FBAR Non-filers Beware of Global Information Exchange Agreements


At the most recent meeting of the Finance Ministers and Central Bank Governors on July 19 & 20, 2013 they said
“We are committed to automatic exchange of information as the new, global standard and we fully support the OECD work with G20 countries aimed at setting such a new single global standard for automatic exchange of information. We ask the OECD to prepare a progress report by our next meeting, including a timeline for completing this work in 2014. We call on all jurisdictions to commit to implement this standard.”

Many U.S. taxpayers have taken the position that there are just too many offshore accounts for the U.S. government to find every one or even most of the non-filers and they are playing “catch me if you can”. As can be seen by the statement of the OECD the process of identification of non-filers is being made simpler by use of automated methods. Much of the groundwork for development of global automated information exchange comes from the U.S.

In 2010 the United States enacted legislation commonly referred to as FATCA (Foreign Account Tax Compliance Act) which effectively requires foreign financial institutions around the globe to report account details of their U.S. customers to the U.S. tax administration. Recognizing the important legal and cost issues of this approach the United States developed together with five other OECD (and EU) member countries (France, Germany, Italy, Spain and the United Kingdom) a model for the intergovernmental implementation of FATCA (Model FATCA IGA). The Model FATCA IGA provides for the implementation of FATCA through reporting by financial institutions to their local tax authorities, which then exchange the information on an automatic basis with the U.S. tax authorities.

As FATCA roles out more and more foreign financial institutions are requesting proof of compliance with U.S. FBAR and income tax laws in order to keep once secret accounts open. The failure to provide proof of compliance may result in closing of the account and cooperation with U.S. prosecutors and investigators who will pursue the offshore non-filers. The message should be clear to all non-filers, come forward or risk civil penalties that can be 50% of the account high balance per year for up to six years and prosecution for tax evasion and/or willful violation of the foreign account reporting rules under the Bank Secrecy Act.

The offshore voluntary disclosure program (OVDP) penalty is 27.5% of the highest single year account balance in the preceding eight years. By entering the OVDP taxpayers can come forward with unreported foreign gifts/bequests as well as unreported foreign trust,, partnerships and corporations ownership interests and avoid the penalties for not filing those returns. On balance the cost of coming forward is most surely less than waiting to be discovered. Remember, you are not in Hollywood, and discovery does not mean a starring role in film, it means casting your fate to the Department of Justice and Internal Revenue Service.


Topics:  EU, FATCA, FBAR, Filing Requirements, G20, IGAs, Information Sharing, OECD, OVDP

Published In: Criminal Law Updates, Finance & Banking Updates, International Trade Updates, Tax Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Sanford Millar, Law Offices of Sanford I. Millar | Attorney Advertising

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Sanford Millar
Law Offices of Sanford I. Millar

Experience and Qualifications: Over 30 years of experience in domestic and international tax... View Profile »

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