4.26.16. Report of Foreign Bank and Financial Accounts (FBAR)

(1) The requirement to report and keep records of foreign bank and financial accounts was added to the United States Code (USC) in 1970 as part of the "Currency and Foreign Transactions Reporting Act of 1970", which came to be known as the "Bank Secrecy Act" or "BSA". These anti-money laundering provisions, as amended, were codified at 31 USC 5311 - 5332, excluding 31 USC 5315.

(2) The Report of Foreign Bank and Financial Accounts (FBAR) is required by the BSA. The statutory and regulatory authority for the reporting and recordkeeping requirements for foreign bank and financial accounts are in Title 31 Section 5314 of the United States Code and the related regulations under 31 CFR 1010.306, Filing of Reports, 31 CFR 1010.350, Reports of Foreign Financial Accounts, and 31 CFR 1010.420, Records to be Made and Retained by Persons Having Financial Interests in Foreign Financial Accounts. The Secretary of the Treasury delegated the authority to administer civil compliance with Title II of the BSA to the Director, Financial Crimes Enforcement Network (FinCEN). FinCEN redelegated to the IRS the authority to interpret the law, examine for compliance, and enforce penalties for violations of the FBAR requirements. Each business operating division (BOD) within the IRS works its own FBAR cases.

(3) The Surface Transportation and Veterans Health Care Choice Improvement Act of 2014, Public Law 114-41, required the Secretary to modify the applicable regulations to change the due date for FBARs due for calendar year 2016 and subsequent years to April 15th. FinCEN announced the due date change on its website and granted filers failing to meet the FBAR annual due date of April 15th an automatic extension to October 15th each year. FinCEN also announced that when the FBAR due date falls on a Saturday, Sunday, or legal holiday, the due date is delayed until the next business day.

(1) The statutory authority for the FBAR is 31 USC 5314, Records and Reports on Foreign Financial Agency Transactions.

(2) 31 USC 5314 directs the Secretary of the Treasury to require a resident or citizen of the United States to keep records and/or file reports when making transactions or maintaining a relationship with a foreign financial agency.

(3) 31 USC 5321(a)(5), Foreign Financial Agency Transaction Violation, and 31 USC 5321(a)(6), Negligence, establish civil penalties for violations of the FBAR reporting and recordkeeping requirements. See IRM 4.26.16.5 below for a discussion of penalties.

(4) 31 CFR 1010.350, Reports of Foreign Financial Accounts, contains the FBAR definitions and requirements. 31 CFR 1010.350(a), In General, states "each United States person having a financial interest in, or signature or other authority over, a bank, securities, or other financial account in a foreign country shall report such relationship to the Commissioner of Internal Revenue for each year in which such relationship exists and shall provide such information as shall be specified in a reporting form prescribed under 31 USC 5314 to be filed by such persons".

(5) 31 CFR 1010.306(c) specifies a filing due date of June 30th for the report for the prior year. The report is required to be electronically filed with FinCEN on FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR). The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, Public Law 114-41 (the Act) required the Secretary of the Treasury to change the FBAR due date to April 15 for calendar year 2016 and subsequent years. The Act provides for a maximum extension for a 6-month period ending on October 15.

(6) Based on the Act, FinCEN announced that the FBAR due date was changed to April 15 to coincide with the Federal income tax filing season. FinCEN also announced an automatic extension of the filing deadline to October 15 for those who file by October 15. FinCEN does not require specific requests for an extension. FinCEN stated that the FBAR filing deadline will follow the Federal income tax due date guidance, which notes that when the Federal income tax due date falls on a Saturday, Sunday, or legal holiday, the due date is delayed until the next business day.

(7) 31 CFR 1010.420, Records to be Made and Retained by Persons Having Financial Interests in Foreign Financial Accounts, requires maintenance and retention of FBAR records for a period of five years.

(8) 31 CFR 1010.810(g) references a Memorandum of Agreement between FinCEN and the IRS, which redelegates, to the IRS, FinCEN's authority to enforce the provisions of 31 USC 5314, Records and Reports on Foreign Financial Agency Transactions, 31 CFR 1010.350 and 31 CFR 1010.420. This includes the authority to:

1. Assess and collect civil FBAR penalties,

2. Investigate possible civil violations of these provisions,

3. Employ the summons power of subpart I of Chapter X,

4. Issue administrative rulings under subpart G of Chapter X, and

5. Take any other action reasonably necessary for the enforcement of these and related provisions, including pursuit of injunctions.

(1) The Director, SB/SE Specialty Exam Policy, is the executive responsible for the FBAR program.

(2) The BSA Policy Program Manager has shared responsibility with the Program Manager, SB/SE HQ Exam, Exam Quality and Technical Support, Offshore and Entities Team and the Program Manager, Offshore Compliance Initiatives, Withholding and International Individual Compliance (WIIC), Large Business and International Division (LB&I) to provide oversight in administering the FBAR program. This oversight supports development and implementation of strategies to address non-compliance.

(3) IRS examiners and technical support from each BOD within IRS are responsible for identifying and addressing issues related to FBAR non-compliance.

(4) IRS Office of Chief Counsel provides guidance and clarification on interpreting laws related to FBAR provisions.

(1) Program Goals: To fulfill service-wide responsibility of the FBAR program and to ensure compliance operations are efficient and effective by improving and creating uniformity in conducting FBAR examinations across operating divisions.

(2) Program Reports: Information regarding the reporting of program objectives are included, but not limited to:

1. FBAR Improvement Team Briefings,

2. Program Manager Monthly Briefings,

3. Examination Operational Review, and

4. Business Performance Reviews.

(3) Program Effectiveness: Periodic program reviews are conducted to:

1. Assess the effectiveness of specific programs within Examination or across the organization,

2. Determine if procedures are being followed,

3. Validate policies and procedures, and

4. Identify and share best/proven practices.

(4) Periodic Review: The BSA Policy Program Manager is responsible for reviewing the information in this IRM to ensure accuracy and promote consistent administration.

(1) See Exhibit 4.26.16-1 for a list of commonly used acronyms and their definitions.

(1) The term "highest aggregate balance" as used in this IRM, is calculated as follows:

1. Determine the high balance in each foreign account (to which the violations relate) during each year under examination,

2. For each year, calculate the "combined high balance" by adding together the high balance of each account as determined in subparagraph (a), and then subtracting any transfers among the accounts during that year as necessary to avoid counting the same funds more than once in determining the "highest aggregate balance". For example, if Account A’s high balance occurs July 15, transfers into Account A after July 15 are not subtracted; however, transfers into Account B from Account A after July 15 and before the date of Account B’s high balance are subtracted, and

3. The highest combined balance calculated under subparagraph (b) among all of the years at issue is the "highest aggregate balance".

(2) Whenever the term "filer" is used in this IRM it includes a US person required to file the FBAR that did not file the FBAR.

(3) Whenever the term "violation" is used in this IRM it includes any reporting or recordkeeping violation of 31 USC 5314, Records and Reports on Foreign Financial Agency Transactions, or its implementing regulations. Each identified FBAR violation is subject to penalty, including each failure to accurately and timely report an account. Each foreign financial account required to be accurately reported on a timely-filed FBAR could be in violation of both the reporting and recordkeeping requirements.

(4) The term "reporting", when used in this IRM, refers to accurately reporting all required information on a timely-filed FBAR form. Examples of reporting violations include (i) failing to report an account, (ii) reporting an account on a late-filed FBAR (even if the account information is reported accurately), and (iii) inaccurately reporting an account on a timely-filed FBAR.

(1) This section should be read together with IRM 4.26.17, Report of Foreign Bank and Financial Accounts (FBAR) Procedures, for a complete understanding of FBAR law and procedures. See the following for additional information:

1. IRM 1.2.2.14.13, Delegation Order 25-13, Enforcement of Report of Foreign Bank and Financial Accounts (FBAR) Requirements

2. IRM 4.26.6, Bank Secrecy Act Examiner Responsibilities for BSA Examinations

3. IRM 4.26.14, Disclosure

4. IRM 4.26.15, General Program

5. 31 CFR 1010.821, Penalty Adjustment and Table

(2) While FinCEN retains its rule-making authority for FBAR, it redelegated civil FBAR enforcement authority to the IRS. See IRM 4.26.16.1.2.

(1) A "United States person" is defined by 31 CFR 1010.350(b), United States Person, to include:

1. A citizen of the United States.

2. A resident of the United States.

3. An entity created, organized, or formed under the laws of the United States, any state, the District of Columbia, any territory or possession of the United States, or an Indian tribe.

(2) The federal tax treatment of a United States person does not determine whether the person must file an FBAR to report an account or accounts.

(3) "United States" is defined by 31 CFR 1010.100(hhh), United States, for FBAR and other Title 31 purposes as:

1. The States of the United States.

2. The District of Columbia.

3. The Indian lands (as defined in the Indian Gaming Regulatory Act).

4. The territories and insular possessions of the United States.

(4) U.S. territories and insular possessions currently include:

• Puerto Rico

• Guam

• American Samoa

• U.S. Virgin Islands

• Northern Mariana Islands

(1) A reportable financial account includes a:

1. Bank account, such as a savings deposit, demand deposit, checking, time deposit (CD), or any other account maintained with a financial institution or other person engaged in the business of banking.

2. Securities account, securities derivatives account, or other financial instruments account held with a person engaged in the business of buying, selling, holding or trading stock or other securities.

3. Other financial account, as defined in (2) below.

(2) "Other Financial Account" is defined by the regulations to include:

1. An account with a person in the business of accepting deposits as a financial agency.

2. An insurance or annuity policy that has a cash value.

   Note: The preamble to the regulations clarifies that there need be no current payment of an income stream to trigger reporting. The cash value of the policy is considered the account value.

3. An account with a person that acts as a broker or dealer for futures or options transactions in any commodity on or subject to the rules of a commodity exchange or association.

4. A mutual fund or similar pooled fund defined as "a fund which issues shares available to the general public that have a regular net asset value determination and regular redemptions".

(3) The following are not considered financial accounts:

1. Stocks, bonds, or similar financial instruments held directly by the person.

2. Real estate or an account holding solely real estate (such as, Mexican "fideicomiso").

3. A safety deposit box.

   Note: A reportable account may exist where the financial institution providing the safety deposit box has access to the contents and can dispose of the contents upon instruction from, or prearrangement with, the person.

4. Precious metals, precious stones, or jewels held directly by the person.

   Note: 31 USC 5311, Declaration of Purpose, defines "financial agency" as "a person acting for a person as a financial institution, bailee, depository trustee, or agent, or acting in a similar way related to money, credit, securities, gold, or a transaction in money, credit, securities, or gold". Therefore, a reportable account relationship may exist where a foreign agency holds precious metals on deposit or provides insurance or other services as an agent of the person owning the precious metals.

(1) Direct Financial Interest:

1. A U.S. person has a financial interest in each account for which such person is the owner of record or has legal title, whether the account is maintained for his own benefit or for the benefit of others including non-U.S. persons.

2. If an account is maintained in the name of two persons jointly, or if several persons each own a partial interest in an account, each of those U.S. persons has a financial interest in that account and, generally, each person must report the account on the FBAR. However, see special rules for spousal reporting in IRM 4.26.16.3.4 below.

   Note: Because the FBAR is a report of foreign financial accounts, the entire account value for jointly-owned accounts is reported on each FBAR. Accounts are not prorated for a person's percentage of ownership interest.

(2) Indirect financial interest: A U.S. person has an "other financial interest" in each bank, securities, or other financial account in a foreign country for which the owner of record or holder of legal title is:

1. A person acting as an agent, nominee, attorney, or in some other capacity on behalf of the U.S. person.

2. A corporation, whether foreign or domestic, in which the U.S. person owns directly or indirectly more than 50 percent of the total value of shares of stock or more than 50 percent of the voting power for all shares of stock.

3. A partnership, whether foreign or domestic, in which the United States person owns directly or indirectly an interest in more than 50 percent of the profits (distributive share of income, taking into account any special allocation agreement) or more than 50 percent of the capital of the partnership.

4. Any other entity in which the U.S. person owns directly or indirectly more than 50 percent of the voting power, total value of the equity interest or assets, or interest in profits.

5. A trust, if the U.S. person is the trust grantor and has an ownership interest in the trust for U.S. federal tax purposes under 26 USC 671–679 and the regulations thereunder.

6. A trust, whether foreign or domestic, in which the U.S. person either has a present beneficial interest, either directly or indirectly, in more than 50 percent of the assets of the trust or from which such person receives more than 50 percent of the trust’s current income.

(3) The family attribution rules under Title 26 do not apply to FBAR reporting.

(4) A U.S. person that causes an entity including, but not limited to, a corporation, partnership, or trust, to be created for the purpose of evading the FBAR reporting or recordkeeping requirements shall have a financial interest in any bank, securities, or other financial account in a foreign country for which the entity is the owner of record or holder of legal title. See 31 CFR 1010.350(e)(3), Anti-Avoidance Rule.

(1) An individual has signature or other authority over an account if that individual (alone or in conjunction with another) can control the disposition of money, funds or other assets held in a financial account by direct communication (whether in writing or otherwise) to the person with whom the financial account is maintained.

(2) Individuals not considered as having signature authority:

1. Individuals with only the authority to buy or sell investments within the account, but no authority to disburse assets from the account.

2. Individuals with supervisory authority over the individuals who communicate with the person with whom the account is maintained. FinCEN clarified, in the preamble to the regulations at 31 CFR 1010.350, Reports of Foreign Financial Accounts, that approving a disbursement that a subordinate orders is not considered signature authority.

(3) Only individuals can have signature authority. Signature authority attributed to entities must be exercised by individuals.

(1) A foreign country includes all geographical areas located outside of the United States as defined in 31 CFR 1010.100(hhh). An account is "foreign" for FBAR purposes if it is located outside:

1. The States of the United States.

2. The District of Columbia.

3. The Indian lands (as defined in the Indian Gaming Regulatory Act).

4. The territories and insular possessions of the United States. See IRM 4.26.16.2.1 above.

(2) It is the location of an account, not the nationality of the financial institution, that determines whether an account is "foreign" for FBAR purposes. Accounts of foreign financial institutions located in the U.S. are not considered foreign accounts for FBAR; conversely, accounts of U.S. financial institutions located outside the U.S. are considered foreign accounts. Examples are:

1. An account with a Hong Kong branch of a U.S.-based bank is a foreign financial account for FBAR purposes.

2. An account with a New York City branch of a foreign-based bank is not a foreign financial account for FBAR purposes.

(1) The final criterion triggering the requirement to report a foreign account on a timely-filed FBAR is the aggregate value of all foreign financial accounts in which the person has a financial interest, or over which the individual has signature or other authority, must be greater than $10,000, valued in U.S. dollars, at any time (on a particular day) during the calendar year.

(2) Steps to determine aggregate account values:

1. Each account should be separately valued according to the steps outlined in IRM 4.26.16.2.2.2 to determine its highest valuation during the year in the foreign denominated currency.

   Exception: Money moved from one foreign account to another foreign account during the year must only be counted once.

2. Each account should be converted from foreign denominated value to U.S. dollars using the Treasury Reporting Rates of Exchange for December 31st of the calendar year being reported. See IRM 4.26.16.2.2.2 above.

(3) All reportable accounts should be aggregated, including:

1. Solely-owned accounts.

2. Jointly-owned accounts.

3. Direct financial interest accounts (see IRM 4.26.16.2.3).

4. Indirect financial interest accounts (see IRM 4.26.16.2.3).

5. Signature or other authority accounts (see IRM 4.26.16.2.4).

(1) The annual due date for filing FBARs to report foreign financial accounts maintained during calendar years 2016 and later, is being treated as April 15 of the following year. This date change was mandated by the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, Public Law 114-41 (the Act). Specifically, section 2006(b)(11) of the Act required the Secretary of the Treasury to change the FBAR due date to April 15, and FinCEN announced a change to April 15 on its website. The annual due date for filing FBARs for accounts maintained during calendar years 2015 and earlier, is June 30 of the following year.

(2) All FBARs filed after June 30, 2013, must be filed electronically through the FinCEN BSA E-Filing website at www.bsaefiling.fincen.gov/main.html unless the filer requested, and was granted, an exception to e-filing by FinCEN.

(3) The FBAR should not be filed with the filer’s federal income tax return or information return.

(1) Help with general questions about account reporting requirements and filing an FBAR, including due dates and filing methods, is available to the public from the IRS by:

1. Calling the IRS Help Lines Monday through Friday, 8 AM to 4:30 PM ET, at 866-270-0733 (toll-free for U.S. callers) or 313-234-6146 (for callers outside the U.S.). Callers select Option 1 for FBAR questions.

2. Reviewing the FBAR Home Page on IRS.gov. Enter "FBAR" in the search box.

(2) Help with electronic filing and BSA regulations is available to the public from FinCEN:

1. For technical questions about BSA E-Filing System by emailing BSAEFilingHelp@fincen.gov, or by calling the BSA E-File Help Desk at 866-346-9478.

2. For E-filing exemption requests to allow FBAR paper-filing, or questions about BSA regulations by calling the FinCEN Resource Center at 800-949-2732 (toll-free for U.S. callers) or 703-905-3975 (for callers outside the U.S.).

(1) Individual Retirement Account (IRA) owners and beneficiaries, and participants in and beneficiaries of U.S. tax-qualified retirement plans, are not required to report a foreign financial account held by or on behalf of the IRA or retirement plan.

(2) A trust beneficiary with a financial interest is not required to report the trust's foreign financial accounts on an FBAR if the trust, trustee of the trust, or agent of the trust:

1. Is a U.S. person, and

2. Files an FBAR disclosing the trust's foreign financial accounts.

(1) Accounts owned jointly by spouses may be filed on one FBAR. The spouse of an individual who files an FBAR is not required to file a separate FBAR if the following conditions are met:

1. All the financial accounts that the non-filing spouse is required to report are jointly owned with the filing spouse.

2. The filing spouse reports the jointly owned accounts on a timely, electronically filed FBAR.

3. Both spouses complete and sign Part I of FinCEN Form 114a, Record of Authorization to Electronically File FBARs. The filing spouse completes Part II of Form 114a in its entirety.

   Note: The completed Form 114a is not filed but must be retained for five years. It must be provided to IRS or FinCEN upon request.

(2) If these conditions are not met, both spouses are required to file separate FBARs, and each spouse must report the entire value of the jointly-owned accounts.

(3) For calendar years prior to 2014, use the instructions for spousal filing for that filing year.

(1) FBAR filers may authorize a paid preparer or other third party to electronically file the FBAR for them.

1. The person reporting a financial interest in, or signature or other authority over, foreign accounts must sign Part I of FinCEN Form 114a.

2. The preparer or other third-party filer must sign Part II of Form 114a.

3. Form 114a is not filed. Both parties must retain the form for five years. It must be provided to IRS or FinCEN upon request.

(2) It remains the responsibility of the filer to ensure that filing takes place timely and the report is accurate. Form 114a contains a disclaimer that states: "...it is my/our legal responsibility, not that of the preparer listed in Part II, to timely file an FBAR if required by law to do so".

(1) 31 CFR 1010.350(g) provides that a United States person that has a financial interest in 25 or more foreign financial accounts only needs to provide the number of financial accounts and certain other basic information on the report, but will be required to provide detailed information concerning each account if the IRS or FinCEN requests it.

(2) Filers must comply with FBAR record-keeping requirements. See IRM 4.26.16.4.1.

(1) 31 CFR 1010.350(g) provides that a United States person that has signature or other authority over 25 or more foreign financial accounts only needs to provide the number of financial accounts and certain other basic information on the report but will be required to provide detailed information concerning each account if the IRS or FinCEN requests it.

(2) Filers must comply with FBAR record-keeping requirements. See IRM 4.26.16.4.1.

(1) The FBAR filing instructions allow for modified reporting by a U.S. person who meets all three of the following criteria:

1. Resides outside the U.S.

2. Is an officer or employee of an employer located outside the U.S.

3. Has signature authority over a foreign financial account(s) of that employer.

(2) In such cases, the U.S. Person should file the FBAR by:

1. Completing filer information.

2. Omitting account information.

3. Completing employer information one time only.

(1) 31 CFR 1010.350(g) allows an entity that is a U.S. person that owns directly or indirectly a greater than 50 percent interest in another entity that is required to file an FBAR to file a consolidated FBAR on behalf of itself and such other entity.

(2) Each controlled entity that has an FBAR filing obligation must be listed in Part V, even if that entity owns foreign accounts only indirectly.

(1) Prior to the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (The Act), there was no authority to extend the time for filing an FBAR.

(2) FinCEN granted filers an automatic extension of the FBAR filing deadline to October 15 each year beginning with FBARs required for calendar year 2016. Specific requests for an extension are not required.

(3) IRC 7508, Time for Performing Certain Acts Postponed by Reason of Service in Combat Zone or Contingency Operation, does not grant U.S. persons that are U.S. Armed Forces members an extension to file the FBAR.

(4) This is not to be confused with extension of the statute of limitations on assessment or collection of penalties, which is possible. See IRM 4.26.17.3.1.3, Extending the FBAR Statute of Limitations.

(1) Delinquent FBARs should be filed using the current electronic report, but using the instructions for the year for which foreign accounts are being reported to determine if FBAR reporting requirements exist.

(2) Page one of FinCEN Form 114 should detail the reason the FBAR was not filed timely and a reason selected from the drop-down box. The "Other" selection allows for a 750-character text box explanation.

(3) A copy of the FBAR should be kept for recordkeeping purposes.

(4) A penalty will not be asserted for an account if it is determined that the failure to report the account on a timely filed FBAR was not willful, the failure to report the account on a timely-filed FBAR was due to reasonable cause, and the account was properly reported on the delinquent FBAR.

(1) To amend a filed FBAR, filers should:

1. Check the "Amended" box in Item 1 at the top of page two and fill in the "Prior Report BSA Identifier" for the original filing in the block provided. If the Prior Report BSA Identifier is not known, the filer is to enter 00000000000000 in the Prior Report BSA Identifier field.

2. Complete the report in its entirety using the amended information.

(1) FBAR filing can be verified on the FinCEN Query System.

(2) A FinCEN Query printout of a filed FBAR can establish that a retained copy of an FBAR provided by a filer or representative was filed and that the retained FBAR has the same information as the filed FBAR. FinCEN Query printouts can be obtained by querying both the filer’s name and Taxpayer Identification Number (TIN).

(3) Filers receive immediate electronic verification for FBARs filed electronically with FinCEN.

(4) Filers can request verification of FBARs filed, 60 days after the date of filing. Requests for verification of FBAR filing and/or paper copies of FBAR reports must be made in writing. The request must include the filer’s name, Taxpayer Identification Number, and filing period(s) needed. Practitioners asking for this information must also include a copy of Form 2848, Power of Attorney and Declaration of Representative, authorizing them to receive it.

1. There is a $5.00 fee for verifying five or fewer forms and a $1.00 fee for each additional form. If copies of the filed FBAR is needed, there is an additional fee of $0.15 per copy. Checks or money orders should be made payable to the United States Treasury. Written requests and payments for FBAR filing verifications and copies of filed FBARs should be mailed to:

IRS Detroit Federal Building

Compliance Review Team

Attn: Verification

P.O. Box 32063

Detroit, MI 48232-0063

(1) A filer who has a financial interest in or signature or other authority over 25 or more foreign financial accounts must also comply with the recordkeeping requirements in IRM 4.26.16.4.

(2) Filers will be required to provide detailed information concerning each account if the IRS or FinCEN requests it.

(1) IRS was delegated the authority to assess and collect civil FBAR penalties. See 31 CFR 1010.810(g). The delegation includes the authority to investigate possible civil FBAR violations and the authority to assess and collect the penalties for violations of the reporting and recordkeeping requirements.

(2) When performing these functions, IRS is not acting under Title 26 but, instead, is acting under the authority of Title 31. Provisions of the IRC generally do not apply to FBARs.

(3) Criminal Investigation was delegated the authority to investigate possible criminal violations of the Bank Secrecy Act. See 31 CFR 1010.810(c)(2).

(1) Information in this section applies to the three civil penalties available for FBAR violations:

(2) For FBAR penalty purposes, the "violation date" for reporting violations occurs:

1. For calendar years 2015 and earlier, at the end of the day June 30th of the year following the calendar year for which accounts must be reported (the due date for filing the FBAR).

2. For calendar years 2016 and subsequent, at the end of the day April 15th of the year following the calendar year for which accounts must be reported, if a complete and accurate FBAR is not filed by October 15th (the automatic, extended due date announced by FinCEN).

(3) For FBAR penalty purposes, the "violation date" for a recordkeeping violation occurs on the date the records are first requested via summons by the IRS examiner if the records are not provided. See IRM 4.26.17.3.1.1, FBAR Statute of Limitations on Assessments, for important information about this requirement. The date of the violation is tied to the date of the request, and not a later date, to assure the filer is unable to manipulate the amount in the account after receiving a request for records.

(4) There may be both a reporting and a recordkeeping violation regarding each account. Examiner discretion applies in determining whether to penalize both violations for a single account, but examiners must consult with Counsel before making a final decision to assert penalties for both violations.

(5) A civil money penalty may be imposed for an FBAR violation even if a criminal penalty is imposed for the same violation. See 31 USC 5321(d).

(6) For purposes of the penalty authorized by 31 USC 5321(a)(5), where there are multiple owners of a foreign financial account to which the violations relate, examiners must make a separate determination with respect to each co-owner of the foreign financial account as to whether there was a violation and, if so, whether the violation was willful or non-willful. For each co-owner against whom a penalty is determined, the penalty will be based on the co-owner’s ownership percentage of the highest balance of the foreign financial account. If examiners are unable to determine a co-owner’s ownership percentage, the penalty will be based on the amount, determined by dividing the highest account balance equally among the co-owners. If examiners believe, based on the facts and circumstances of a particular case, that the penalty should be allocated among the co-owners in some other manner, they may do so with the group manager’s approval after consultation with an Operating Division FBAR Coordinator. The examiner’s workpapers must support such a determination and document the group manager’s approval.

(7) The penalty for each violation is limited to the applicable statutory maximum in 31 USC 5321(a)(5), Foreign Financial Agency Transaction Violation, and 31 USC 5321(a)(6), Negligence, adjusted for inflation as described in IRM 4.26.16.5.

(1) There are two negligence penalties that apply generally to all BSA provisions. See 31 USC 5321(a)(6), Negligence. These penalties may be assessed against a financial institution or non-financial trade or business for any negligent violation of the BSA, including FBAR violations.

1. Negligence penalty

2. Pattern of negligent violations

(2) These two negligence penalties apply only to trades or businesses, including financial institutions, and not to individuals. Generally, only examiners in BSA Examination assert negligence penalties under 31 USC 5321(a)(6).

(3) The FBAR penalties under 31 USC 5321(a)(5) and the FBAR warning letter, Letter 3800, adequately address most FBAR violations identified. The FBAR warning letter may be issued in the cases where the examiner determines none of the 31 USC 5321(a)(5) FBAR penalties are warranted. If the examiner believes, however, that assertion of a 31 USC 5321(a)(6) negligence penalty is warranted in a particular case, the examiner should contact a Bank Secrecy Act FBAR program analyst for guidance.

(1) For violations occurring after October 22, 2004, a penalty for a non-willful FBAR violation may be imposed on any filer who violates or causes any violation of the FBAR filing, reporting and recordkeeping requirements. See 31 USC 5321(a)(5)(A), Penalty Authorized, and 31 USC 5321(a)(5)(B), Amount of Penalty.

(2) The penalty applies to individuals as well as entities, including financial institutions and nonfinancial trades or businesses.

(3) The penalty should not be imposed if:

1. The violation was due to reasonable cause, and

2. Accurate delinquent or amended FBAR(s) are filed, rectifying prior violation(s).

   Note: A few courts have concluded that the principles of reasonable cause within Title 26 can be used to determine the existence of reasonable cause for FBAR penalties for non-willful violations. United States v. Ott, 2019 U.S. Dist. LEXIS 132013, at *5-7 (E.D. Mich. August 7, 2019); Jarnagin v. United States, 134 Fed. Cl. 368, 376 (2017); Moore v. United States, No. C13-2063RAJ, 2015 U.S. Dist. LEXIS 43979, at *1, **12-13 (W.D. Wash. Apr. 1, 2015) ("There is no reason to think that Congress intended the meaning of 'reasonable cause' in the Bank Secrecy Act to differ from the meaning ascribed to it in tax statutes."), dismissed by 2015 U.S. Dist. LEXIS 99804 (W.D. Wash. July 24, 2015). [A] person has "reasonable cause" for an FBAR violation when he committed that violation despite an exercise of ordinary business care and prudence. Moore, at *4.

(4) For each non-willful violation occurring after October 22, 2004, a penalty may be imposed up to the $10,000 penalty amount under 31 USC 5321(a)(5)(B(i), adjusted for inflation as described in paragraph (5).

(5) For penalties assessed after August 1, 2016, for non-willful violations occurring after November 2, 2015, the statutory maximum penalty amount under 31 USC 5321(a)(5)(B)(i) is subject to annual inflationary adjustment under the FCPIA Act. Adjusted maximum penalty amounts are set forth in 31 CFR 1010.821, Penalty Adjustment and Table.

(6) Examiners have discretion in determining the penalty amount and should use the mitigation and other guidelines in this section in making their determinations. The purpose of FBAR penalties is to promote compliance with the FBAR reporting and recordkeeping requirements. See IRM 4.26.16.5.2.1 for more information about examiner discretion.

(1) The penalty for willful FBAR violations may be imposed on any filer who willfully violates or causes any violation of any provisions of 31 USC 5314 (the FBAR reporting and recordkeeping requirements). See 31 USC 5321(a)(5)(A) and 31 USC 5321(a)(5)(C).

(2) The penalty applies to individuals as well as entities, including financial institutions and nonfinancial trades or businesses.

(3) For violations occurring after October 22, 2004, a penalty for each willful FBAR violation may be imposed up to the greater of the $100,000 penalty amount under 31 USC 5321(a)(5)(C)(i)(I), adjusted for inflation as described in paragraph (4), or 50% of the amount in the account at the time of the violation (the "violation date" as described in IRM 4.26.16.5.2). See 31 USC 5321(a)(5)(C) and 31 USC 5321(a)(5)(D).

(4) For penalties assessed after August 1, 2016, for violations occurring after November 2, 2015, the $100,000 penalty amount under 31 USC 5321(a)(5)(C)(i)(I) is subject to the annual inflationary adjustment under the FCPIA Act. Adjusted maximum penalty amounts are set forth in 31 CFR 1010.821, Penalty Adjustment and Table.

(5) Examiners have discretion in determining the penalty amount and should use the mitigation and other guidelines in this section in making their determinations. The purpose of FBAR penalties is to promote compliance with the FBAR reporting and recordkeeping requirements. See IRM 4.26.16.5.2.1 for more information about examiner discretion.

(1) Managers must perform a meaningful review of the examiner's penalty determination prior to assessment.

(2) The manager must verify that the penalties were fairly imposed and accurately computed; that the examiner did not improperly assert the penalties in the first instance; and that the conclusions regarding "reasonable cause" (or the lack thereof) were proper.

(3) Written managerial approval must be documented on the FBAR Penalty Approval Form. This form is available on the Servicewide FBAR Knowledge Base by clicking "Document Repository", found on the right-hand side of https://portal.ds.irsnet.gov/sites/VL101/Pages/default.aspx.