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For most U.S. persons who maintain or have signature authority over an overseas bank account, November 1, 2011 marks the deadline to comply (for periods ending December 31, 2009 and prior), with an oft-misunderstood part of the Bank Secrecy Act that regulators recently amended.
The Report of Foreign Bank and Financial Accounts requirements (31 CFR 103.24), or the FBAR rules, require many U.S. persons to file paperwork alerting regulators to overseas holdings. Generally, this reporting is meant to assist U.S. government agencies to detect and prevent money laundering, tax evasion, or other criminal activities. It impacts corporate users as well as individuals.
IT2 recommends corporates tackle this renewed requirement at the treasury level. To automate many parts of the reporting data collection process, corporates can use their IT2 treasury workstations to compile a list of all foreign bank accounts whether currently open or closed, track the employees who currently have or previously had signing and funds transfer authority and therefore need to file an FBAR entry, and discover which accounts fall within the scope of the ruling by tracking the account peak balances during each reporting period. The workstation will allow the treasury departments to greatly reduce the amount of paperwork and research needed to perform the reporting.
In an amendment to the Act (.pdf) issued on Feb. 24, 2011 regulators increased the scope of persons required to report foreign accounts and clarified the types of accounts reportable.
Jeanne Castro Schmidt, President of Treasury Management Solutions, said, “This new interpretation of the rule is a major nightmare for most companies. Many of them are grappling with it right now because the filing deadline is approaching.”
She explained: “The ruling requires any US ‘person,’ as defined in the code, who was a signer or wire transfer approver or otherwise empowered to move funds from bank accounts located outside the U.S., to file a form each year with the IRS listing the bank account details of the accounts for which they had such authority. The report must be filed even if the account was closed during the reporting year, or if the signer was changed or terminated, or only performed the job for a brief period of time.”
Castro Schmidt continued: “The details needed to comply include the basics such as bank name, account number, address, but also the maximum balance held in the account during the period. Any account that had more than $10,000 at any one time during the reporting year must be included in the filing.”
The regulation defines a U.S. “person” as a citizen or resident of the United States or a person in and doing business in the country – including partnerships, investment entities, and other corporate entities.