Why is this Topic Important to Wealth Managers? Presents information useful to wealth managers who incorporate offshore activities into clients’ personal and business planning. Discusses, specifically, Foreign Bank and Financial Account reporting and compliance requirements.
There is no specific Federal law that prohibits an individual from owning any interest in a financial account in foreign jurisdictions. “However, because offshore financial accounts can be used to hide criminal proceeds or evade taxes, federal law does require disclosure of such accounts.” 
“Congress has directed the Secretary of the Treasury to require residents and citizens of the U.S., or persons in and doing business in the U.S., to maintain records and file reports of transactions and relations with foreign financial agencies.” 
Specifically, every “U.S. citizen, resident and businessperson who has a financial interest in, or signatory authority over, one or more bank accounts, securities accounts or other financial accounts in a foreign country”, must “report that relationship to the U.S. Department of the Treasury if the aggregate value of the accounts exceeds $10,000 at any time during the calendar year”, annually through Form TD F 90-22.1. 
For each foreign account, the Form TD F 90-22 must include:
- The name in which the account is maintained;
- The account number or other account designation;
- The name and address of the foreign bank or other person with whom the account is maintained;
- The type of account; and
- The maximum value of the account during the calendar year. 
Recently, the well known UBS situation highlighted the Foreign Bank and Financial Account or FBAR requirements, where U.S. account holders “held in the name of offshore trusts and other sham entities”, funds at the Bank.  In what was thought of by many as unprecedented the Swiss Bank agreed “provide the IRS with the identities and account information of certain U.S. clients.”  Federal criminal and civil suits soon followed “resulting in a scramble by thousands of holders of offshore accounts to come clean through an IRS partial amnesty program that was available until October 15, 2009.” 
“However, the IRS estimates that for every person who files an FBAR, four persons fail to file a required FBAR in any calendar year.” 
Nevertheless, any person who willfully violates the FBAR reporting requirements, or any person who willfully causes such a violation, is subject to a civil money penalty in the amount of $100,000 or 50 percent of the balance in the account at the time of the reporting violation, whichever is greater. 
Furthermore, any person who willfully violates the FBAR reporting requirements, or any person who willfully causes such a violation, is subject to criminal fine of up to $250,000 and/or imprisonment for up to five years.  Moreover, if the “violation occurs while the person is violating another federal law or as part of a pattern of unlawful activity involving in excess of $100,000 in a one-year period, the person is subject to up to a $500,000 fine, up to ten years imprisonment, or both.” 
The new reporting requirement discussed yesterday is similar to the information furnished in an FBAR report but is slightly different. “For example, a beneficiary of a foreign trust who is not within the scope of the FBAR reporting requirements because his or her interest in the trust is less than 50 percent may nonetheless be required to disclose the interest in the trust with his or her tax return if the value of his or her interest in the trust together with the value of other specified foreign financial assets exceeds $50,000.” 
Tomorrow’s blogticle will discuss additional international planning considerations.
We invite your questions and comments by posting them below, or by calling the Panel of Experts.
Steven Mark Levy. Federal Money Laundering Regulation: Banking, Corporate and Securities Compliance (FMNYL) § 10.02. Wolters Kluwer. 2010.
 31 U.S.C. § 5314(a).
 31 U.S.C. §§ 5314(a), 5314(b); 31 C.F.R. § 103.24, 31 C.F.R. § 103.27(c), (d),
 31 C.F.R. § 103.32.
 FMNYL § 10.01. Citing, IRS Chief: Swiss Deal Shows U.S. Resolve. August 19, 2009. National Public Radio. Interview. Douglas Shulman IRS Commissioner.
 Department of the Treasury, Report to Congress in Accordance with § 361(b) of the USA Patriot Act, at 6 (April 26, 2002).
 31 U.S.C. §§ 5321(a)(5)(C)(i).
 31 U.S.C. § 5322(a); 31 C.F.R. § 103.59(b).
 FMNYL § 10.09. Citing, 31 U.S.C. § 5322(b); 31 C.F.R. § 103.59(c).
 Joint Committee on Taxation, Technical Explanation of the Revenue Provisions Contained in Senate Amendment 3310, the “Hiring Incentives to Restore Employment Act,” under consideration by the Senate (JCX-4-10), Page 60. February 23, 2010.