FinCEN Amends BSA Regs on FBAR Filings

The Financial Crimes Enforcement Network (FinCEN) on February 24 issued a final rule that amends the regulations under the Bank Secrecy Act (BSA) regarding Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), to clarify when an account is foreign and therefore reportable as a foreign financial account and the definition of key terms like “signature or other authority.”

FinCEN, which is an agency of the Treasury Department, said the IRS will soon publish instructions for completing the FBAR form. More information on developments in FBAR filing requirements over the past two years is available at the JofA’s “FBAR Resources” page.

FinCEN said in a press release that the final rule adopts, with slight modifications, a Notice of Proposed Rulemaking (NPR) issued in February 2010. The final rule says the proposal set out to (1) define the scope of individuals and entities required to file the FBAR; (2) delineate the types of reportable accounts; and (3) exempt certain persons and accounts from the reporting requirement and provide certain additional relief. The changes proposed in the NPR were accompanied by proposed changes to the FBAR form instructions, a draft of which appeared in the Federal Register as an attachment to the NPR.

The preamble to the final rule explains FinCEN’s approach to issues raised in comments submitted in response to the proposal. In particular, commenters were uncertain about when an account was reportable under the FBAR rules and the scope of individuals covered by the signature authority definition.

The preamble to the final rule:

• Explains whether an account is foreign and therefore reportable as a foreign financial account and addresses the treatment of custodial accounts in this context;
• Revises the definition of “signature or other authority” to more clearly apply to individuals who have the authority to control the disposition of assets in the account by direct communication (whether in writing or otherwise) to the foreign financial institution;
• Explains that an officer or employee who files an FBAR because of signature or other authority over the foreign financial account of their employer is not expected to personally maintain the records of the foreign financial accounts of their employer; and
• Advises filers that they may rely on provisions of this final rule to determine their filing obligation for FBARs in those cases where filing was properly deferred under prior Treasury guidance.

The FBAR filing requirements, authorized under one of the original provisions of the BSA, have been in place since 1972. The FBAR form is used to report a financial interest in, or signature or other authority over, one or more financial accounts in foreign countries. No report is required if the aggregate value of the accounts does not exceed $10,000.

The rule is effective March 28 and applies to reports required to be filed by June 30, 2011, with respect to foreign financial accounts maintained in calendar year 2010, and for reports required to be filed with respect to all subsequent calendar years.