- Proposed FBAR Changes: One Step Forward, Two Steps Back
- March 28, 2016
- Law Firm: Sutherland Asbill Brennan LLP - Washington Office
- On March 10, 2016, the Financial Crimes Enforcement Network (“FinCEN”), a division of the U.S. Department of Treasury, proposed significant changes to the Report of Foreign Bank and Financial Accounts (“FBAR”) regulations. Under current law, a “U.S. person,” including U.S. citizens and residents and U.S. entities, is generally required to file an FBAR on FinCEN Form 114 if the U.S. person has a financial interest in, or signature authority over, a non-U.S. financial account. Civil penalties for a failure to file an FBAR can range from $10,000 per failure in the case of a non-willful failure to the greater of $100,000 or 50% of the account balance in the case of a willful failure.
The proposed changes would limit duplicative reporting as a result of “overlapping” signature authority by expanding the current signature authority exemption for certain officers, employees, and agents of certain entities, including public companies. This change is a positive development which could ease the reporting requirements of many officers, employees, and agents of entities with financial interests in non-U.S. financial accounts.
The proposed changes would eliminate an existing exception permitting limited reporting for U.S. persons with financial interests in, or signature authority over, 25 or more non-U.S. financial accounts. The Notice of Proposed Rulemaking notes that in 2013, FBARs filed by individuals and entities with interests in 25 or more non-U.S. financial accounts represented approximately 56% of all non-U.S. financial accounts reported that year. The elimination of this exception will significantly increase the amount of information required to be reported by individuals and entities with 25 or more non-U.S. financial accounts.
Finally, the proposed changes reflect a new FBAR filing deadline of April 15 beginning with the 2016 reporting year, two and a half months earlier than the existing June 30 deadline.