The U.S. Department of Treasury requires that U.S. citizens and Residents fulfill their obligation to disclose a financial interest in foreign bank account. A resident also includes any person doing business in or employed in United States.
According to Title 31, Section 103.24, of the Code of Federal Regulations (“CFR”), 31 CFR 103.24, which applies to any person or entity subject to the jurisdiction of the U.S., having a financial interest in, or signature or other authority over, a bank, securities or other financial account having a value exceeding $10,000 in a foreign country. Such persons or entities shall report such relationships to the Commissioner of the Internal Revenue on or before June 30th of the year following the calendar year in which such relationship exists. To report the relationship, the person or entity is required to file form TD F 90-22.1 (“FBAR”).
Failure to file an FBAR could result in substantial civil and criminal penalties. The civil penalty for failure to file an FBAR, as instituted by the 2004 American Jobs Creation Act (“AJCA”), can be as much as $10,000, regardless of whether the violation is willful. If the person willfully fails to file an FBAR, the civil penalty imposed will equal the greater of 50% of the balance in the account at the time of the violation or $100,000, but not less than $25,000. The criminal penalty for willful failure to file an FBAR is a fine of not greater than $250,000 and/or imprisonment for not more than five (5) years. If the violation is part of a pattern of criminal activity, the criminal fine and/or term of imprisonment may be doubled.
In the past few years, the U.S. Department of the Treasury has stepped up its efforts to enforce compliance. During 2003, the U.S. Department of the Treasury delegated the enforcement of the FBAR from the Financial Crimes Enforcement Network to the Internal Revenue Service. The Internal Revenue Service has since been working to establish internal guidelines and procedures to enforce FBAR compliance. The delegation of enforcement of the FBAR to the Internal Revenue Service and Internal Revenue Service’s increased emphasis on enforcement indicates that it is likely the Internal Revenue Service will begin to more strictly enforce the penalty provisions in the near future.
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