Offshore Reporting Requirements (FBARs)

If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, exceeding certain thresholds, the Bank Secrecy Act may require you to report the account yearly to the Department of Treasury by electronically filing a Financial Crimes Enforcement Network (FinCEN) 114, Report of Foreign Bank and Financial Accounts (FBAR). 

Willful Failure to File FBARs

For violations occurring after October 22, 2004, a penalty for a willful FBAR violation may be imposed up to the greater of $100,000 or 50% of the amount in the account at the time of the violation.  See Title 31 USC 5321(a)(5)(C).  For cases involving willful violations over multiple years, examiners may recommend a penalty for each year for which the FBAR violation was willful. 

 

After May 12, 2015, in most cases, the total penalty amount for all years under examination will be limited to 50 percent of the highest aggregate balance of all unreported foreign financial accounts during the years under examination.

FBAR Prosecutions

DOJ Tax Division has prosecuted a number of high profile cases involving failure to file FBARs.

  • DOJ Tax Division has prosecuted a number of high profile cases involving failure to file FBARs.

  • DOJ Tax Division has prosecuted a number of high profile cases involving failure to file FBARs.

 

Charles Blazer

On November 25, 2013, the defendant Charles Blazer, the former CONCACAF general secretary and a former FIFA executive committee member, waived indictment and pled guilty to a 10-count information charging him with racketeering conspiracy, wire fraud conspiracy, money laundering conspiracy, income tax evasion, and failure to file a Report of Foreign Bank and Financial Accounts (FBAR).

H. Ty Warner

TY Inc. was in the business of selling plush animal toys, including Beanie Babies, and its headquarters were located in Westmont, Illinois.

 

Defendant H. TY WARNER was the 100% owner of TY Inc. and had other business interests.

On or about January 31, 1996, WARNER traveled to Zurich, Switzerland to open a secret offshore financial account with the Union Bank of Switzerland (“UBS”). The account held funds of WARNER’s with profits or losses credited or debited to the account;

 

On or about January 31, 1996, WARNER agreed that any correspondence pertaining to his UBS account be held by the bank as opposed to being mailed elsewhere;

In December of 2002, WARNER confirmed with UBS representatives

his intention to close his UBS account and transfer those assets to Zürcher Kantonalbank (“ZKB”) in Zurich, Switzerland. As a result, in and around December 2002 and January 2003, WARNER agreed to have UBS transfer the assets in his UBS financial account, which had a balance of approximately $93,630,083 as of December 19, 2002, to ZKB;

Beginning in and around December 2002, WARNER concealed his name from being listed on the ZKB account by holding the account in the name of a purported “Molani Foundation;”

On or by June 30, 2003, WARNER failed to file an FBAR for calendar year 2002 and failed to disclose the required information about his UBS account;

In FY 2014, the United States Attorney’s Office in the Northern District of Illinois collected a $53 million civil penalty on behalf of the Internal Revenue Service due to Warner’s failure to file a FBAR.  The penalty represented 50% of the accounts highest balance.

 

The Internal Revenue Service and the Department of Justice are expanding their efforts to identify non compliant taxpayers.

DOJ Tax Division - Enforcement

  • Swiss Bank Project

  • Created on Aug. 29, 2013

  • Allows Swiss banks to resolve potential criminal liabilities in the United States. 

  • Swiss banks eligible to enter the program were required to advise the department by Dec. 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared U.S.-related accounts. 

  • Banks already under criminal investigation and all indivduals were expressly excluded from the program

  • Under the program, banks are required to:

  • Make a complete disclosure of their cross-border activities;

  • Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;

  • Cooperate in treaty requests for account information;

  • Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed;

  • Agree to close accounts of accountholders who fail to come into compliance with U.S. reporting obligations; and

  • Pay appropriate penalties.

  • In April 2013, a federal district court authorized the IRS to issue a “John Doe” summons seeking information about U.S. taxpayers who may hold undeclared offshore accounts at CIBC FirstCaribbean International Bank (FCIB), a Barbados-based bank with branches across the Caribbean. The summons, issued to Wells Fargo N.A., seeks records of U.S. taxpayers and financial institutions that used FCIB’s United States correspondent account at Wells Fargo to evade taxes.

  • The Tax Division is committed to using every tool available in its efforts to identify, investigate, and prosecute these wrongdoers. For example, a growing number of district and circuit courts are upholding subpoenas to accountholders for foreign financial records over Fifth Amendment objections, based on the requirements under Title 31 that such records be maintained. Prosecutors have also made effective use of subpoenas on U.S.-based correspondent accounts of foreign banks to obtain vital evidence in tax prosecutions.