What is FBAR?
FBAR is the Reporting of Foreign Bank Accounts. FBAR is an anti-money laundering regulation dating back to 1970. It was originally devised for the US Department of the Treasury under 31 U.S. Code 5311, in the context of ‘criminal, tax or regulatory investigations or proceedings, or in the conduct of intelligence or counterintelligence activities, including analysis, to protect against international terrorism.’ FBAR mandates US persons to declare any account outside the US with the FBAR form (TD F 90-22.1).
FBAR assumes that any entity failing to report a foreign account is hiding profits from a criminal activity, and it therefore levies unsustainable civil penalties (up to 50% of total assets for each year of omission), obviously designed to cripple or bankrupt that entity.
In 2003, the US Department of Treasury transferred the administration of FBAR to the IRS, which shifted the focus of FBAR from its original target (white-collar criminals and international terrorists) to the mass of taxpayers, particularly ordinary American expatriates.
In 2008, the reporting threshold was lowered to $10,000 held in aggregate across all foreign accounts. This reduction applied FBAR to middle-class Americans who may already have declared those accounts to the IRS through other means.
With FBAR, not only the account owner is liable to heavy penalties (as described above), but also any ‘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.’ Hence banks, asset managers and attorneys involved with managing overseas Americans’ bank accounts are also liable to full FBAR penalties in addition to the account holder.
FBAR allows the IRS or the US Department of Justice to:
- Force all overseas Americans to surrender their financial data to the IRS who are permitted to share this information with other US government agencies.
- At their sole discretion, select, target, penalize, seize the assets of, agree on onerous ‘settlements’, or else bankrupt any entity that failed to file an FBAR form. This includes those who were not aware of this obligation, including US expatriates, accidental Americans, and any foreign bank, in any country, where any such account was hosted.
(Information and text taken from ‘Notes on FBAR vs. FATCA “FATCA is the Hammer, FBAR is the Anvil”’ by James Bopp, Jr.)