This is the third of a series of four posts exploring some of the more difficult and “interesting” areas of (possible) FBAR obligations.The first post explains the FBAR filing obligations of trusts. The second post explains when individuals may have to file an FBAR because of their relationship to a trust. This third post explains how/why one may be required to file an FBAR based on control of an account rather than ownership of the account. The fourth post continues the discussion of when beneficial ownership without legal ownership triggers an FBAR obligation. The four posts are based on Podcasts with US tax lawyer Virginia La Torre Jeker.
Podcast 1: February 23, 2002 – FBAR Obligations Attaching To A Trust
Podcast 2: March 4, 2022 – FBAR Obligations Attaching To People Because Of Their Relationship To A Trust
Podcast 3: May 25, 2022 – Looking For Mr. FBAR – A New Sighting – ”exercised control over and had access to the account”
Podcast 4: September 29, 2022 – When ”Beneficial Ownership” Constitutes A Financial Interest And Triggers An FBAR Requirement
Podcast May 22, 2022 – Participants include:
Virginia La Torre Jeker – @VLJeker
John Richardson – @ExpatriationLaw
The Question: When might an obligation to file an FBAR arise when one does NOT have “signature authority” over an account?
– what qualifies as having an “financial interest”?
– what if a lawyer is holding your money in his/her trust account?
– what if one has a “bank card” which allows access to another person’s bank account?
– and more?
On May 19, 2022 Virginia La Torre Jeker published a post about Paul Manafort and his adventures with Mr. FBAR. Mr. Manafort was on the receiving end of three million dollars in FBAR penalties. Because he had not paid, the US government began a lawsuit to convert the FBAR penalty to a legally enforceable judgment. To understand the complete context of Mr. Manafort’s meeting with Mr. FBAR, I refer you to Virginia’s post.
In relevant part her post included:
“Regardless, of the fact that others technically owned and operated some of the accounts, Manafort still exercised control over, and had access to, each of the accounts. This means he had a “financial interest” in the accounts for purposes of the Bank Secrecy Act, and relevant regulations which includes in the definition of “financial interest” the case when “[t]he owner of record or holder of legal title is a person acting as an agent, nominee, attorney, or a person acting on behalf of the United States person with respect to the account.”
Interestingly paragraph 17 of the government’s compliant included:
“17. Regardless, Manafort still exercised control over, and had access to, each of the accounts.”
In this podcast we go back to the basics and discuss who exactly is required to file an FBAR and why. Our discussion analyzes the FinCEN FBAR instructions.
It all starts here. The instructions state that:
“Who Must File an FBAR. A United States person that has a financial interest in or signature authority over foreign financial accounts must file an FBAR if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year. See General Definitions, to determine who is a United States person.”
Our concern – starting at the 32 minute mark of the discussion – is with “FBAR application creep”. How long will it take before the test of “exercised control over” and/or “had access to” will be applied to the most pedestrian of situations?
In other words: First, Mr. Manafort. Now, the average person living abroad!
John Richardson – Follow me on Twitter @Expatriationlaw