Financial Agency Transactions.
2. 31 USC 5314 directs the Secretary of the Treasury to require a resident or citizen of the United States to keep records and/or file reports when making transactions or maintaining a relationship with a foreign financial agency.
3. 31 USC 5321(a)(5), Foreign Financial Agency Transaction Violation, and 31 USC 5321(a)(6), Negligence, establish civil penalties for violations of the FBAR reporting and recordkeeping requirements. See IRM 4.26.16.5 below for a discussion of penalties.
4. 31 CFR 1010.350, Reports of Foreign Financial Accounts, contains the FBAR definitions and requirements. 31 CFR 1010.350(a), In General, states "each United States person having a financial interest in, or signature or other authority over, a bank, securities, or other financial account in a foreign country shall report such relationship to the Commissioner of Internal Revenue for each year in which such relationship exists and shall provide such information as shall be specified in a reporting form prescribed under 31 USC 5314 to be filed by such persons" .
5. 31 CFR 1010.306(c) specifies a filing due date of June 30th for the report for the prior year. The report is required to be electronically filed with FinCEN on FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR). The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, Public Law 114-41 (the Act) required the Secretary of the Treasury to change the FBAR due date to April 15 for calendar year 2016 and subsequent years. The Act provides for a maximum extension for a 6-month period ending on October 15.
6. Based on the Act, FinCEN announced that the FBAR due date was changed to April 15 to coincide with the Federal income tax filing season. FinCEN also announced an automatic extension of the filing deadline to October 15 for those who file by October 15. FinCEN does not require specific requests for an extension. FinCEN stated that the FBAR filing deadline will follow the Federal income tax due date guidance, which notes that when the Federal income tax due date falls on a Saturday, Sunday, or legal holiday, the due date is delayed until the next business day.
7. 31 CFR 1010.420, Records to be Made and Retained by Persons Having Financial Interests in Foreign Financial Accounts, requires maintenance and retention of FBAR records for a period of five years.
8. 31 CFR 1010.810(g) references a Memorandum of Agreement between FinCEN and the IRS, which redelegates, to the IRS, FinCEN's authority to enforce the provisions of 31 USC 5314, Records and Reports on Foreign Financial Agency Transactions, 31 CFR 1010.350 and 31 CFR 1010.420. This includes the authority to:

1. Assess and collect civil FBAR penalties,
2. Investigate possible civil violations of these provisions,
3. Employ the summons power of subpart I of Chapter X,
4. Issue administrative rulings under subpart G of Chapter X, and
5. Take any other action reasonably necessary for the enforcement of these and related provisions, including pursuit of injunctions.

Responsibilities

1. The Director, SB/SE Specialty Exam Policy, is the executive responsible for the FBAR program.
2. The BSA Policy Program Manager has shared responsibility with the Program Manager, SB/SE HQ Exam, Exam Quality and Technical Support, Offshore and Entities Team and the Program Manager, Offshore Compliance Initiatives, Withholding and International Individual Compliance (WIIC), Large Business and International Division (LB&I) to provide oversight in administering the FBAR program. This oversight supports development and implementation of strategies to address non-compliance.
3. IRS examiners and technical support from each BOD within IRS are responsible for identifying and addressing issues related to FBAR non-compliance.
4. IRS Office of Chief Counsel provides guidance and clarification on interpreting laws related to FBAR provisions.

Program Management and Reviews

1. Program Goals: To fulfill service-wide responsibility of the FBAR program and to ensure compliance operations are efficient and effective by improving and creating uniformity in conducting FBAR examinations across operating divisions.
2. Program Reports: Information regarding the reporting of program objectives are included, but not limited to:

1. FBAR Improvement Team Briefings,
2. Program Manager Monthly Briefings,
3. Examination Operational Review, and
4. Business Performance Reviews.

1. Assess the effectiveness of specific programs within Examination or across the organization,
2. Determine if procedures are being followed,
3. Validate policies and procedures, and
4. Identify and share best/proven practices.

Acronyms

1. See Exhibit 4.26.16-1 for a list of commonly used acronyms and their definitions.

Terms

1. The term "highest aggregate balance" as used in this IRM, is calculated as follows:

1. Determine the high balance in each foreign account (to which the violations relate) during each year under examination,
2. For each year, calculate the "combined high balance" by adding together the high balance of each account as determined in subparagraph (a), and then subtracting any transfers among the accounts during that year as necessary to avoid counting the same funds more than once in determining the "highest aggregate balance" . For example, if Account A’s high balance occurs July 15, transfers into Account A after July 15 are not subtracted; however, transfers into Account B from Account A after July 15 and before the date of Account B’s high balance are subtracted, and
3. The highest combined balance calculated under subparagraph (b) among all of the years at issue is the "highest aggregate balance" .

Related Resources

1. This section should be read together with IRM 4.26.17, Report of Foreign Bank and Financial Accounts (FBAR) Procedures, for a complete understanding of FBAR law and procedures. See the following for additional information:

1. IRM 1.2.2.14.13, Delegation Order 25-13, Enforcement of Report of Foreign Bank and Financial Accounts (FBAR) Requirements
2. IRM 4.26.6, Bank Secrecy Act Examiner Responsibilities for BSA Examinations
3. IRM 4.26.14, Disclosure
4. IRM 4.26.15, General Program
5. 31 CFR 1010.821, Penalty Adjustment and Table

FBAR Filing Criteria

1. An FBAR is required if all the following apply:

1. The filer is a U.S. person.
2. The U.S. person has a financial interest in a financial account or signature or other authority over a financial account.
3. The financial account is in a foreign country.
4. The aggregate amount(s) in the account(s) valued in U.S. dollars exceed $10,000 at any time during the calendar year.

United States Person

1. A "United States person" is defined by 31 CFR 1010.350(b), United States Person, to include:

1. A citizen of the United States.
2. A resident of the United States.
3. An entity created, organized, or formed under the laws of the United States, any state, the District of Columbia, any territory or possession of the United States, or an Indian tribe.

Example:

Single-member Limited Liability Companies are disregarded for federal tax purposes but would have to report foreign accounts on a timely-filed FBAR if otherwise required to do so.

Example:

Some trusts may not file tax returns but may have a requirement to report a foreign bank account on a timely-filed FBAR.

1. The States of the United States.
2. The District of Columbia.
3. The Indian lands (as defined in the Indian Gaming Regulatory Act).
4. The territories and insular possessions of the United States.

• Puerto Rico
• Guam
• American Samoa
• U.S. Virgin Islands
• Northern Mariana Islands

U.S. Citizen

1. A citizen of the U.S. has a U.S. birth certificate or naturalization papers.
2. U.S. citizenship is not defined by residency. A citizen of the U.S. may reside outside the U.S.

Example:

Children born of U.S. citizens living abroad are U.S. citizens even though they may never have been to the U.S.

U.S. Resident

1. Prior to February 24, 2011, when revised regulations were issued, the FBAR regulations did not define the term "U.S. resident" .
2. For FBARs required to be filed by June 30, 2011, or later, 31 CFR 1010.350(b) defines "United States resident" using the definition of resident alien in IRC 7701(b), Definition of Resident Alien and Nonresident Alien, and the regulations thereunder but using the Title 31 definition of "United States" . The major tests of residency found in IRC 7701(b) are:

1. The green card test. Individuals who at any time during the calendar year have been lawfully granted the privilege of residing permanently in the U.S. under the immigration laws automatically meet the definition of resident alien under the green card test.
2. The substantial presence test. Individuals are defined as resident aliens under the substantial presence test if they are physically present in the U.S. for at least 183 days during the current year, or they are physically present in the U.S. for at least 31 days during the current year and meet the specifications contained in IRC 7701(b)(3), Substantial Presence Test.
3. The individual files a first-year election on his income tax return to be treated as a resident alien under IRC 7701(b)(4), First-Year Election.
4. The individual is considered a resident under the special rules in IRC 7701(b)(2), Special Rules for First and Last Year of Residency, for first-year or last-year residency.

U.S. Entity

1. A U.S. entity is a legal entity created, organized, or formed under the laws of the U.S., any state, the District of Columbia, any territory or possession of the U.S., or an Indian tribe.
2. 31 CFR 1010.350(b) specifically names, but does not limit these types of entities to:

• Corporations
• Partnerships
• Trusts
• Limited Liability Companies

Financial Account

1. A reportable financial account includes a:

1. Bank account, such as a savings deposit, demand deposit, checking, time deposit (CD), or any other account maintained with a financial institution or other person engaged in the business of banking.
2. Securities account, securities derivatives account, or other financial instruments account held with a person engaged in the business of buying, selling, holding or trading stock or other securities.
3. Other financial account, as defined in (2) below.

1. An account with a person in the business of accepting deposits as a financial agency.
2. An insurance or annuity policy that has a cash value.

Note:

The preamble to the regulations clarifies that there need be no current payment of an income stream to trigger reporting. The cash value of the policy is considered the account value.

1. Stocks, bonds, or similar financial instruments held directly by the person.
2. Real estate or an account holding solely real estate (such as, Mexican "fideicomiso" ).
3. A safety deposit box.

Note:

A reportable account may exist where the financial institution providing the safety deposit box has access to the contents and can dispose of the contents upon instruction from, or prearrangement with, the person.

Note:

31 USC 5311, Declaration of Purpose, defines "financial agency" as "a person acting for a person as a financial institution, bailee, depository trustee, or agent, or acting in a similar way related to money, credit, securities, gold, or a transaction in money, credit, securities, or gold" . Therefore, a reportable account relationship may exist where a foreign agency holds precious metals on deposit or provides insurance or other services as an agent of the person owning the precious metals.

Financial Account Exceptions

1. The following are not considered reportable financial accounts for FBAR purposes:

1. An account of a department or agency of the U.S., an Indian tribe, any state or any political subdivision of a state, any territory or insular possession of the U.S., or a wholly-owned entity, agency or instrumentality of any of the foregoing.
2. An account of an international financial institution of which the U.S. government is a member (such as, the International Monetary Fund (IMF) and the World Bank).
3. An account in an institution known as a "United States military banking facility" , that is, a facility designated to serve U.S. military installations abroad.
4. Correspondent or "nostro" accounts that are maintained by banks and used solely for bank-to-bank settlements.
5. Custodial or "omnibus" accounts held for the person by a U.S. institution acting as a global custodian, if the person cannot directly access the foreign custodial account.

Account Valuation

1. The FBAR is required for each calendar year during which the aggregate amount(s) in the foreign account(s) exceeded $10,000, valued in U.S. dollars, at any time during that calendar year. To determine the account value to report on the FBAR follow these steps:

1. Determine the maximum value in locally denominated currency. The maximum value of an account is the largest amount of currency and non-monetary assets that appear on any quarterly or more frequent account statement issued for the applicable year.

Example:

If the statement closing balance is $9,000 but at any time during the year a balance of $15,000 appears on a statement, the maximum value reportable on an FBAR is $15,000.

Note:

If periodic account statements are not issued, the maximum account asset value is the largest amount of currency and non-monetary assets in the account at any time during the year.

Financial Interest

1. Direct Financial Interest:

1. A U.S. person has a financial interest in each account for which such person is the owner of record or has legal title, whether the account is maintained for his own benefit or for the benefit of others including non-U.S. persons.
2. If an account is maintained in the name of two persons jointly, or if several persons each own a partial interest in an account, each of those U.S. persons has a financial interest in that account and, generally, each person must report the account on the FBAR. However, see special rules for spousal reporting in IRM 4.26.16.3.4 below.

Note:

Because the FBAR is a report of foreign financial accounts, the entire account value for jointly-owned accounts is reported on each FBAR. Accounts are not prorated for a person's percentage of ownership interest.

1. A person acting as an agent, nominee, attorney, or in some other capacity on behalf of the U.S. person.
2. A corporation, whether foreign or domestic, in which the U.S. person owns directly or indirectly more than 50 percent of the total value of shares of stock or more than 50 percent of the voting power for all shares of stock.
3. A partnership, whether foreign or domestic, in which the United States person owns directly or indirectly an interest in more than 50 percent of the profits (distributive share of income, taking into account any special allocation agreement) or more than 50 percent of the capital of the partnership.
4. Any other entity in which the U.S. person owns directly or indirectly more than 50 percent of the voting power, total value of the equity interest or assets, or interest in profits.
5. A trust, if the U.S. person is the trust grantor and has an ownership interest in the trust for U.S. federal tax purposes under 26 USC 671–679 and the regulations thereunder.
6. A trust, whether foreign or domestic, in which the U.S. person either has a present beneficial interest, either directly or indirectly, in more than 50 percent of the assets of the trust or from which such person receives more than 50 percent of the trust’s current income.

Signature or Other Authority Over an Account

1. An individual has signature or other authority over an account if that individual (alone or in conjunction with another) can control the disposition of money, funds or other assets held in a financial account by direct communication (whether in writing or otherwise) to the person with whom the financial account is maintained.
2. Individuals not considered as having signature authority:

1. Individuals with only the authority to buy or sell investments within the account, but no authority to disburse assets from the account.
2. Individuals with supervisory authority over the individuals who communicate with the person with whom the account is maintained. FinCEN clarified, in the preamble to the regulations at 31 CFR 1010.350, Reports of Foreign Financial Accounts, that approving a disbursement that a subordinate orders is not considered signature authority.

Signature Authority Exceptions

1. An officer or employee of the following institutions need not report signature or other authority over a foreign financial account owned or maintained by the institution if the officer or employee has no financial interest in the account:

1. A bank that is examined by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, or the National Credit Union Administration.
2. A financial institution that is registered with and examined by the Securities and Exchange Commission or Commodity Futures Trading Commission.
3. An Authorized Service Provider for a foreign financial account owned or maintained by an investment company that is registered with the Securities and Exchange Commission.

Note:

Authorized Service Provider is an entity that is registered with and examined by the Securities and Exchange Commission and that provides services to an investment company registered under the Investment Company Act of 1940.

Note:

Previously, instructions to the form allowed a "large corporation" exception for listed corporations. That exception was expanded to include all listed entities.

Extended Due Dates for Certain Individuals Who Only Had Signature Authority

1. IRS Notice 2009-62, issued in August 2009 extended the due date for filing an FBAR for calendar years 2008 and prior years until June 30, 2010 for:

1. U.S. persons with signature authority, but no financial interest, in an account.
2. U.S. persons with a financial interest in, or signature authority over, a foreign financial account in which the assets are held in a commingled fund.

1. Employees or officers of an entity under 31 CFR 1010.350(f)(2)(i)-(v), Exceptions, with signature or other authority over, and no financial interest in, a foreign financial account of a controlled person of the entity.
2. Employees or officers of a controlled person of an entity under 31 CFR 1010.350(f)(2)(i)-(v) with signature or other authority over, and no financial interest in, a foreign financial account of the entity, the controlled person, or another controlled person of the entity.

Foreign Country

1. A foreign country includes all geographical areas located outside of the United States as defined in 31 CFR 1010.100(hhh). An account is "foreign" for FBAR purposes if it is located outside:

1. The States of the United States.
2. The District of Columbia.
3. The Indian lands (as defined in the Indian Gaming Regulatory Act).
4. The territories and insular possessions of the United States. See IRM 4.26.16.2.1 above.

1. An account with a Hong Kong branch of a U.S.-based bank is a foreign financial account for FBAR purposes.
2. An account with a New York City branch of a foreign-based bank is not a foreign financial account for FBAR purposes.

Aggregate Value Over $10,000

1. The final criterion triggering the requirement to report a foreign account on a timely-filed FBAR is the aggregate value of all foreign financial accounts in which the person has a financial interest, or over which the individual has signature or other authority, must be greater than $10,000, valued in U.S. dollars, at any time (on a particular day) during the calendar year.
2. Steps to determine aggregate account values:

1. Each account should be separately valued according to the steps outlined in IRM 4.26.16.2.2.2 to determine its highest valuation during the year in the foreign denominated currency.

Exception:

Money moved from one foreign account to another foreign account during the year must only be counted once.

1. Solely-owned accounts.
2. Jointly-owned accounts.
3. Direct financial interest accounts (see IRM 4.26.16.2.3 ).
4. Indirect financial interest accounts (see IRM 4.26.16.2.3 ).
5. Signature or other authority accounts (see IRM 4.26.16.2.4 ).

FBAR Filing Procedures

1. The determination of whether a U.S. person is required to report accounts on the FBAR is made annually. For example, a person may be required to report an account on an FBAR for one calendar year but not for a subsequent year if the person’s aggregate foreign account balance does not exceed $10,000 at any time during the year.
2. An FBAR must be filed for each calendar year that the person has a financial interest in, or signature or other authority over, foreign financial account(s) whose aggregate balance exceeds the $10,000 threshold at any time during the year. Each foreign financial account must be reported on the FBAR.

General FBAR Filing

1. The annual due date for filing FBARs to report foreign financial accounts maintained during calendar years 2016 and later, is being treated as April 15 of the following year. This date change was mandated by the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, Public Law 114-41 (the Act). Specifically, section 2006(b)(11) of the Act required the Secretary of the Treasury to change the FBAR due date to April 15, and FinCEN announced a change to April 15 on its website. The annual due date for filing FBARs for accounts maintained during calendar years 2015 and earlier, is June 30 of the following year.
2. All FBARs filed after June 30, 2013, must be filed electronically through the FinCEN BSA E-Filing website at www.bsaefiling.fincen.gov/main.html unless the filer requested, and was granted, an exception to e-filing by FinCEN.
3. The FBAR should not be filed with the filer’s federal income tax return or information return.

FBAR Filing Help

1. Help with general questions about account reporting requirements and filing an FBAR, including due dates and filing methods, is available to the public from the IRS by:

1. Calling the IRS Help Lines Monday through Friday, 8 AM to 4:30 PM ET, at 866-270-0733 (toll-free for U.S. callers) or 313-234-6146 (for callers outside the U.S.). Callers select Option 1 for FBAR questions.
2. Reviewing the FBAR Home Page on IRS.gov. Enter "FBAR" in the search box.

1. For technical questions about BSA E-Filing System by emailing BSAEFilingHelp@fincen.gov, or by calling the BSA E-File Help Desk at 866-346-9478.
2. For E-filing exemption requests to allow FBAR paper-filing, or questions about BSA regulations by calling the FinCEN Resource Center at 800-949-2732 (toll-free for U.S. callers) or 703-905-3975 (for callers outside the U.S.).

FBAR Filing Exceptions

1. Individual Retirement Account (IRA) owners and beneficiaries, and participants in and beneficiaries of U.S. tax-qualified retirement plans, are not required to report a foreign financial account held by or on behalf of the IRA or retirement plan.

Caution:

This exception is for U.S. plans only. Foreign plans, such as a Canadian Registered Retirement Savings Plan (RRSP) and accounts managed by Mexico’s Administrators of Retirement Funds (AFORES), are normally reportable on an FBAR.

1. Is a U.S. person, and
2. Files an FBAR disclosing the trust's foreign financial accounts.

FBAR Filing by Married Couples

1. Accounts owned jointly by spouses may be filed on one FBAR. The spouse of an individual who files an FBAR is not required to file a separate FBAR if the following conditions are met:

1. All the financial accounts that the non-filing spouse is required to report are jointly owned with the filing spouse.
2. The filing spouse reports the jointly owned accounts on a timely, electronically filed FBAR.
3. Both spouses complete and sign Part I of FinCEN Form 114a, Record of Authorization to Electronically File FBARs. The filing spouse completes Part II of Form 114a in its entirety.

Note:

The completed Form 114a is not filed but must be retained for five years. It must be provided to IRS or FinCEN upon request.

Electronic FBAR Filing by a Third Party

1. FBAR filers may authorize a paid preparer or other third party to electronically file the FBAR for them.

1. The person reporting a financial interest in, or signature or other authority over, foreign accounts must sign Part I of FinCEN Form 114a.
2. The preparer or other third-party filer must sign Part II of Form 114a.
3. Form 114a is not filed. Both parties must retain the form for five years. It must be provided to IRS or FinCEN upon request.

FBAR Filing for Financial Interest in 25 or More Accounts

1. 31 CFR 1010.350(g) provides that a United States person that has a financial interest in 25 or more foreign financial accounts only needs to provide the number of financial accounts and certain other basic information on the report, but will be required to provide detailed information concerning each account if the IRS or FinCEN requests it.
2. Filers must comply with FBAR record-keeping requirements. See IRM 4.26.16.4.1 .

FBAR Filing for Signature or other Authority for 25 or More Accounts

1. 31 CFR 1010.350(g) provides that a United States person that has signature or other authority over 25 or more foreign financial accounts only needs to provide the number of financial accounts and certain other basic information on the report but will be required to provide detailed information concerning each account if the IRS or FinCEN requests it.
2. Filers must comply with FBAR record-keeping requirements. See IRM 4.26.16.4.1 .

FBAR Filing for U.S. Persons Residing and Employed Outside the United States

1. The FBAR filing instructions allow for modified reporting by a U.S. person who meets all three of the following criteria:

1. Resides outside the U.S.
2. Is an officer or employee of an employer located outside the U.S.
3. Has signature authority over a foreign financial account(s) of that employer.

1. Completing filer information.
2. Omitting account information.
3. Completing employer information one time only.

Filing A Consolidated FBAR

1. 31 CFR 1010.350(g) allows an entity that is a U.S. person that owns directly or indirectly a greater than 50 percent interest in another entity that is required to file an FBAR to file a consolidated FBAR on behalf of itself and such other entity.
2. Each controlled entity that has an FBAR filing obligation must be listed in Part V, even if that entity owns foreign accounts only indirectly.

FBAR Filing Extension

1. Prior to the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (The Act), there was no authority to extend the time for filing an FBAR.
2. FinCEN granted filers an automatic extension of the FBAR filing deadline to October 15 each year beginning with FBARs required for calendar year 2016. Specific requests for an extension are not required.
3. IRC 7508, Time for Performing Certain Acts Postponed by Reason of Service in Combat Zone or Contingency Operation, does not grant U.S. persons that are U.S. Armed Forces members an extension to file the FBAR.
4. This is not to be confused with extension of the statute of limitations on assessment or collection of penalties, which is possible. See IRM 4.26.17.3.1.3, Extending the FBAR Statute of Limitations.

Delinquent FBAR Filing Procedures

1. Delinquent FBARs should be filed using the current electronic report, but using the instructions for the year for which foreign accounts are being reported to determine if FBAR reporting requirements exist.
2. Page one of FinCEN Form 114 should detail the reason the FBAR was not filed timely and a reason selected from the drop-down box. The "Other" selection allows for a 750-character text box explanation.
3. A copy of the FBAR should be kept for recordkeeping purposes.
4. A penalty will not be asserted for an account if it is determined that the failure to report the account on a timely filed FBAR was not willful, the failure to report the account on a timely-filed FBAR was due to reasonable cause, and the account was properly reported on the delinquent FBAR.

Amending a Filed FBAR

1. To amend a filed FBAR, filers should:

1. Check the "Amended" box in Item 1 at the top of page two and fill in the "Prior Report BSA Identifier" for the original filing in the block provided. If the Prior Report BSA Identifier is not known, the filer is to enter 00000000000000 in the Prior Report BSA Identifier field.
2. Complete the report in its entirety using the amended information.

FBAR Filing Verification

1. FBAR filing can be verified on the FinCEN Query System.
2. A FinCEN Query printout of a filed FBAR can establish that a retained copy of an FBAR provided by a filer or representative was filed and that the retained FBAR has the same information as the filed FBAR. FinCEN Query printouts can be obtained by querying both the filer’s name and Taxpayer Identification Number (TIN).
3. Filers receive immediate electronic verification for FBARs filed electronically with FinCEN.
4. Filers can request verification of FBARs filed, 60 days after the date of filing. Requests for verification of FBAR filing and/or paper copies of FBAR reports must be made in writing. The request must include the filer’s name, Taxpayer Identification Number, and filing period(s) needed. Practitioners asking for this information must also include a copy of Form 2848, Power of Attorney and Declaration of Representative, authorizing them to receive it.

1. There is a $5.00 fee for verifying five or fewer forms and a $1.00 fee for each additional form. If copies of the filed FBAR is needed, there is an additional fee of $0.15 per copy. Checks or money orders should be made payable to the United States Treasury. Written requests and payments for FBAR filing verifications and copies of filed FBARs should be mailed to:

FBAR Recordkeeping

1. If the FBAR is required, certain records must be retained by the filer. 31 CFR 1010.420, Records to be Made and Retained by Persons Having Financial Interests in Foreign Financial Accounts. Each person having a financial interest in or signature or other authority over any such account must keep the following records:

1. Name in which the account is maintained.
2. Number or other designation identifying the account.
3. Name and address of the foreign financial institution or other person with whom the account is maintained.
4. Type of account.
5. Maximum value of each account during the reporting period.

FBAR Recordkeeping for Filers Having 25 or More Accounts

1. A filer who has a financial interest in or signature or other authority over 25 or more foreign financial accounts must also comply with the recordkeeping requirements in IRM 4.26.16.4 .
2. Filers will be required to provide detailed information concerning each account if the IRS or FinCEN requests it.

FBAR Penalties

1. The IRS has been delegated authority to assess civil FBAR penalties.
2. When there is an FBAR violation, the examiner will either issue the FBAR warning letter, Letter 3800, Warning for Report of Foreign Bank and Financial Accounts (FBAR) Apparent Violations, or determine a penalty.

Note:

When multiple violations are under examination and a monetary penalty is imposed for some but not all the violations in the year(s) under examination, a Letter 3800 will not be issued for the violation(s) for which a monetary penalty is not imposed

FBAR Penalty Authority

1. IRS was delegated the authority to assess and collect civil FBAR penalties. See 31 CFR 1010.810(g). The delegation includes the authority to investigate possible civil FBAR violations and the authority to assess and collect the penalties for violations of the reporting and recordkeeping requirements.
2. When performing these functions, IRS is not acting under Title 26 but, instead, is acting under the authority of Title 31. Provisions of the IRC generally do not apply to FBARs.
3. Criminal Investigation was delegated the authority to investigate possible criminal violations of the Bank Secrecy Act. See 31 CFR 1010.810(c)(2).

FBAR Penalty Structure

1. Information in this section applies to the three civil penalties available for FBAR violations:

• 31 USC 5321(a)(5)(A) and (B) for non-willful violations;
• 31 USC 5321(a)(5)(A) and (C) for willful violations

• IRM 4.26.16.5.4 for non-willful violations;
• IRM 4.26.16.5.5 for willful violations

1. For calendar years 2015 and earlier, at the end of the day June 30th of the year following the calendar year for which accounts must be reported (the due date for filing the FBAR).
2. For calendar years 2016 and subsequent, at the end of the day April 15th of the year following the calendar year for which accounts must be reported, if a complete and accurate FBAR is not filed by October 15th (the automatic, extended due date announced by FinCEN).

FBAR Penalties - Examiner Discretion

1. The examiner may determine that the facts and circumstances of a particular case do not justify asserting a penalty.
2. The examiner has discretion in determining the amount of the penalty, if any, based on the facts and circumstances of the case. Examiners may consider whether the issuance of a warning letter and the securing of delinquent and/or amended FBARs, rather than the determination of a penalty, will achieve the desired result of improving compliance with the FBAR reporting and recordkeeping requirements in the future.
3. Factors to consider when applying examiner discretion may include, but are not limited to, the following:

1. Whether compliance objectives would be achieved by issuance of a warning letter,
2. Whether the person who committed the violation had been previously issued a warning letter or assessed an FBAR penalty,
3. The nature of the violation and the amounts involved,
4. The filer’s conduct contributing to the violation,
5. Whether the filer cooperated during the examination,
6. The balance in each account during the year, and
7. The total amount of all penalties to be asserted for all violations.

BSA Negligence Penalties

1. There are two negligence penalties that apply generally to all BSA provisions. See 31 USC 5321(a)(6), Negligence. These penalties may be assessed against a financial institution or non-financial trade or business for any negligent violation of the BSA, including FBAR violations.

1. Negligence penalty
2. Pattern of negligent violations

Negligence Defined

1. Actual knowledge of the FBAR reporting and recordkeeping requirements is not required to find a violation was negligent. If the financial institution or nonfinancial trade or business should have known about these requirements, failure to file, report, or maintain records is negligent.
2. Use general negligence principles in determining whether to apply the negligence penalty. In evaluating whether the financial institution or nonfinancial trade or business exercised ordinary business care and prudence, consider industry standards of practice. 26 CFR 1.6664-4, Reasonable Cause and Good Faith Exception to Section 6662 Penalties, may serve as useful guidance in determining the factors to consider.
3. If an FBAR violation is due to reasonable cause, and not due to negligence by the financial institution or nonfinancial trade or business, the negligence penalty should not be asserted.

BSA Simple Negligence Penalty

1. 31 USC 5321(a)(6), Negligence, and 31 CFR 1010.820(h), Civil Penalty, provide for a penalty for each negligent violation of any requirement of the Bank Secrecy Act, including FBAR reporting and recordkeeping requirements.
2. The simple negligence penalty applies only to businesses, not individuals.

BSA Simple Negligence Penalty Amount

1. For each negligent violation of any requirement of the Bank Secrecy Act committed after October 27, 1986, a civil penalty may be assessed not to exceed the $500 penalty amount in 31 USC 5321(a)(6)(A), adjusted for inflation as described in paragraph (2).
2. For penalties assessed after August 1, 2016, for violations occurring after November 2, 2015, the negligence penalty amount under 31 USC 5321(a)(6)(A) is subject to annual inflationary adjustment under the FCPIA Act. Adjusted maximum penalty amounts are set forth in 31 CFR 1010.821, Penalty Adjustment and Table.
3. Generally, the statutory maximum penalty amount is assessed. Although 31 USC 5321(a)(6) permits discretion to assert a lower amount, there are no mitigation guidelines for this penalty.

BSA Pattern of Negligence Penalty

1. 31 USC 5321(a)(6)(B), Pattern of Negligent Activity, provides for a civil money penalty on a business that engages in a pattern of negligent BSA violations including violations of the FBAR rules. This penalty is in addition to any negligence penalty.
2. The pattern of negligence penalty has applied to financial institutions since 1992. For violations occurring after October 26, 2001, the penalty applies to all trades or businesses. This penalty does not apply to individuals.

BSA Pattern of Negligence Penalty Amount

1. If any trade or business engages in a pattern of negligent violations of any provision, including the FBAR requirements, of the BSA, a civil penalty may be imposed up to the $50,000 penalty amount in 31 USC 5321(a)(6)(B), adjusted for inflation as described in paragraph (2). This is in addition to the simple negligence penalty in 31 USC 5321(a)(6)(A). The examiner is given discretion to determine the penalty amount up to the maximum in 31 USC 5321(a)(6)(B).
2. For penalties assessed after August 1, 2016, for violations occurring after November 2, 2015, the pattern of negligence penalty amount under 31 USC 5321(a)(6)(B) is subject to annual inflationary adjustment under the FCPIA Act. Adjusted maximum penalty amounts are set forth in 31 CFR 1010.821, Penalty Adjustment and Table.
3. Although 31 USC 5321(a)(6) permits discretion to assert a lower amount, there are no mitigation guidelines for this penalty. The pattern of negligence penalty should be asserted only in egregious cases.

Penalty for Non-willful FBAR Violations

1. For violations occurring after October 22, 2004, a penalty for a non-willful FBAR violation may be imposed on any filer who violates or causes any violation of the FBAR filing, reporting and recordkeeping requirements. See 31 USC 5321(a)(5)(A), Penalty Authorized, and 31 USC 5321(a)(5)(B), Amount of Penalty.
2. The penalty applies to individuals as well as entities, including financial institutions and nonfinancial trades or businesses.
3. The penalty should not be imposed if:

1. The violation was due to reasonable cause, and
2. Accurate delinquent or amended FBAR(s) are filed, rectifying prior violation(s).

Note:

A few courts have concluded that the principles of reasonable cause within Title 26 can be used to determine the existence of reasonable cause for FBAR penalties for non-willful violations. United States v. Ott, 2019 U.S. Dist. LEXIS 132013, at *5-7 (E.D. Mich. August 7, 2019); Jarnagin v. United States, 134 Fed. Cl. 368, 376 (2017); Moore v. United States, No. C13-2063RAJ, 2015 U.S. Dist. LEXIS 43979, at *1, **12-13 (W.D. Wash. Apr. 1, 2015) ("There is no reason to think that Congress intended the meaning of 'reasonable cause' in the Bank Secrecy Act to differ from the meaning ascribed to it in tax statutes." ), dismissed by 2015 U.S. Dist. LEXIS 99804 (W.D. Wash. July 24, 2015). [A] person has "reasonable cause" for an FBAR violation when he committed that violation despite an exercise of ordinary business care and prudence. Moore, at *4.

Penalty for Non-willful Violations - Calculation

1. In ascertaining the penalty amount for non-willful violations (assuming the reasonable cause exception does not apply), first determine whether the mitigation criteria in Exhibit 4.26.16-2 are met.
2. If the mitigation criteria are met, make a preliminary penalty calculation using the mitigation guidelines in Exhibit 4.26.16-2 , except limit the total mitigated penalties for each year to the statutory maximum for a single non-willful violation. Allocate the total penalty amount for each year among all violations in that year for which a penalty is recommended. This is the penalty amount, unless, in the examiner’s discretion as noted in IRM 4.26.16.5.2.1 , the facts and circumstances of a case warrant a different penalty amount. The provisions in paragraph (7) below apply to this paragraph.
3. If the mitigation criteria are not met, the mitigation guidelines do not apply. Do not make a preliminary penalty calculation using the guidelines in Exhibit 4.26.16-2 .
4. If the mitigation criteria are not met, or are met but the facts and circumstances of a case warrant a different penalty amount than calculated in paragraph (2), examiners will consider, as appropriate:

1. Asserting penalties, totaling (in each year for which non-willful violations are being penalized) no more than the statutory maximum penalty amount for a single violation, regardless of the number of non-willful violations. Since FBAR penalties are determined under the statute on a per-violation basis, the total penalty amount for each year should be allocated among all non-willful violations for which a penalty is recommended.
2. If asserting penalties computed under subparagraphs (a) and (c) are not warranted, asserting penalties, totaling (for all years for which non-willful violations are being penalized) no more than the statutory maximum penalty amount for a single violation, regardless of the number of non-willful violations. Allocate the total penalty amount among all years for which non-willful violations are being penalized. Since FBAR penalties are determined under the statute on a per-violation basis, the total penalty amount allocated to each year should be further allocated among all non-willful violations for which a penalty is recommended.
3. If asserting penalties computed under subparagraphs (a) and (b) are not appropriate, asserting penalties for each non-willful violation in each open year, with a penalty amount for each violation up to the statutory maximum penalty amount.
4. In determining an appropriate penalty amount, consider the facts and circumstances of the case and apply discretion as appropriate. See IRM 4.26.16.5.2.1 for more information about examiner discretion.
5. The provisions in paragraph (7) below apply to this paragraph.

Penalty for Willful FBAR Violations

1. The penalty for willful FBAR violations may be imposed on any filer who willfully violates or causes any violation of any provisions of 31 USC 5314 (the FBAR reporting and recordkeeping requirements). See 31 USC 5321(a)(5)(A) and 31 USC 5321(a)(5)(C).
2. The penalty applies to individuals as well as entities, including financial institutions and nonfinancial trades or businesses.
3. For violations occurring after October 22, 2004, a penalty for each willful FBAR violation may be imposed up to the greater of the $100,000 penalty amount under 31 USC 5321(a)(5)(C)(i)(I), adjusted for inflation as described in paragraph (4), or 50% of the amount in the account at the time of the violation (the "violation date" as described in IRM 4.26.16.5.2 ). See 31 USC 5321(a)(5)(C) and 31 USC 5321(a)(5)(D).
4. For penalties assessed after August 1, 2016, for violations occurring after November 2, 2015, the $100,000 penalty amount under 31 USC 5321(a)(5)(C)(i)(I) is subject to the annual inflationary adjustment under the FCPIA Act. Adjusted maximum penalty amounts are set forth in 31 CFR 1010.821, Penalty Adjustment and Table.
5. Examiners have discretion in determining the penalty amount and should use the mitigation and other guidelines in this section in making their determinations. The purpose of FBAR penalties is to promote compliance with the FBAR reporting and recordkeeping requirements. See IRM 4.26.16.5.2.1 for more information about examiner discretion.

Willful FBAR Violations - Defining Willfulness

1. The civil test for willfulness is whether a person either: (1) knowingly violated a legal duty; (2) recklessly violated a legal duty; or (3) acted with "willful blindness" by making a conscious effort to avoid learning about a legal duty.
2. A finding of willfulness under the BSA must be supported by evidence of willfulness.
3. The burden of establishing willfulness is on the Service.
4. Knowing violation. Willfulness is shown when a person knew of the FBAR reporting and recordkeeping requirements and made a voluntary, intentional, or conscious choice not to accurately report an account on a timely filed FBAR or keep required records.
5. Reckless violation. Willfulness is also shown when a person recklessly disregarded the FBAR reporting and recordkeeping requirements. Recklessness is evaluated using an objective standard, not by looking at whether a person subjectively believed that he or she was not required to accurately report the account on a timely filed FBAR or keep required records. The objective standard looks at whether conduct entailed an unjustifiably high risk of harm that is either known or so obvious that it should be known. The harm in the FBAR context is that the reporting or recordkeeping requirements are not being met. A person recklessly violates the FBAR reporting or recordkeeping requirements when the person clearly ought to have known that there was a grave risk that the requirements were not being met and the person was in a position to very easily find out for certain whether or not the requirements were being met.
6. Willful Blindness. Willfulness is also shown when a person acted with willful blindness by making a conscious effort to avoid learning about the FBAR reporting or recordkeeping requirements.

Example:

Willful blindness may be present when a person admits knowledge of, and fails to answer questions concerning, their interest in or signature or other authority over financial accounts at foreign banks on Schedule B of their Federal income tax return. This section of the income tax return refers taxpayers to the instructions for Schedule B, which provides guidance on their responsibilities for reporting foreign bank accounts and discusses the duty to file the FBAR. These resources indicate that the person could have learned of the reporting requirements quite easily. It is reasonable to assume that a person who has foreign bank accounts should read the information specified by the government in tax forms. The failure to act on this information and learn of the further reporting requirement, as suggested on Schedule B, may provide evidence of willful blindness on the part of the person.

Note:

The failure to learn of the reporting requirements coupled with other factors, such as the efforts taken to conceal the existence of the accounts and the amounts involved, may lead to a conclusion that the violation was due to willful blindness. A person checking the wrong box, or no box, on a Schedule B is a significant fact to consider when establishing whether the FBAR violation was attributable to willful blindness. That fact should be coupled with other facts and circumstances to prove willful blindness. A person checking the wrong box, or no box, on a Schedule B is also a significant fact to consider when determining whether the FBAR violation was the result of reckless disregard.

1. A person files the FBAR but omits one of three foreign bank accounts. The person had previously closed the omitted account at the time of filing the FBAR. The person explains that the omission was due to unintentional oversight. During the examination, the person provides all information requested with respect to the omitted account. The information provided does not disclose anything suspicious about the account, and the person reported all income associated with the account on their tax return. The penalty for a willful violation should not apply absent other evidence that may indicate willfulness.
2. A person reported one or more foreign accounts on a timely FBAR in earlier years but failed to report a foreign account on timely-filed FBARs in subsequent years when required to do so. In addition, the person may have failed to report income associated with the unreported foreign bank account for the year that the FBAR was not filed. If the person’s explanation for the failure to report the account and other available evidence do not outweigh the facts supporting a determination that the failure was intentional or the result of reckless disregard or willful blindness, the penalty for a willful violation should apply.
3. A person received a warning letter informing him of the foreign account reporting and recordkeeping requirements, but the person fails to file an FBAR in a subsequent year. In addition, the person may have failed to report income associated with the foreign bank accounts for the year that the FBAR was not filed. If the person’s explanation for the failure to file an FBAR and other available evidence do not outweigh the facts supporting a determination that the failure was intentional or the result of reckless disregard or willful blindness, the penalty for a willful violation should apply.

Willful FBAR Violations - Evidence

1. Willfulness can rarely be proven by direct evidence since it is a state of mind. It is usually established by drawing a reasonable inference from the available facts. The government may base a determination of willfulness on inference from conduct meant to conceal sources of income or other financial information. For FBAR purposes, this could include concealing signature authority, interests in various transactions, and interests in entities transferring cash to foreign banks.
2. Documents that may be helpful in establishing willfulness include:

1. Copies of statements for the foreign bank account.
2. Notes of the examiner's interview with the foreign account holder about the foreign account.
3. Correspondence with the account holder's tax return preparer that may address the FBAR filing requirement.
4. Documents showing criminal activity related to the non-filing of the FBAR (or non-compliance with other BSA provisions).
5. Promotional material (from a promoter or offshore bank).
6. Statements for debit or credit cards from the offshore bank that, for example, reveal the account holder used funds from the offshore account to cover everyday living expenses in a manner that conceals the source of the funds.
7. Copies of any FBARs filed previously by the account holder (or FinCEN Query printouts of FBARs).
8. Copies of Information Document Requests with requested items that were not provided highlighted along with explanations as to why the requested information was not provided.
9. Copies of debit or credit card agreements and fee schedules with the foreign bank, which may show a significantly higher cost than typically associated with cards from domestic banks.
10. Copies of any investment management or broker’s agreement and fee schedules with the foreign bank, which may show significantly higher costs than costs associated with domestic investment management firms or brokers.
11. The written explanation of why the FBAR was not filed, if such a statement is provided. Otherwise, note in the workpapers whether there was an opportunity to provide such a statement.
12. Copies of any previous warning letters issued or certifications of prior FBAR penalty assessments.

1. Copies of documents from the administrative case file (including the Revenue Agent Report) for the income tax examination that show income related to funds in a foreign bank account was not reported.
2. A copy of the signed income tax return with Schedule B attached, showing whether the box pertaining to foreign accounts is checked or unchecked.
3. Copies of tax returns (or RTVUE/BRTVU) for at least three years prior to the opening of the offshore account and for all years after the account was opened, to show if a significant drop in reportable income occurred after the account was opened. (Review of the three years' returns prior to the opening of the account would give the examiner a better idea of what the taxpayer might have typically reported as income prior to opening the foreign account).
4. Copies of any prior Revenue Agent Reports that may show a history of noncompliance.
5. Two sets of cash T accounts (a reconciliation of the taxpayer's sources and uses of funds) with one set showing any unreported income in foreign accounts that was identified during the examination and the second set excluding the unreported income in foreign accounts.
6. Any documents that would support fraud (see IRM 4.10.6.2.2, Fraud, for a list of items to consider in asserting the fraud penalty).
7. Copies of filed Form 8938, Statement of Specified Foreign Financial Assets.

Penalty for Willful FBAR Violations - Calculation

1. In ascertaining the penalty amount for willful violations, first determine whether the mitigation criteria in Exhibit 4.26.16-2 are met.
2. If the mitigation criteria are met, make a preliminary penalty calculation using the mitigation guidelines in Exhibit 4.26.16-2 , except limit the total mitigated penalties (among all open years) to no more than 50 percent of the highest aggregate balance of all unreported foreign financial accounts (to which the violations relate) during the years under examination. Allocate the total mitigated penalty amount for each year among all violations in that year for which a penalty is recommended. This is the penalty amount, unless, in the examiner’s discretion as noted in IRM 4.26.16.5.2.1 , the facts and circumstances of a case warrant a different penalty amount. The provisions in paragraphs (7) and (8) below apply to this paragraph.
3. If the mitigation criteria are not met, the mitigation guidelines do not apply. Do not make a preliminary penalty calculation using the guidelines in Exhibit 4.26.16-2 .
4. If the mitigation criteria are not met or are met but the facts and circumstances of a case warrant a different penalty amount than calculated in paragraph (2), examiners will consider, as appropriate.

1. Asserting penalties, totaling (among all open years) no more than 50 percent of the highest aggregate balance of all unreported foreign financial accounts during the years under examination, regardless of the number of willful violations. Allocate the total penalty amount among all open years (with willful violations) based on the ratio of the combined high balance for each year to the total of the combined high balances for all years. Since FBAR penalties are determined under the statute on a per-violation basis, the total penalty allocated to each year will be further allocated among all violations being penalized in that year, subject to the maximum penalty limitation in 31 USC 5321(a)(5)(C) for each violation. The "highest aggregate balance" and the "combined high balance" are calculated as described in IRM 4.26.16.1.6 .
2. If asserting penalties computed under subparagraph (a) is not appropriate, asserting penalties for each willful violation in each open year with a penalty amount for each violation up to the statutory maximum penalty amount for that violation.
3. In determining an appropriate penalty amount, consider the facts and circumstances of the case and apply discretion as appropriate. See IRM 4.26.16.5.2.1 for more information about examiner discretion.
4. The provisions of paragraphs (7) and (8) below apply to this paragraph.

Note:

Since each account holder has a separate responsibility to report an account, for an account that had a zero balance on the violation date, each account holder can be liable for a penalty in the amount prescribed in 31 CFR 1010.821 for 31 USC 5321(a)(5)(C)(i)(I).

1. If, after reasonable efforts by the examiner to obtain it, the violation date balance is not available, the examiner may estimate it using available information, including the balance in the account on another date.
2. The examiner should document in the case file: 1) the efforts made to obtain the violation date balance, 2) the fact that the violation date balance is being estimated, and 3) the reason an estimate is used.
3. The examiner should also document what information was used to estimate the violation date balance. For example, if the examiner used the account balance on another date to estimate the violation date balance, the examiner should document 1) the date of that account balance; 2) where that account balance was obtained, for example the balance was included on an account statement; 3) any changes made to that account balance to arrive at the estimated violation date balance, such as changes made to reflect known transfers into or out of the account between the date of the account balance and the violation date; 4) and any other information the examiner considers relevant to the estimated balance.
4. If the account balance on another date is used to estimate the violation date balance, the examiner should use the closest balance date available, unless the examiner determines that the closest available balance is not the most accurate balance to use. If the examiner uses the account balance on another date to estimate the violation date balance but does not use the closest available balance, the reason the closest available balance was not used should be documented.
5. For purposes of determining the violation date balance for accounts where a currency other than U.S. dollars is used, follow additional guidance in paragraph (4) of IRM 4.26.16.2.2.2 .

Managerial Involvement and Approval of FBAR Penalties

1. Managers must perform a meaningful review of the examiner's penalty determination prior to assessment.
2. The manager must verify that the penalties were fairly imposed and accurately computed; that the examiner did not improperly assert the penalties in the first instance; and that the conclusions regarding "reasonable cause" (or the lack thereof) were proper.
3. Written managerial approval must be documented on the FBAR Penalty Approval Form. This form is available on the Servicewide FBAR Knowledge Base by clicking "Document Repository" , found on the right-hand side of https://portal.ds.irsnet.gov/sites/VL101/Pages/default.aspx.

Acronyms

The following table contains acronyms used in this IRM and their definitions.

FBAR Penalty Mitigation Guidelines for Violations Occurring After October 22, 2004

To qualify for the mitigation guidelines in this Exhibit for violations occurring after October 22, 2004, the filer must meet four criteria:

1. The filer has no history of criminal tax or BSA convictions for the preceding 10 years and has no history of prior FBAR penalty assessments.
2. No money passing through any of the foreign accounts associated with the filer was from an illegal source or used to further a criminal purpose.
3. The filer cooperated during the examination (such as, IRS did not have to resort to a summons to obtain non-privileged information; the filer responded to reasonable requests for documents, meetings, and interviews; and the filer back-filed correct reports.
4. IRS did not determine a civil fraud penalty against the person for an underpayment for the year in question due to the failure to report income related to any amount in a foreign account. If Examination determined a civil fraud penalty, mitigation is not appropriate for the year in question even if the determination was appealed and the Appeals process is pending. If, however, Appeals concluded its review and did not sustain the civil fraud penalty prior to the examiner’s consideration of whether the mitigation criteria are met, this criterion is met for the year in question. If Examination determined a civil fraud penalty, mitigation is not appropriate for the year in question even if a Tax Court case challenging the determination is pending. If, however, a Tax Court decision holding that the taxpayer is not subject to the civil fraud penalty becomes final, or the parties stipulate that the taxpayer is not subject to the civil fraud penalty, prior to the examiner’s consideration of whether the mitigation criteria are met, this condition is met for the year in question.

If the filer qualifies for mitigation, calculate the mitigated penalty amount using the applicable mitigation guidelines in this Exhibit. Use the computed mitigated penalty amount in conjunction with guidance in IRM 4.26.16.5.4 and IRM 4.26.16.5.5 to complete the penalty determination for non-willful and willful violations, respectively.

The following table contains FBAR penalty mitigation guidelines for penalties per filer per year for non-willful (NW) violations.

The following table contains FBAR penalty mitigation guidelines for penalties per filer per year for willful violations.

Money Transmitter FBAR Filing Requirements

This material was originally issued as Interim Guidance Memorandum SBSE-04-0607-024, Interim Guidance on Money Transmitter Report of Foreign Bank and Financial Accounts (FBAR) Filing Requirements.

BSA Examiners should continue to be alert to FBAR reporting and recordkeeping requirements encountered during all BSA compliance examinations. Examiners often encounter FBAR issues specific to the money transmission industry. Some of the most common issues and questions have been summarized and are addressed below.

Money transmitters in the U.S. send money overseas generally using foreign banks or non-bank agents located in foreign countries. The arrangement permits the money transmitter to readily send payments, in the currency of the foreign country, to the recipient. The U.S. money transmitter wires funds to the foreign bank or non-bank agent and provides instructions to make payments to the recipient located in the foreign country. The money transmitter typically does not have signature or other authority over the agent’s bank account. In this situation, the money transmitter is not required to file an FBAR for the agent’s bank account.

However, if the money transmitter has a direct financial interest in the foreign financial account, has signature authority, or other authority, over the foreign financial account and the aggregate value is in excess of $10,000 at any time during the year in question, the money transmitter is required to file an FBAR. Another person holding the foreign account on behalf of the money transmitter does not negate the FBAR filing requirement.

Frequently Asked Questions (FAQ’s) concerning money transmitters filing FBARs:

1. Is there an FBAR filing requirement when the money transmitter wires funds to a foreign bank account or has a business relationship with someone located in a foreign country?