[Federal Register Volume 75, Number 38 (Friday, February 26, 2010)]
[Proposed Rules]
[Pages 8844-8854]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-4042]
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DEPARTMENT OF THE TREASURY
31 CFR Part 103
RIN 1506-AB08
Financial Crimes Enforcement Network; Amendment to the Bank
Secrecy Act Regulations--Reports of Foreign Financial Accounts
AGENCY: Financial Crimes Enforcement Network (FinCEN), Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: FinCEN, a bureau of the Department of the Treasury (Treasury),
is proposing to revise the regulations implementing the Bank Secrecy
Act (BSA) regarding reports of foreign financial accounts. The proposed
rule would clarify which persons will be required to file reports of
foreign financial accounts and which accounts will be reportable. In
addition, the proposed rule would exempt certain persons with signature
or other authority over foreign financial accounts from filing reports
and would include provisions intended to prevent United States persons
from avoiding this reporting requirement.
DATES: Written comments on the notice of proposed rulemaking may be
submitted on or before April 27, 2010.
ADDRESSES: You may submit comments, identified by RIN 1506-AB08, by any
of the following methods:
Federal e-rulemaking portal: http://www.regulations.gov.
Refer to Docket Number Fincen-2009-0008 and follow the instructions for
submitting comments.
Mail: FinCEN, P.O. Box 39, Vienna, VA 22183. Include RIN
1506-AB08 in the body of the text.
Inspection of comments: Comments may be inspected, between 10 a.m.
and 4 p.m., in the FinCEN reading room in Vienna, VA. Persons wishing
to inspect the comments submitted must request an appointment with the
Disclosure Officer by telephoning (703) 905-5034 (not a toll-free
call).
FOR FURTHER INFORMATION CONTACT: Regulatory Policy and Programs
Division, FinCEN (800) 949-2732 and select option 1.
SUPPLEMENTARY INFORMATION:
I. Introduction
The provision of the BSA authorizing reports of foreign financial
accounts reflects congressional concern that foreign financial
institutions were being used to evade domestic criminal, tax, and
regulatory laws. The House report on the bill leading to the enactment
of the BSA described the use of undisclosed foreign financial accounts
for a wide range of abuses.\1\ Nearly four decades after the enactment
of the BSA, foreign financial accounts continue to be used for many of
the abuses cataloged by Congress when it was originally considering the
enactment of the BSA. For example, the Senate Permanent Subcommittee on
Investigations has found that Americans have continued to use complex
schemes to try to conceal their foreign financial accounts in attempts
to circumvent United States law.\2\
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\1\ The House report states:
Considerable testimony was received by the Committee from the
Justice Department, the United States Attorney for the Southern
District of New York, the Treasury Department, the Internal Revenue
Service, the Securities and Exchange Commission, the Defense
Department and the Agency for International Development about
serious and widespread use of foreign financial facilities located
in secrecy jurisdictions for the purpose of violating American law.
Secret foreign bank accounts and secret foreign financial
institutions have permitted proliferation of `white collar' crime;
have served as the financial underpinning of organized criminal
operations in the United States; have been utilized by Americans to
evade income taxes, conceal assets illegally, and purchase gold;
have allowed Americans and others to avoid the law and regulations
governing securities and exchanges; have served as essential
ingredients in frauds including schemes to defraud the United
States; have served as the ultimate depository of black market
proceeds from Vietnam; have served as a source of questionable
financing for conglomerate and other corporate stock acquisitions,
mergers and takeovers; have covered conspiracies to steal from the
U.S. defense and foreign aid funds; and have served as the cleansing
agent for `hot' or illegally obtained monies. H.R. Rep. No. 975 91st
Cong. 2d Sess. 12 (1970).
\2\ See Tax Haven Banks and U.S. Tax Compliance, Staff Report,
Permanent Subcommittee on Investigations, Senate Comm. on Homeland
Security and Governmental Affairs, (July 17, 2008); Tax Haven
Abuses: The Enablers, the Tools and Secrecy, Staff Report, Permanent
Subcommittee on Investigations, Senate Comm. on Homeland Security
and Governmental Affairs, (Aug. 1, 2006).
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Considerable effort has been made to address these abuses. The
Internal Revenue Service (IRS), for example, has several projects
focused on the use of offshore accounts to evade federal income taxes.
II. Background
A. Statutory and Regulatory Background
The BSA, Titles I and II of Public Law 91-508, as amended, codified
at 12 U.S.C. 1829b, 12 U.S.C. 1951-1959, and 31 U.S.C. 5311-5314 and
5316-5332, authorizes the Secretary of the Treasury (Secretary), among
other things, to issue regulations requiring persons to keep records
and file reports that are determined to have a high degree of
usefulness in criminal, tax, regulatory, and counterterrorism matters.
The regulations implementing the BSA appear at 31 CFR Part 103. The
Secretary's authority to administer the BSA has been delegated to the
Director of FinCEN.
Under 31 U.S.C. 5314 the Secretary is authorized to require any
``resident or citizen of the United States, or a person in, and doing
business in, the United States, to * * * keep records and file reports,
when the resident, citizen, or person makes a transaction or maintains
a relation for any person with a foreign financial agency.'' For this
purpose, foreign financial agency means ``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
in a transaction in money, credit, securities or gold.'' \3\ The
Secretary is also
[[Page 8845]]
authorized to prescribe exemptions to the reporting requirement and to
prescribe other matters the Secretary considers necessary to carry out
section 5314.
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\3\ See 31 U.S.C. 5312(a)(1) which excepts from the definition
of financial agency a person acting for a country, a monetary or
financial authority acting as a monetary or financial authority or
an international financial institution of which the United States
government is a member.
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B. Overview of Current Regulations and Form
The regulations implementing 31 U.S.C. 5314 appear at 31 CFR
103.24, 103.27, and 103.32. Section 103.24 generally requires each
person subject to the jurisdiction of the United States having a
financial interest in or signature or other authority over a bank,
securities, or other financial account in a foreign country to ``report
such relationship to the Commissioner of Internal Revenue for each year
in which such relationship exists, and * * * provide such information
as shall be specified in a reporting form prescribed by the Secretary
to be filed by such persons.'' Section 103.27 requires the form to be
filed with respect to foreign financial accounts exceeding $10,000. The
form must be filed on or before June 30 of each calendar year for
accounts maintained during the previous calendar year. Section 103.32
requires records of accounts to be maintained for each person having a
financial interest in or signature or other authority over such
account. The records must be maintained for a period of five years.\4\
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\4\ This notice of proposed rulemaking would not amend sections
103.27 and 103.32.
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The form used to file the report required by section 103.24 is the
Report of Foreign Bank and Financial Accounts--Form TD F 90-22.1 (the
FBAR).\5\ The instructions to the FBAR specify which persons must file
as well as the types of accounts that must be reported. The
instructions also provide exemptions from reporting for certain persons
with signature or other authority over the accounts.
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\5\ The FBAR form currently available on both the FinCEN and IRS
Web sites allows users to complete the form electronically and then
print a PDF document that can be mailed to the address on the form.
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The authority to enforce the provisions of 31 U.S.C. 5314 and
sections 103.24 and 103.32 has been re-delegated from FinCEN to the
Commissioner of Internal Revenue by means of a Memorandum of Agreement
between FinCEN and the IRS dated April 2, 2003.\6\ With this
delegation, FinCEN conferred upon the IRS the authority to enforce the
FBAR provisions of the BSA and its implementing regulations,
investigate possible violations, and assess and collect civil penalties
in connection therewith. The delegation also conferred upon the IRS the
authority to: (1) Respond to public inquiries and requests for advice;
(2) issue administrative rulings; and (3) provide related assistance to
the public with respect to compliance with FBAR requirements. Finally,
the delegation conferred upon the IRS the authority to revise the FBAR
form and instructions, and to propose to FinCEN revisions of the
applicable regulations for the purpose of enhancing FBAR compliance and
enforcement.
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\6\ See 31 CFR 103.56(g).
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A revised Form TD F 90-22.1 that modified several aspects of the
FBAR form instructions was issued in October 2008. Most notably, the
revised FBAR form instructions broadened the definition of ``United
States person'' to conform more closely to the FBAR's authorizing
statute,\7\ and sought to clarify the scope of foreign financial
accounts that trigger FBAR filing requirements. In the ensuing months,
the IRS received a number of questions and comments seeking guidance on
compliance with the revised FBAR instructions. In response to these
comments, the IRS published guidance indicating that until further
notice, all persons may rely on the definition of ``United States
person'' found in the prior version of the FBAR instructions from 2000.
The IRS also extended the FBAR filing deadline for the 2008 and earlier
calendar years to September 23, 2009 for certain filers.\8\
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\7\ 31 U.S.C. 5314.
\8\ Announcement 2009-51, 2009-25 I.R.B. 1005.
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In addition, the IRS published Notice 2009-62 on August 10, 2009,
which extended the FBAR filing deadline for the 2008 and earlier
calendar years to June 30, 2010 for certain filers, and requested
comments from the public regarding several FBAR-related issues.
Specifically, Notice 2009-62 requested public comment regarding: (1)
When a person with signature or other authority over, but no financial
interest in, a foreign financial account should be relieved of filing
an FBAR for the account; (2) whether to expand the filing exemption
currently available to officers and employees of banks and certain
publicly traded domestic companies, where such officers and employees
have signature or other authority over their employer's accounts; and
(3) when an interest in a foreign entity should trigger an FBAR filing
requirement.\9\
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\9\ In crafting the proposed rule, FinCEN reviewed the public
comments received in response to Notice 2009-62.
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III. Section-by-Section Analysis
The proposed rule would include a definition of United States
persons and definitions of bank, securities, and other financial
accounts in a foreign country. FinCEN believes that inclusion of these
definitions will more clearly delineate both the scope of individuals
and entities that would be required to file the FBAR and the types of
accounts for which such reports should be made, so that determining a
person's filing obligations will be more straightforward and
predictable. In addition, the proposed rule would exempt certain
persons with signature or other authority from filing the FBAR.
Finally, the proposed rule would include provisions intended to prevent
United States persons required to file the FBAR from avoiding this
reporting requirement.
A. Sec. 103.24(a)--In General
FinCEN proposes to amend 31 CFR 103.24 by using a new term ``United
States person'' to indicate persons that would be required to file an
FBAR.
B. Section 103.24(b)--United States Person
FinCEN proposes to define a United States person as a citizen or
resident of the United States, or an entity, including but not limited
to a corporation, partnership, trust or limited liability company,
created, organized, or formed under the laws of the United States, any
state, the District of Columbia, the Territories and Insular
Possessions of the United States or the Indian Tribes. This definition
applies to an entity regardless of whether an election has been made
under 26 CFR 301.7701-2 or 301.7701-3 to disregard the entity for
federal income tax purposes. The determination of whether an individual
is a resident of the United States would be made under the rules of the
Internal Revenue Code, specifically 26 U.S.C. 7701(b) and the
regulations thereunder except that the definition of the term ``United
States'' provided in 31 CFR 103.11(nn) will be used instead of the
definition of ``United States'' in 26 CFR 301.7701(b)-1(c)(2)(ii).
FinCEN believes that this approach is appropriate because it provides
for uniformity regardless of where in the United States an individual
may be. In addition, FinCEN believes this approach takes into account
that individuals may seek to hide their residency in an effort to
obscure the source of their income or location of their assets.\10\
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\10\ See Tax Haven Banks and U.S. Tax Compliance, Staff Report,
Permanent Subcommittee on Investigations, Senate Comm. on Homeland
Security and Governmental Affairs at 8 (July 17, 2008).
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[[Page 8846]]
C. Section 103.24(c)--Types of Reportable Accounts
FinCEN proposes to amend 31 CFR 103.24 by adding definitions of the
accounts subject to reporting. Section 5314 authorizes the Secretary to
require records or reports when a person ``makes a transaction or
maintains a relation for any person with a foreign financial agency.''
Although section 5314 authorizes the Secretary to address both
transactions and relations, FinCEN is focusing in this rulemaking on
relations. FinCEN believes that when a person maintains an account with
a foreign financial institution, the person is maintaining a relation
with a foreign financial agency. For this purpose, an account means a
formal relationship with such person to provide regular services,
dealings and other financial transactions. The length of the time for
which service is being provided does not affect the fact that a formal
account relationship has been established. For example, in the case of
an escrow account, an individual may establish a relationship with a
financial institution to service and maintain that account, albeit for
a short period of time. However, an account is not established simply
by conducting transactions such as wiring money or purchasing a money
order where no relationship has otherwise been established.
FinCEN has chosen to define bank, securities, and other financial
accounts with reference to the kinds of financial services for which a
person maintains an account. FinCEN believes this is necessary because
while the BSA provides guidance as to the definition of a financial
institution, financial institutions under the BSA are largely defined
by reference to United States law and terminology. For example, a
financial institution is defined in the BSA to include an insured bank
as defined in section 3(h) of the Federal Deposit Insurance Act.\11\
Accordingly, the proposed amendment to section 103.24 would include
definitions of bank account, securities account, and other financial
accounts.
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\11\ See 31 U.S.C. 5312(a)(2)A.
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D. Section 103.24(c)(1)--Bank Account
The term ``bank account'' means a savings deposit, demand deposit,
checking, or any other account maintained with a person engaged in the
business of banking. This definition includes time deposits such as
certificates of deposit accounts that allow individuals to deposit
funds with a banking institution and redeem the initial amount, along
with interest earned after a prescribed period of time.
E. Section 103.24(c)(2)--Securities Account
The term ``securities account'' means an account maintained with a
person in the business of buying, selling, holding, or trading stock or
other securities.
F. Section 103.24(c)(3)--Other Financial Account
The term ``other financial account'' appears in current section
103.24. While FinCEN understands that the term ``other financial
account'' is broad enough to cover a range of relationships with
foreign financial agencies, FinCEN believes that compliance will be
enhanced by more clearly delineating the types of relationships that
must be reported.
Thus, the proposal would define ``other financial account'' to mean
An account with a person that is in the business of
accepting deposits as a financial agency;
An account that is an insurance policy with a cash value
or an annuity policy;
An account with a person that acts as a broker or dealer
for futures or options transactions in any commodity on or subject to
the rules of a commodity exchange or association; or
An account with a mutual fund or similar pooled fund which
issues shares available to the general public that have a regular net
asset value determination and regular redemptions.
The proposed definition includes an account with a person that
accepts deposits as a financial agency. FinCEN believes that it is
necessary to include this provision to ensure that deposit accounts and
similar relationships will be covered despite differences in
terminology, operations of financial institutions, and legal frameworks
in other countries.
The definition of other financial account also includes an account
that is an insurance policy with a cash value or an annuity policy.
Life insurance policies that have a cash surrender value are potential
money laundering vehicles because cash value can be redeemed by a money
launderer. Similarly, annuity contracts pose a money laundering risk
because they allow a money launderer to exchange illicit funds for an
immediate or deferred income stream or to purchase a deferred annuity
and obtain clean funds upon redemption.
The definition of other financial account specifically includes an
account with a mutual fund or similar pooled fund, or other investment
fund. FinCEN believes that these types of companies fall within the
definition of ``investment company,'' which is a financial institution
under the BSA.\12\
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\12\ See 31 U.S.C. 5312(a)(2)I.
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Mutual funds and similar pooled funds are offered to the general
public and typically are identifiable by the ability of the account
holder to redeem shares on a daily or otherwise regular basis. FinCEN
believes that these types of accounts present risks for money
laundering. As with other types of financial accounts, money launderers
may use mutual fund accounts to layer their funds by sending and
receiving money and wiring it quickly through several accounts and
multiple institutions. Layering could also involve purchasing funds in
the name of a fictitious corporation or an entity designed to conceal
the true owner. Most importantly, mutual funds can also be used for
integrating illegal income into legitimate assets, allowing illegal
proceeds to appear to have a legitimate source when the shares of the
fund are redeemed and deposited into a bank account.
FinCEN recognizes that outside of mutual funds and similar pooled
funds, individuals may invest in other types of pooled investment
companies, such as private equity funds, venture capital funds and
hedge funds. Because these kinds of funds are privately offered funds,
their characteristics vary greatly. In addition, the lack of functional
regulation over these kinds of funds makes it difficult to define and
distinguish certain types of these funds from others. FinCEN is aware,
however, of pending legislative proposals that would apply additional
regulation and oversight over the operations of some of these
investment companies. Accordingly, FinCEN has determined that, at this
time, the proposal should reserve the treatment of investment companies
other than mutual funds or similar pooled funds. Treasury remains
concerned about the use of, for example, hedge funds to evade taxes and
FinCEN will continue to study this issue.\13\
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\13\ Concerns about the use of hedge funds to evade taxes is
discussed in The Report of the President's Working Group on
Financial Market, Hedge Funds, Leverage, and the Lessons of Long-
Term Capital Management (April 1999). ``In the tax area, the fact
that a significant number of hedge funds are established in offshore
financial centers that are tax havens has focused attention on
whether offshore hedge funds are associated with illegal tax
avoidance and are taking advantage of their offshore situs for other
inappropriate purposes.'' Id. at 4. FinCEN is also aware of pending
legislative proposals that would require United States individuals
to annually report to the IRS with respect to foreign hedge funds
and private equity funds, for example.
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[[Page 8847]]
G. Section 103.24(c)(4)--Exceptions for Certain Accounts
Paragraph (c)(4) includes exceptions for certain accounts for which
reporting will not be required by persons with a financial interest in
or signature or other authority over the accounts. The following
accounts are proposed to be excepted from reporting.
An account of a department or agency of the United States;
an Indian Tribe; or any State or any political subdivision of a State;
or a wholly-owned entity, agency, or instrumentality of any of the
foregoing is not required to be reported. In addition, reporting is not
required with respect to an account of an entity established under the
laws of the United States; of an Indian Tribe; of any State; or of any
political subdivision of any State; or under an intergovernmental
compact between two or more States or Indian Tribes that exercises
governmental authority on behalf of the United States, an Indian Tribe,
or any such State or political subdivision. For this purpose, an entity
generally exercises governmental authority on behalf of the United
States, an Indian Tribe, a State, or a political subdivision only if
its authorities include one or more of the powers to tax, to exercise
the power of eminent domain, or to exercise police powers with respect
to matters within its jurisdiction.
An account of an international financial institution of
which the United States government is a member is not required to be
reported.
An account in an institution known as a ``United States
military banking facility'' (or ``United States military finance
facility'') operated by a United States financial institution
designated by the United States Government to serve United States
government installations abroad is not required to be reported even
though the United States military banking facility is located in a
foreign country.
Correspondent or nostro accounts that are maintained by
banks and used solely for bank-to-bank settlements are not required to
be reported.
The first three exceptions take into account the governmental
status and functions of the entities and agencies. The last exception
for nostro accounts takes into account the limited access to the
account.
H. Section 103.24(d)--Foreign Country
Foreign country includes all geographical areas located outside of
the United States as defined in 31 CFR 103.11(nn).
I. Section 103.24(e)--Financial Interest
Financial Interest When the United States Person Is the Owner of Record
or Holder of Legal Title
A United States person has a financial interest in each bank,
securities, or other financial account in a foreign country for which
he is the owner of record or holds legal title regardless of whether
the account is maintained for his own benefit or for the benefit of
others. If an account is maintained in the name of more than one
person, each United States person in whose name the account is
maintained has a financial interest in that account.
Financial Interest When Another Is Acting on Behalf of the United
States Person
A United States person also has a financial interest in each bank,
securities, or other financial account in a foreign country for which
the owner of record or holder of legal title is a person acting on
behalf of that United States person such as an attorney, agent or
nominee with respect to the account.
Other Situations Giving Rise to a Financial Interest
Further, a United States person is deemed to have a financial
interest in a bank, securities, or other financial account in a foreign
country for which the owner of record or holder of legal title is--
A corporation in which the United States person owns
directly or indirectly more than 50 percent of the voting power or the
total value of the shares, a partnership in which the United States
person owns directly or indirectly more than 50 percent of the interest
in profits or capital, or any other entity (other than a trust) in
which the United States 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.
A trust, if the United States person is the trust settlor
and has an ownership interest in the account for United States federal
tax purposes. See 26 U.S.C. 671-679 to determine if a settlor has an
ownership interest in a trust's financial account for a year.
A trust in which the United States person either has a
beneficial interest in more than 50 percent of the assets or from which
such person receives more than 50 percent of the current income.
A trust that was established by the United States person
and for which the United States person has appointed a trust protector
that is subject to such person's direct or indirect instruction.\14\
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\14\ As described by the Senate Permanent Subcommittee on
Investigations (PSI), Committee on Homeland Security and
Governmental Affairs, in its 2006 report, Tax Haven Abuses: the
Enablers, the Tools and Secrecy, Senate Hearing 109-797, 109th
Cong., 2d Sess. (August 1, 2006), arrangements such as ``trust
protectors'' have been employed by United States taxpayers to
achieve substantial control over assets held in offshore trusts. In
some cases trust protectors serve to safeguard trust assets from
misappropriation. However, many offshore trusts are established with
the intention of maintaining client control. In such cases trust
protectors can serve as conduits of the client's instructions to the
trustees, with the trustees merely rubber stamping the protectors'
directions. Such an arrangement permits greater client control while
maintaining the appearance of trustee independence.
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Finally, a United States person that causes an entity to be created
for a purpose of evading the reporting requirement shall have a
financial interest in any bank, securities, or other financial account
in a foreign country for which the entity is the owner of record or
holder of legal title. The term ``evading'' as used in the anti-
avoidance rule is not intended to apply to persons who make a good
faith effort to comply with the regulations implementing section 5314.
The definition of financial interest includes certain instances
where a United States person's ownership or control over the owner of
record or holder of legal title rises to such a level that the person
should be deemed to have a financial interest in the account. FinCEN
believes that these rules are necessary to ensure that these financial
interests of United States persons are reported on the FBAR regardless
of how the interest is held or structured. Lastly, FinCEN has included
an anti-avoidance rule to capture reporting in instances where persons
seek to evade the requirement to file an FBAR through the use of
devices such as transfer companies. Such devices have been documented
in reports by the Senate Permanent Subcommittee on Investigations as
methods by which United States persons have tried to hide ownership of
foreign financial accounts.\15\
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\15\ The PSI reported the use of transfer companies, single
purpose companies used solely to disguise the transfer of funds from
an entity controlled by a taxpayer to the account of another entity
controlled by the taxpayer. See Tax Haven Banks and U.S. Tax
Compliance, Staff Report, Permanent Subcommittee on Investigations,
Senate Comm. on Homeland Security and Governmental Affairs, at 4, 65
(July 17, 2008).
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J. Section 103.24(f)--Signature or Other Authority
FinCEN has included in proposed section 103.24 provisions that
would address signature or other authority over
[[Page 8848]]
a bank, securities, or other financial account in a foreign country.
Signature or Other Authority In General
Current section 103.24 requires reporting by United States persons
with signature or other authority over bank, securities, or other
financial accounts in a foreign country. The proposal would continue
this requirement and would define signature or other authority.
Signature or other authority means authority of an individual (alone or
in conjunction with another) to control the disposition of money,
funds, or other assets held in a financial account by delivery of
instructions (whether communicated in writing or otherwise) directly to
the person with whom the financial account is maintained.
Exceptions for Signature or Other Authority
FinCEN is including in the proposed rule certain exceptions for
United States persons with signature or other authority over reportable
accounts. These exceptions generally apply to officers and employees of
financial institutions that have a federal functional regulator, and
certain entities that are publicly traded on a United States national
securities exchange, or that are otherwise required to register their
equity securities with the Securities and Exchange Commission. FinCEN
believes that such relief is appropriate in light of the federal
oversight of these entities. These exceptions apply, however, only
where the officer or employee has no financial interest in the
reportable account. These institutions would still be obligated to
report their financial interest in these reportable accounts. FinCEN is
proposing the following exceptions.
An officer or employee of 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 need not report that he has signature or other authority
over a foreign financial account owned or maintained by the bank if the
officer or employee has no financial interest in the account.
This exception is available to officers or employees of banks
examined by the federal banking agencies. Officers or employees can
avail themselves of this exemption without receiving notice from the
bank that the bank has filed an FBAR with respect to the reportable
accounts over which it has a financial interest.
An officer or employee of a financial institution that is
registered with and examined by the Securities and Exchange Commission
or Commodity Futures Trading Commission need not report that he has
signature or other authority over a foreign financial account owned or
maintained by such financial institution if the officer or employee has
no financial interest in the account.
This exception is available to officers or employees of financial
institutions such as securities broker dealers or futures commission
merchants which are registered with and examined by, the Securities and
Exchange Commission or Commodity Futures Trading Commission. Again,
officers or employees of such financial institutions can avail
themselves of this exemption without receiving a notice from the
employer.
An officer or employee of an Authorized Service Provider
need not report that he has signature or other authority over a foreign
financial account owned or maintained by an investment company that is
registered with the Securities and Exchange Commission if the officer
or employee has no financial interest in the account. ``Authorized
Service Provider'' means an entity that is registered with and examined
by the Securities and Exchange Commission and provides services to an
investment company registered under the Investment Company Act of 1940.
This exception has been included to address the fact that mutual
funds do not have employees of their own. Instead, the day-to-day
operations of such a fund are performed by individuals who are employed
by fund service providers, such as investment advisors. Officers or
employees of an Authorized Service Provider which is registered with
and examined by the Securities and Exchange Commission may avail
themselves of this exemption without receiving notice from the employer
provided that the fund they service is also registered with the
Securities and Exchange Commission. FinCEN believes that this exception
is appropriate in light of the requirement that both the service
provider and the fund are registered with the Securities and Exchange
Commission.
An officer or employee of an entity with a class of equity
securities listed on any United States national securities exchange
need not report that he has signature or other authority over a foreign
financial account of such entity if the officer or employee has no
financial interest in the account. An officer or employee of a United
States subsidiary of such entity need not file a report concerning
signature or other authority over a foreign financial account of the
subsidiary if he has no financial interest in the account and the
United States subsidiary is named in a consolidated FBAR report of the
parent filed under proposed paragraph (g)(3) of 31 CFR 103.24.
This exception is available to officers and employees of entities
which are listed upon a United States national securities exchange,
regardless of whether the entity is domestic or foreign. Officers and
employees of a United States subsidiary of such listed entities are
also covered by this exception if the United States subsidiary is named
in a consolidated FBAR report of the parent.
An officer or employee of a United States corporation that
has a class of equity securities registered under section 12(g) of the
Securities Exchange Act need not report that he has signature or other
authority over the foreign financial accounts of such corporation if he
has no financial interest in the accounts.
This exception applies to officers and employees of United States
corporations whose size in terms of assets and shareholders \16\
requires them to register their stock with the Securities and Exchange
Commission and makes them subject to reporting under the Securities
Exchange Act.
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\16\ Currently, these are corporations which have more than $10
million in assets and more than 500 shareholders of record. See 15
U.S.C. 78l(g) (2006) and the regulations thereunder.
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K. 103.24(g)--Special Rules
FinCEN is proposing special rules to simplify FBAR filings in
certain cases.
25 or more foreign financial accounts. A United States
person having a financial interest in 25 or more foreign financial
accounts need only 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 when so requested by the
Secretary or his delegate. Similarly, a United States person having
signature or other authority over 25 or more foreign financial accounts
need only 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 when so requested by the
Secretary or his delegate.
Consolidated reports. An entity that is a United States
person and owns directly or indirectly more than a 50 percent interest
in an entity required to
[[Page 8849]]
report under this section will be permitted to file a consolidated
report on behalf of itself and such other entity.
Participants and beneficiaries in certain retirement
plans. Participants and beneficiaries in retirement plans under
sections 401(a), 403(a) or 403(b) of the Internal Revenue Code as well
as owners and beneficiaries of individual retirement accounts under
section 408 of the Internal Revenue Code or Roth IRAs under section
408A of the Internal Revenue Code will not be required to file an FBAR
with respect to a foreign financial account held by or on behalf of the
retirement plan or IRA. \17\
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\17\ This proposed exemption is not intended to affect the
filing requirements with respect to qualified pension plans or
individual retirement accounts. FinCEN believes that, in most cases,
such entities (which are subject to a number of statutory
requirements and limitations) are in a better position to be aware
of the presence of a foreign financial account). An IRA is an
individual retirement account described in section 408 of the
Internal Revenue Code (i.e., a traditional IRA, IRA annuity, SEP
IRA, SIMPLE IRA, or deemed IRA) or a Roth IRA (including a Roth IRA
annuity or a deemed Roth IRA) described in section 408A of the
Internal Revenue Code.
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Certain trust beneficiaries. A beneficiary of a trust
described in proposed paragraph (e)(2)(iv) is not required to report
the trust's foreign financial accounts if the trust, trustee of the
trust, or agent of the trust is a United States person that files an
FBAR disclosing the trust's foreign financial accounts and provides any
additional information as required by the report.\18\
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\18\ FinCEN believes that, in most cases, the trust or its
trustees are in a better position than the beneficiaries to be aware
of the presence of a foreign financial account and the information
needed to file the FBAR as well as whether individual beneficiaries
exceed the 50 percent threshold.
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In addition, FinCEN anticipates that in the case of United States
persons who are employed in a foreign country and who have signature or
other authority over foreign financial accounts owned or maintained by
their employer, the instructions to the FBAR form will prescribe a
modified form of reporting for such persons.
IV. Proposed Changes to the FBAR Instructions
The changes proposed by this notice of proposed rulemaking, if
adopted as a final rule, would also require changes to the instructions
to the FBAR. A draft of revised changes to the FBAR instructions
appears as an attachment at the end of this notice of proposed
rulemaking.
V. Regulatory Flexibility Act
Pursuant to the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et
seq.), FinCEN certifies that these proposed regulation revisions will
not have a significant economic impact on a substantial number of small
entities. The proposed rule revises an existing rule that requires
reports to be made to Treasury with respect to certain foreign
financial accounts. Because this proposal clarifies the existing rules
and narrows the scope of individuals and entities subject to reporting
and recordkeeping requirements, we will reduce regulatory obligations
overall.
The proposed rule will not affect a substantial number of small
entities. The proposed rule applies to United States persons, a term
which includes entities of all sizes, if they have reportable accounts
under this rule. However, we expect that small entities will be less
likely to have reportable foreign financial accounts or to have many
such accounts unlike larger entities, which have a broader base of
business operations.
In any event, the proposed rule will not have a significant
economic impact on small entities. As explained above, the proposed
rule revises an existing rule that requires reports to be made to
Treasury with respect to certain foreign financial accounts. Filing the
reports will require entities to transfer basic information that they
will have received on account statements from the foreign financial
institution at which the account is opened and maintained. Those
statements will provide the entity with the information about the
account needed to file the FBAR. No special accounting or legal skills
would be necessary to transfer the basic information required to be
reported, such as the name of the foreign financial institution, the
type of account, and the account number, to the FBAR. Furthermore, the
proposed rule continues a simplified reporting method for persons with
a financial interest in 25 or more foreign financial accounts and
extends the relief of this simplified reporting method to persons with
signature or other authority over 25 or more foreign financial
accounts. FinCEN requests comments on the accuracy of the statement
that the regulations in this document will not have a significant
economic impact on a substantial number of small entities.
VI. Paperwork Reduction Act Notices
The reporting requirement contained in this proposed rule (31 CFR
103.24) is being submitted to the Office of Management and Budget for
review in accordance with the Paperwork Reduction Act of 1995 (44
U.S.C. 3507(d)). This proposed rulemaking seeks to clarify the scope of
existing definitions and related rules. By making requirements clearer
for reporting persons, there is a potential that certain reporting
persons may see an increase in the collection and reporting of
information, but any such potential increase may likely be offset by
the corresponding exceptions and clarifications in the proposal.
Moreover, to the extent that we have clarified the existing rules and
narrowed the scope of individuals or entities subject to reporting or
recordkeeping requirements, we will have reduced regulatory obligations
overall.\19\
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\19\ This proposed amendment to 31 CFR 103.24 clarifies the
filing requirement for certain foreign persons thereby reducing the
overall burden of BSA recordkeeping and reporting requirements.
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Comments concerning the estimated burden and other questions should
be sent to the Desk Officer for the Department of the Treasury, Office
of Information and Regulatory Affairs, Office of Management and Budget,
Paperwork Reduction Project (1506), Washington, DC 20503 with a copy to
FinCEN and the IRS SBSE by mail or comments may also be submitted by e-
mail to [email protected]. Please submit comments by one
method only. Comments are welcome and must be received by April 27,
2010.
Amendment to the Bank Secrecy Act Regulations--Reports of Foreign Bank
and Financial Accounts
In accordance with requirements of the Paperwork Reduction Act of
1995, 44 U.S.C. 3506(c)(2)(A), and its implementing regulations, 5 CFR
part 1320, the following information concerning the collection of
information of the Amendment to the Bank Secrecy Act Regulations--
Reports of Foreign Bank and Financial Accounts is presented to assist
those persons wishing to comment on the information collection.
Description of Affected Filers: Individuals and certain entities
that maintain foreign financial accounts reportable under 31 CFR
103.24.
Estimated Number of Affected Filing Individuals and Entities:
400,000.
Estimated Average Annual Burden Hours per Affected Filer: The
estimated average burden associated with the recordkeeping requirement
in this proposed rule will vary depending on the number of reportable
accounts. We estimate that the recordkeeping burden will range from
five minutes to sixty minutes, and that the average burden will be
thirty minutes. The estimated average burden associated with the
reporting requirement (FBAR form completion) will also vary depending
on the number of reportable accounts and whether the filer will be able
to take
[[Page 8850]]
advantage of the exceptions provided in this proposed rule. We estimate
that the average reporting burden will range from approximately twenty
minutes to one hour and that the average reporting burden will be
approximately 45 minutes. The reporting burden is reflected in the
burden listed for completing TD-F 90-22.1 (See OMB Control Number 1506-
0009/1545-2038). The burden associated with reporting a financial
interest in or signature or other authority over a foreign financial
account to the Commissioner of Internal Revenue is reflected in the
burden for the appropriate income tax return or schedule.
Estimated Total Annual Burden: 500,000 hours.
VII. Unfunded Mandates Act of 1995 Statement
Section 202 of the Unfunded Mandates Reform Act of 1995 (``Unfunded
Mandates Act''), Public Law 104-4 (March 22, 1995), requires that an
agency prepare a budgetary impact statement before promulgating a rule
that may result in expenditure by state, local, and tribal governments,
in the aggregate, or by the private sector, of $100 million or more in
any one year. If a budgetary impact statement is required, section 202
of the Unfunded Mandates Act also requires an agency to identify and
consider a reasonable number of regulatory alternatives before
promulgating a rule. FinCEN has determined that it is not required to
prepare a written statement under section 202 and has concluded that on
balance the proposals in the Notice of Proposed Rulemaking provide the
most cost-effective and least burdensome alternative to achieve the
objectives of the rule.
List of Subjects in 31 CFR Part 103
Administrative practice and procedure, Banks, Banking, Brokers,
Currency, Foreign banking, Foreign currencies, Gambling,
Investigations, Penalties, Reporting and recordkeeping requirements,
Securities, Terrorism.
Amendment
For the reasons set forth above in the preamble, 31 CFR Part 103 is
proposed to be amended as follows:
PART 103--FINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY AND
FOREIGN TRANSACTIONS
1. The authority citation for part 103 is revised to read as
follows:
Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5314
and 5316-5332; title III, sec. 314, Pub. L. 107-56, 115 Stat. 307.
2. Section 103.24 is revised to read as follows:
Sec. 103.24 Reports of foreign financial accounts.
(a) In general. 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 U.S.C. 5314
to be filed by such persons. The form prescribed under section 5314 is
the Report of Foreign Bank and Financial Accounts (TD-F 90-22.1), or
any successor form. See paragraphs (g)(1) and (g)(2) of this section
for a special rule for persons with a financial interest in 25 or more
accounts, or signature or other authority over 25 or more accounts.
(b) United States person. For purposes of this section, the term
``United States person'' means--
(1) A citizen of the United States;
(2) A resident of the United States. A resident of the United
States is an individual who is a resident alien under 26 U.S.C. 7701(b)
and the regulations thereunder but using the definition of ``United
States'' provided in 31 CFR 103.11(nn) rather than the definition of
``United States'' in 26 CFR 301.7701(b)-1(c)(2)(ii); and
(3) An entity, including but not limited to a corporation,
partnership, trust, or limited liability company created, organized, or
formed under the laws of the United States, any State, the District of
Columbia, the Territories and Insular Possessions of the United States,
or the Indian Tribes.
(c) Types of reportable accounts--(1) Bank account. The term ``bank
account'' means a savings deposit, demand deposit, checking, or any
other account maintained with a person engaged in the business of
banking.
(2) Securities account. The term ``securities account'' means an
account with a person engaged in the business of buying, selling,
holding or trading stock or other securities.
(3) Other financial account. The term ``other financial account''
means--
(i) An account with a person that is in the business of accepting
deposits as a financial agency;
(ii) An account that is an insurance policy with a cash value or an
annuity policy;
(iii) An account with a person that acts as a broker or dealer for
futures or options transactions in any commodity on or subject to the
rules of a commodity exchange or association; or
(iv) An account with--
(A) Mutual fund or similar pooled fund. A mutual fund or similar
pooled fund which issues shares available to the general public that
have a regular net asset value determination and regular redemptions;
or
(B) Other investment fund. [RESERVED].
(4) Exceptions for certain accounts.
(i) An account of a department or agency of the United States, an
Indian Tribe, or any State or any political subdivision of a State, or
a wholly-owned entity, agency or instrumentality of any of the
foregoing is not required to be reported. In addition, reporting is not
required with respect to an account of an entity established under the
laws of the United States, of an Indian Tribe, of any State, or of any
political subdivision of any State, or under an intergovernmental
compact between two or more States or Indian Tribes that exercises
governmental authority on behalf of the United States, an Indian Tribe,
or any such State or political subdivision. For this purpose, an entity
generally exercises governmental authority on behalf of the United
States, an Indian Tribe, a State, or a political subdivision only if
its authorities include one or more of the powers to tax, to exercise
the power of eminent domain, or to exercise police powers with respect
to matters within its jurisdiction.
(ii) An account of an international financial institution of which
the United States government is a member is not required to be
reported.
(iii) An account in an institution known as a ``United States
military banking facility'' (or ``United States military finance
facility'') operated by a United States financial institution
designated by the United States Government to serve United States
government installations abroad is not required to be reported even
though the United States military banking facility is located in a
foreign country.
(iv) Correspondent or nostro accounts that are maintained by banks
and used solely for bank-to-bank settlements are not required to be
reported.
(d) Foreign country. A foreign country includes all geographical
areas located outside of the United States as defined in 31 CFR
103.11(nn).
(e) Financial interest. A financial interest in a bank, securities
or other financial account in a foreign country
[[Page 8851]]
means an interest described in this paragraph (e):
(1) Owner of record or holder of legal title. A United States
person has a financial interest in each bank, securities or other
financial account in a foreign country for which he is the owner of
record or has legal title whether the account is maintained for his own
benefit or for the benefit of others. If an account is maintained in
the name of more than one person, each United States person in whose
name the account is maintained has a financial interest in that
account.
(2) Other financial interest. A United States person has a
financial interest in each bank, securities or other financial account
in a foreign country for which the owner of record or holder of legal
title is--
(i) A person acting as an agent, nominee, attorney or in some other
capacity on behalf of the United States person with respect to the
account;
(ii) A corporation in which the United States person owns directly
or indirectly more than 50 percent of the voting power or the total
value of the shares, a partnership in which the United States person
owns directly or indirectly more than 50 percent of the interest in
profits or capital, or any other entity (other than an entity in
paragraphs (e)(2)(iii) through (v) of this section) in which the United
States 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;
(iii) A trust, if the United States person is the trust settlor and
has an ownership interest in the account for United States federal tax
purposes. See 26 U.S.C. 671-679 and the regulations thereunder to
determine if a settlor has an ownership interest in a trust's financial
account for a year;
(iv) A trust in which the United States person either has a
beneficial interest in more than 50 percent of the assets or from which
such person receives more than 50 percent of the income; or
(v) A trust that was established by the United States person and
for which the United States person has appointed a trust protector that
is subject to such person's direct or indirect instruction.
(3) Anti-avoidance rule. A United States person that causes an
entity, including but not limited to a corporation, partnership, or
trust, to be created for a purpose of evading this section shall have a
financial interest in any bank, securities, or other financial account
in a foreign country for which the entity is the owner of record or
holder of legal title.
(f) Signature or other authority--(1) In general. Signature or
other authority means authority of an individual (alone or in
conjunction with another) to control the disposition of money, funds or
other assets held in a financial account by delivery of instructions
(whether communicated in writing or otherwise) directly to the person
with whom the financial account is maintained.
(2) Exceptions--(i) An officer or employee of 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 need not report that he has signature or other
authority over a foreign financial account owned or maintained by the
bank if the officer or employee has no financial interest in the
account.
(ii) An officer or employee of a financial institution that is
registered with and examined by the Securities and Exchange Commission
or Commodity Futures Trading Commission need not report that he has
signature or other authority over a foreign financial account owned or
maintained by such financial institution if the officer or employee has
no financial interest in the account.
(iii) An officer or employee of an Authorized Service Provider need
not report that he has signature or other authority over a foreign
financial account owned or maintained by an investment company that is
registered with the Securities and Exchange Commission if the officer
or employee has no financial interest in the account. ``Authorized
Service Provider'' means 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.
(iv) An officer or employee of an entity with a class of equity
securities listed on any United States national securities exchange
need not report that he has signature or other authority over a foreign
financial account of such entity if the officer or employee has no
financial interest in the account. An officer or employee of a United
States subsidiary of such entity need not file a report concerning
signature or other authority over a foreign financial account of the
subsidiary if he has no financial interest in the account and the
United States subsidiary is included in a consolidated report of the
parent filed under this section.
(v) An officer or employee of a United States entity that has a
class of equity securities registered under section 12(g) of the
Securities Exchange Act need not report that he has signature or other
authority over the foreign financial accounts of such entity if he has
no financial interest in the accounts.
(g) Special rules--(1) Financial interest in 25 or more foreign
financial accounts. A United States person having a financial interest
in 25 or more foreign financial accounts need only 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 when so requested by the Secretary or his delegate.
(2) Signature or other authority over 25 or more foreign financial
accounts. A United States person having signature or other authority
over 25 or more foreign financial accounts need only 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 when so requested by the Secretary or his delegate.
(3) Consolidated reports. An entity that is a United States person
and which owns directly or indirectly more than a 50 percent interest
in one or more other entities required to report under this section
will be permitted to file a consolidated report on behalf of itself and
such other entities.
(4) Participants and beneficiaries in certain retirement plans.
Participants and beneficiaries in retirement plans under sections
401(a), 403(a) or 403(b) of the Internal Revenue Code as well as owners
and beneficiaries of individual retirement accounts under section 408
of the Internal Revenue Code or Roth IRAs under section 408A of the
Internal Revenue Code are not required to file an FBAR with respect to
a foreign financial account held by or on behalf of the retirement plan
or IRA.
(5) Certain trust beneficiaries. A beneficiary of a trust described
in paragraph (e)(2)(iv) of this section is not required to report the
trust's foreign financial accounts if the trust, trustee of the trust,
or agent of the trust is a United States person that files a report
under this section disclosing the trust's foreign financial accounts.
Dated: February 23, 2010.
James H. Freis, Jr.,
Director, Financial Crimes Enforcement Network.
Note: The following attachment will not appear in the Code of
Federal Regulations. Attachment: Draft instructions to the Report of
Foreign Bank and Financial Accounts--Form TDF90-22.1(FBAR)
[[Page 8852]]
General Instructions
Form TD F 90-22.1 (the ``FBAR'') is used to report a financial
interest in or signature authority over a foreign financial account.
The FBAR must be received by the Department of the Treasury on or
before June 30th of the year immediately following the calendar year
being reported. Unlike the filing date for an income tax return, the
June 30th filing date for the FBAR may not be extended.
Who Must File an FBAR.
The following persons are required to file an FBAR:
A United States citizen;
A United States resident;
An entity, including but not limited to, a corporation, partnership,
or limited liability company created or organized in the United
States or under the laws of the United States; and
A trust or estate formed under the laws of the United States.
See definition of United States below.
If the person has:
A financial interest in or signature authority over any foreign
financial account and the aggregate value of the financial
account(s) exceeds $10,000 at any time during the calendar year. See
Part II, Item 15, regarding the $10,000 threshold.
The tax treatment of an entity does not determine whether the
entity has an FBAR filing requirement. For example, an entity that
is disregarded for purposes of Title 26 of the United States Code
must still file an FBAR, if otherwise required to do so. Similarly,
a trust for which the trust income, deductions, or credits are taken
into account by another person for purposes of Title 26 of the
United States Code must file an FBAR, if otherwise required to do
so.
See Exceptions below.
General Definitions
Financial Account. A financial account includes, but is not
limited to, a securities, brokerage, savings, demand, checking,
deposit, time deposit, or other account maintained with a financial
institution (or other person performing the services of a financial
institution). A financial account also includes a commodity futures
or options account, an insurance policy with a cash surrender value
(such as a variable annuity or a whole life insurance policy), an
annuity, and shares in a mutual fund or similar pooled fund (i.e., a
fund with a regular net asset value determination and redemptions).
Foreign Financial Account. A foreign financial account is a
financial account that is located outside of the United States. For
example, an account maintained with a foreign branch of a United
States bank is a foreign financial account. An account maintained
with a United States branch of a foreign bank is not a foreign
financial account. An insurance or annuity policy that is purchased
outside of the United States, as defined in 31 CFR Sec. 103.11(nn),
from a non-United States issuer is a foreign financial account.
Financial Interest. A person has a financial interest in each
financial account for which
(1) the person is the owner of record or holder of legal title,
regardless of whether the account is maintained for that person's
benefit or for the benefit of another person; or
(2) the owner of record or holder of legal title is one of the
following:
(a) An agent, nominee, attorney, or a person authorized to act
on behalf of the person with respect to the account;
(b) A corporation in which the person owns directly or
indirectly: (i) more than 50 percent of the total value of shares of
stock or (ii) more than 50 percent of the voting power of all shares
of stock;
(c) A partnership in which the person owns directly or
indirectly: (i) an interest in more than 50 percent of the
partnership's profits (distributive share of partnership income
taking into account any special allocation agreement) or (ii) an
interest in more than 50 percent of the partnership capital;
(d) A trust, if the person: (i) is the trust settlor; and (ii)
has an ownership interest in the trust for United States federal tax
purposes. See 26 U.S.C. Sec. Sec. 671 through 679 to determine if a
person has an ownership interest in a trust for a year for United
States federal tax purposes;
(e) A trust, if the person has more than a 50 percent beneficial
interest in the assets or income of the trust for the calendar year,
as determined under all of the facts and circumstances, including
the terms of the trust and any accompanying documents;
(f) A trust that was established by the person and for which the
person has appointed a trust protector that is subject to such
person's direct or indirect instruction; or
(g) Any other entity, if the person owns directly or indirectly
more than 50 percent of the voting power, total value of equity
interest or assets, or interest in profits.
Person. A person includes an individual and all legal entities
including, but not limited to, limited liability companies,
corporations, partnerships, trusts, and estates.
Signature Authority. Signature authority is the authority (alone
or in conjunction with any other individual) to control the
disposition of money, funds, or other assets held in a financial
account by delivery of instructions (whether communicated in writing
or otherwise) directly to the financial institution (or other person
performing the services of a financial institution), with which the
financial account is maintained. See Exception for Signature
Authority.
United States. For FBAR purposes, the United States includes the
States, the District of Columbia, all territories and possessions
(for example American Samoa, the Commonwealth of the Northern
Marianas Islands, the Commonwealth of Puerto Rico, Guam, and the
United States Virgin Islands), and the Indian lands as defined in
the Indian Gaming Regulatory Act. References to the laws of the
United States include the laws of the United States federal
government and the laws of all places listed in this definition.
United States Resident. A United States resident is an alien
residing in the United States. To determine if the filer is a
resident of any place listed in the definition of United States,
apply the residency tests in 26 U.S.C. Sec. 7701(b).
Exceptions
Certain Accounts Jointly Owned by Spouses. 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 spouse is required to report are jointly owned with the
filing spouse; (2) the filing spouse reports the jointly owned
accounts on a timely filed FBAR; and (3) both spouses sign the FBAR
in Item 44. See Explanations for Specific Items, Part III, Items 25-
33. If the filer's spouse is required to file an FBAR for any
account that is not jointly owned with the filer, the filer's spouse
must file a separate FBAR for all accounts, including those owned
jointly with the filing spouse.
Consolidated FBAR. If a person is named in a consolidated FBAR
filed by a more than 50 percent owner, the person is not required to
file a separate FBAR. See Explanations for Specific Items, Part V.
Correspondent/Nostro Account. Correspondent or nostro accounts
(which are maintained by banks and used solely for bank-to-bank
settlements) are not required to be reported on an FBAR.
Governmental Entity. A foreign financial account of any
governmental entity is not required to be reported on an FBAR by any
person. For purposes of this form, governmental entity includes: (1)
a college or university that is an agency or instrumentality of, or
owned or operated by, a governmental entity; and (2) an employee
retirement or welfare benefit plan of a governmental entity.
International Financial Institution. A foreign financial account
of any international financial institution of which the United
States is a member is not required to be reported on an FBAR by any
person.
IRA Owners and Beneficiaries. An owner or beneficiary of an IRA
is not required to file an FBAR with respect to a foreign financial
account held in the IRA.
Participants in and Beneficiaries of Tax-Qualified Retirement
Plans. A participant in or beneficiary of a retirement plan
described in Internal Revenue Code Sec. 401(a), 403(a), or 403(b)
is not required to file an FBAR with respect to a foreign financial
account held by or on behalf of the retirement plan.
Signature Authority. Signature authority over a foreign
financial account need not be reported on an FBAR by an individual
with no financial interest in the foreign financial account in the
following situations:
(1) An officer or employee of 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 need not report signature authority over
a foreign financial account owned or maintained by the bank.
(2) An officer or employee of a financial institution that is
registered with and regulated or examined by the Securities and
Exchange Commission or Commodity Futures Trading Commission need not
report
[[Page 8853]]
signature authority over a foreign financial account owned or
maintained by the financial institution.
(3) An officer or employee of an Authorized Service Provider
need not report signature authority over a foreign financial account
that is owned or maintained by an investment company that is
registered with the Securities and Exchange Commission. Authorized
Service Provider means an entity that is registered with and
examined by the Securities and Exchange Commission and provides
services to an investment company registered under the Investment
Company Act of 1940.
(4) An officer or employee of an entity whose class of equity
securities is listed on any United States national securities
exchange need not report signature authority over a foreign
financial account in which the entity has a financial interest. An
officer or employee of a United States subsidiary of such entity
need not report signature authority over a foreign financial account
of the subsidiary.
(5) An officer or employee of a United States entity that has a
class of securities registered under section 12(g) of the Securities
and Exchange Act need not report signature authority over a foreign
financial account of such corporation.
Trust Beneficiaries. A trust beneficiary with a financial
interest described in section (2)(f) is not required to report the
trust's foreign financial accounts on an FBAR if the trust, trustee
of the trust, or agent of the trust: (1) is a United States citizen,
a United States resident, an entity created or organized in the
United States or under the laws of the United States, or a trust
formed under the laws of the United States; and (2) files an FBAR
disclosing the trust's foreign financial accounts.
United States Military Banking Facility. An FBAR need not be
filed for a financial account maintained with a financial
institution located on a United States military installation, even
if that military installation is outside of the United States.
Filing Information--Do NOT file with Federal Income Tax Return
When and Where to File. The FBAR is an annual report and must be
received by the Department of the Treasury on or before June 30th of
the year following the calendar year being reported.
File by mailing the FBAR to:
Department of the Treasury, Post Office Box 32621, Detroit, MI
48232-0621
If an express delivery service is used, file by mailing to:
IRS Enterprise Computing Center, ATTN: CTR Operations Mailroom, 4th
Floor, 985 Michigan Avenue, Detroit, MI 48226
The FBAR may be hand delivered to any local office of the Internal
Revenue Service for forwarding to the Department of the Treasury,
Detroit, MI. The FBAR may also be delivered to the Internal Revenue
Service's tax attaches located in United States embassies and
consulates for forwarding to the Department of Treasury, Detroit,
MI. The FBAR is not considered filed until it is received by the
Department of the Treasury in Detroit, MI.
No Extension of Time to File. There is no extension of time
available for filing an FBAR. Extensions of time to file federal tax
returns do NOT extend the time for filing an FBAR. If a delinquent
FBAR is filed, attach a statement explaining the reason for the late
filing.
Verification of Filing. Ninety days after the date of filing,
the filer can request verification that the FBAR was received. An
FBAR filing verification request may be made by calling 1-800-800-
2877 and selecting option 2. Up to five documents may be verified
over the phone. There is no fee for this verification.
Alternatively, an FBAR filing verification request may be made in
writing and must include the filer's name, taxpayer identification
number, and the filing period. There is a $5.00 fee for verifying
five or fewer FBARs and a $1.00 fee for each additional FBAR. A copy
of the filed FBAR can be obtained at a cost of $0.15 per page. Check
or money order should be made payable to the United States Treasury.
The request and payment should be mailed to:
IRS Enterprise Computing Center/Detroit, ATTN: Verification, P.O.
Box 32063, Detroit, MI 48232
Record Keeping Requirements. Persons required to file an FBAR
must retain records that contain the name in which each account is
maintained, the number or other designation of the account, the name
and address of the foreign financial institution that maintains the
account, the type of account, and the maximum account value of each
account during the reporting period. The records must be retained
for a period of five years from June 30th of the year following the
calendar year reported and must be available for inspection as
provided by law. Persons filing an FBAR should retain a copy for
their records.
Explanations for Specific Items
Part I
Item 1. The FBAR is an annual report. Enter the calendar year
being reported.
To amend a filed FBAR, check the ``Amended'' box in the upper
right hand corner of the first page of the FBAR, make the needed
additions or corrections, attach a statement explaining the
additions or corrections, and staple a copy of the original FBAR to
the amendment. An amendment should not be made until at least 90
calendar days after the FBAR is filed. Follow the instructions in
``When and Where to File'' to file an amendment.
Item 2. Check the appropriate box describing the filer. Check
only one box. Individuals filing based on signature authority, check
box ``a.'' If filing a consolidated FBAR, check box ``d.'' To
determine if a consolidated FBAR can be filed, see Part V. If the
type of filer is not listed in boxes ``a'' through ``c,'' check box
``e'' and enter type of filer. Persons that should check box ``e''
include, but are not limited to, trusts, estates, limited liability
companies, and tax-exempt entities (even if the entity is organized
as a corporation). A disregarded entity must check box ``e'' and
enter its type of person and the term ``(D.E.).'' For example, a
limited liability company that is disregarded for United States
federal tax purposes would enter ``limited liability company
(D.E.).''
Item 3. Provide the filer's taxpayer identification number.
Generally, this is the filer's United States social security number
(SSN), United States individual taxpayer identification number
(ITIN), or employer identification number (EIN). Numbers should be
entered with no spaces, dashes, or other punctuation throughout the
FBAR. If the filer does NOT have a United States taxpayer
identification number, complete Item 4.
Item 4. Complete Item 4 only if the filer does NOT have a United
States taxpayer identification number. Item 4 requires the filer to
provide information from an official foreign government document to
verify the filer's nationality or residence. Enter the document
number followed by the country of issuance, check the appropriate
type of document, and if ``other'' is checked, provide the type of
document.
Item 5. If the filer is an individual, enter the filer's date of
birth, using the month, day, and year convention.
Items 9, 10, 11, 12 and 13. Enter the filer's address. An
individual residing in the United States must enter the street
address of the individual's United States residence, not a post
office box. An individual residing outside the United States must
enter the individual's United States mailing address. If the
individual does not have a United States mailing address, the
individual must enter a foreign residence address.
An entity must enter its United States mailing address. If the
entity does not have a United States mailing address, the entity
must enter its foreign mailing address.
Item 14. If the filer has a financial interest in 25 or more
foreign financial accounts, check ``Yes'' and enter the number of
accounts. Do not complete Part II (Continuation of Separate
Accounts) or Part III (Joint Accounts) of the Report.
If filing a consolidated FBAR, only complete Part V, Items 34
through 42, for each person included in the consolidated FBAR.
Note: If the filer has signature authority over 25 or more
foreign financial accounts, only complete Part IV (for signature
authority), Items 34-43, for each person for which the filer has
signature authority, and check ``No'' in Part I, Item 14.
The filer must retain the detailed account information otherwise
required by the FBAR for five years from June 30th of the year
following the calendar year reported. The information must be
available for inspection. See Filing Information, Record Keeping
Requirements.
Part II
Enter information in the applicable parts of the form only. If
there is not enough space to provide all account information, copy
and complete additional pages of the required Part as necessary. Do
not use any attachments unless otherwise specified in the
instructions.
Item 15.
Determining Maximum Account Value. Step 1. Determine the maximum
value of
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each account (in the currency of that account) during the calendar
year being reported. The maximum value of an account is a reasonable
approximation of the greatest value of currency or nonmonetary
assets in the account during the calendar year. Periodic account
statements may be relied on to determine the maximum value of the
account provided that the statements fairly reflect the maximum
account value during the calendar year. For Item 15, if the filer
had a financial interest in more than one account, each account is
to be valued separately.
Step 2. In the case of non-United States currency, convert the
maximum account value for each account into United States dollars.
Convert foreign currency by using the Treasury's Financial
Management Service rate (this rate may be found at
www.fms.treas.gov) from the last day of the calendar year. If no
Treasury Financial Management Service rate is available, use another
verifiable exchange rate and provide the source of that rate. In
valuing currency of a country that uses multiple exchange rates, use
the rate that would apply if the currency in the account were
converted into United States dollars on the last day of the calendar
year.
If the aggregate of the maximum account values exceeds $10,000,
an FBAR must be filed. An FBAR is not required to be filed if the
person did not have $10,000 of aggregate value in foreign financial
accounts at any time during the calendar year.
For persons with a financial interest in or signature authority
over fewer than 25 accounts that are unable to determine if the
aggregate maximum account values of the accounts exceeded $10,000 at
any time during the calendar year, complete Part II, III, IV, or V,
as appropriate, for each of these accounts and enter ``value
unknown'' in Item 15.
If a foreign financial account is jointly owned by two or more
persons, each person must report the entire value of the account.
Item 16. Indicate the type of account. Check only one box. If
``Other'' is selected, describe the account.
Item 17. Provide the name of the financial institution with
which the account is held.
Item 18. Provide the account number that the financial
institution uses to designate the account.
Items 19-23. Provide the complete mailing address of the
financial institution where the account is located.
If the foreign address does not include a state (e.g., province)
or postal code, leave the box(es) blank.
Part III
Enter information in the applicable parts of the form only. If
there is not enough space to provide all account information, copy
and complete additional pages of the required Part as necessary. Do
not use any attachments unless otherwise specified in the
instructions.
For Items 15-23, see Part II.
Item 24. Enter the number of joint owners for the account. If
the exact number is not known, provide an estimate. Do not count the
filer when determining the number of joint owners.
Items 25-33. Use the identity information of the principal joint
owner (excluding the filer) to complete Items 25-33. Leave blank
items for which no information is available. A spouse having an
interest in a jointly owned account with the filing spouse is the
principal joint owner. Enter the term ``(spouse)'' on Line 26 after
the last name of the joint spousal owner.
If the filer's spouse is required to report only jointly owned
financial accounts that are reported on the filer's FBAR, the
filer's spouse need not file a separate FBAR but must also sign the
filer spouse's FBAR to fulfill his or her reporting obligation. See
Items 44-46 on page one. If the filer's spouse is required to file
an FBAR for any account that is not jointly owned with the filer,
the filer's spouse must file a separate FBAR for all of the
accounts, including those owned jointly with the other spouse.
Part IV--Signature Authority
Enter information in the applicable parts of the form only. If
there is not enough space to provide all account information, copy
and complete additional pages of the required Part as necessary. Do
not use any attachments unless otherwise specified in the
instructions.
25 or More Foreign Financial Accounts. Filers with signature
authority over 25 or more financial accounts must complete only
Items 34-43 for each person on whose behalf the filer has signature
authority.
For Items 15-23, see Part II.
Items 34-42. Provide the name, address, and identifying number
of the owner of a foreign financial account for which the individual
has signature authority but no financial interest. If there is more
than one owner of the account for which the individual has signature
authority, provide the information in Items 34-42 for the principal
joint owner (excluding the filer). If account information is
completed for more than one account of the same owner, identify the
owner only once and write ``Same Owner'' in Item 34 for the
succeeding accounts of the same owner.
Item 43. Enter filer's title for the position that provides
signature authority (e.g., treasurer).
A United States person who is employed in a foreign country and
who has signature authority over a foreign financial account that is
owned or maintained by the individual's employer should only
complete Part 1 and Part IV, Items 34-43 of the FBAR. Part IV, Items
34-43 should only be completed one time with information about the
individual's employer.
Part V--Consolidated FBAR
Enter information in the applicable parts of the form only. If
there is not enough space to provide all account information, copy
and complete additional pages of the required Part as necessary. Do
not use any attachments.
Who Can File a Consolidated FBAR. An entity that owns directly
or indirectly more than a 50 percent interest in a legal entity that
is required to file an FBAR is permitted to file a consolidated FBAR
on behalf of itself and such other legal entity. Check box ``d'' in
Part I, Item 2 and complete Part V. If filing a consolidated FBAR
and reporting 25 or more financial accounts, complete only Items 34-
42 for each person included in the consolidated FBAR.
For Items 15-23, see Part II.
Items 34-42. Provide the name, taxpayer identification number,
and address of the owner of the foreign financial account as shown
on the books of the financial institution. If account information is
completed for more than one account of the same owner, identify the
owner only once and write ``Same Owner'' in Item 34 for the
succeeding accounts of the same owner.
Signatures
Items 44-46. The FBAR must be signed by the filer named in Part
I. If the FBAR is being filed on behalf of a partnership,
corporation, limited liability company, trust, estate, or other
legal entity, it must be signed by an authorized individual. The
authorized individual's title is entered in Item 45. An authorized
official of the person filing the consolidated FBAR must sign the
FBAR.
An individual must leave ``Filer's Title'' blank, unless the
individual is filing an FBAR due to the individual's signature
authority. If an individual is filing because the individual has
signature authority over a foreign financial account, the individual
should enter the title upon which his or her authority is based in
Item 45.
A spouse included as a joint owner, who does not file a separate
FBAR in accordance with the instructions in Part III, must also sign
the FBAR (in Item 44) for the jointly owned accounts. See the
instructions for Part III.
Penalties
A person who is required to file an FBAR and fails to properly
file may be subject to a civil penalty not to exceed $10,000. If
there is reasonable cause for the failure and the balance in the
account is properly reported, no penalty will be imposed. A person
who willfully fails to report an account or account identifying
information may be subject to a civil monetary penalty equal to the
greater of $100,000 or 50 percent of the balance in the account at
the time of the violation. See 31 U.S.C. Sec. 5321(a)(5). Willful
violations may also be subject to criminal penalties under 31 U.S.C.
Sec. 5322(a), 31 U.S.C. Sec. 5322(b), or 18 U.S.C. Sec. 1001.
[FR Doc. 2010-4042 Filed 2-25-10; 8:45 am]
BILLING CODE 4810-02-P