On February 23, 2011, FinCEN issued amendment to the FBAR reporting requirements in the Bank Secrecy Act (BSA) that addresses the scope of persons required to file reports, the types of reportable accounts and provisions intended to prevent the rule from being circumvented by those persons subject to the reporting requirement.
Form 90-22.1, popularly known as FBAR – is used to report a financial interest in, or signature or other authority over, one or more financial accounts in foreign countries if the maximum aggregate balance meets the $10,000 threshold. When filed, FBARs become part of the BSA database. They are used in combination with Suspicious Activity Reports, Currency Transaction Reports, and other BSA reports to provide law enforcement and regulatory investigators with valuable information to fight fraud, money laundering, terrorist financing, tax evasion and other financial crime.
FinCEN delegated the authority to enforce the FBAR rules and to amend the form to IRS in 2003. However, FinCEN retained the authority to revise the applicable regulations.
On February 26, 2010, FinCEN published a Notice of Proposed Rulemaking (NPRM) proposing to amend the BSA implementing regulations regarding the FBAR. Amongst other things, the NPRM proposed to: define the scope of individuals required to file the FBAR; delineate the types of reportable accounts; and exempt certain persons and accounts from the reporting requirements.
The final rule issued by FinCEN:
- Clarifies if and account is foreign and must be reported (as well as addresses the treatment of custodial accounts);
- Modifies the definition of “signature or other authority” to extend the filing requirement to persons who have the authority to control the disposition of assets in the account by direct communication;
- Provides that officers/employees that file an FBAR are not expected to personally maintain their employer’s account records; and
- Clarifies that filers may rely on the final rules to determine their filing obligation for FBAR where their filing was properly deferred under prior Treasury guidance.