[Federal Register Volume 75, Number 38 (Friday, February 26, 2010)]
[Proposed Rules]
[Pages 8844-8854]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-4042]


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DEPARTMENT OF THE TREASURY

31 CFR Part 103

RIN 1506-AB08


Financial Crimes Enforcement Network; Amendment to the Bank 
Secrecy Act Regulations--Reports of Foreign Financial Accounts

AGENCY: Financial Crimes Enforcement Network (FinCEN), Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: FinCEN, a bureau of the Department of the Treasury (Treasury), 
is proposing to revise the regulations implementing the Bank Secrecy 
Act (BSA) regarding reports of foreign financial accounts. The proposed 
rule would clarify which persons will be required to file reports of 
foreign financial accounts and which accounts will be reportable. In 
addition, the proposed rule would exempt certain persons with signature 
or other authority over foreign financial accounts from filing reports 
and would include provisions intended to prevent United States persons 
from avoiding this reporting requirement.

DATES: Written comments on the notice of proposed rulemaking may be 
submitted on or before April 27, 2010.

ADDRESSES: You may submit comments, identified by RIN 1506-AB08, by any 
of the following methods:
    <bullet> Federal e-rulemaking portal: http://www.regulations.gov. 
Refer to Docket Number Fincen-2009-0008 and follow the instructions for 
submitting comments.
    <bullet> Mail: FinCEN, P.O. Box 39, Vienna, VA 22183. Include RIN 
1506-AB08 in the body of the text.
    Inspection of comments: Comments may be inspected, between 10 a.m. 
and 4 p.m., in the FinCEN reading room in Vienna, VA. Persons wishing 
to inspect the comments submitted must request an appointment with the 
Disclosure Officer by telephoning (703) 905-5034 (not a toll-free 
call).

FOR FURTHER INFORMATION CONTACT: Regulatory Policy and Programs 
Division, FinCEN (800) 949-2732 and select option 1.

SUPPLEMENTARY INFORMATION:

I. Introduction

    The provision of the BSA authorizing reports of foreign financial 
accounts reflects congressional concern that foreign financial 
institutions were being used to evade domestic criminal, tax, and 
regulatory laws. The House report on the bill leading to the enactment 
of the BSA described the use of undisclosed foreign financial accounts 
for a wide range of abuses.\1\ Nearly four decades after the enactment 
of the BSA, foreign financial accounts continue to be used for many of 
the abuses cataloged by Congress when it was originally considering the 
enactment of the BSA. For example, the Senate Permanent Subcommittee on 
Investigations has found that Americans have continued to use complex 
schemes to try to conceal their foreign financial accounts in attempts 
to circumvent United States law.\2\
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    \1\ The House report states:
    Considerable testimony was received by the Committee from the 
Justice Department, the United States Attorney for the Southern 
District of New York, the Treasury Department, the Internal Revenue 
Service, the Securities and Exchange Commission, the Defense 
Department and the Agency for International Development about 
serious and widespread use of foreign financial facilities located 
in secrecy jurisdictions for the purpose of violating American law. 
Secret foreign bank accounts and secret foreign financial 
institutions have permitted proliferation of `white collar' crime; 
have served as the financial underpinning of organized criminal 
operations in the United States; have been utilized by Americans to 
evade income taxes, conceal assets illegally, and purchase gold; 
have allowed Americans and others to avoid the law and regulations 
governing securities and exchanges; have served as essential 
ingredients in frauds including schemes to defraud the United 
States; have served as the ultimate depository of black market 
proceeds from Vietnam; have served as a source of questionable 
financing for conglomerate and other corporate stock acquisitions, 
mergers and takeovers; have covered conspiracies to steal from the 
U.S. defense and foreign aid funds; and have served as the cleansing 
agent for `hot' or illegally obtained monies. H.R. Rep. No. 975 91st 
Cong. 2d Sess. 12 (1970).
    \2\ See Tax Haven Banks and U.S. Tax Compliance, Staff Report, 
Permanent Subcommittee on Investigations, Senate Comm. on Homeland 
Security and Governmental Affairs, (July 17, 2008); Tax Haven 
Abuses: The Enablers, the Tools and Secrecy, Staff Report, Permanent 
Subcommittee on Investigations, Senate Comm. on Homeland Security 
and Governmental Affairs, (Aug. 1, 2006).
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    Considerable effort has been made to address these abuses. The 
Internal Revenue Service (IRS), for example, has several projects 
focused on the use of offshore accounts to evade federal income taxes.

II. Background

A. Statutory and Regulatory Background

    The BSA, Titles I and II of Public Law 91-508, as amended, codified 
at 12 U.S.C. 1829b, 12 U.S.C. 1951-1959, and 31 U.S.C. 5311-5314 and 
5316-5332, authorizes the Secretary of the Treasury (Secretary), among 
other things, to issue regulations requiring persons to keep records 
and file reports that are determined to have a high degree of 
usefulness in criminal, tax, regulatory, and counterterrorism matters. 
The regulations implementing the BSA appear at 31 CFR Part 103. The 
Secretary's authority to administer the BSA has been delegated to the 
Director of FinCEN.
    Under 31 U.S.C. 5314 the Secretary is authorized to require any 
``resident or citizen of the United States, or a person in, and doing 
business in, the United States, to * * * keep records and file reports, 
when the resident, citizen, or person makes a transaction or maintains 
a relation for any person with a foreign financial agency.'' For this 
purpose, foreign financial agency means ``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 
in a transaction in money, credit, securities or gold.'' \3\ The 
Secretary is also

[[Page 8845]]

authorized to prescribe exemptions to the reporting requirement and to 
prescribe other matters the Secretary considers necessary to carry out 
section 5314.
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    \3\ See 31 U.S.C. 5312(a)(1) which excepts from the definition 
of financial agency a person acting for a country, a monetary or 
financial authority acting as a monetary or financial authority or 
an international financial institution of which the United States 
government is a member.
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B. Overview of Current Regulations and Form

    The regulations implementing 31 U.S.C. 5314 appear at 31 CFR 
103.24, 103.27, and 103.32. Section 103.24 generally requires each 
person subject to the jurisdiction of the United States having a 
financial interest in or signature or other authority over a bank, 
securities, or other financial account in a foreign country to ``report 
such relationship to the Commissioner of Internal Revenue for each year 
in which such relationship exists, and * * * provide such information 
as shall be specified in a reporting form prescribed by the Secretary 
to be filed by such persons.'' Section 103.27 requires the form to be 
filed with respect to foreign financial accounts exceeding $10,000. The 
form must be filed on or before June 30 of each calendar year for 
accounts maintained during the previous calendar year. Section 103.32 
requires records of accounts to be maintained for each person having a 
financial interest in or signature or other authority over such 
account. The records must be maintained for a period of five years.\4\
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    \4\ This notice of proposed rulemaking would not amend sections 
103.27 and 103.32.
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    The form used to file the report required by section 103.24 is the 
Report of Foreign Bank and Financial Accounts--Form TD F 90-22.1 (the 
FBAR).\5\ The instructions to the FBAR specify which persons must file 
as well as the types of accounts that must be reported. The 
instructions also provide exemptions from reporting for certain persons 
with signature or other authority over the accounts.
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    \5\ The FBAR form currently available on both the FinCEN and IRS 
Web sites allows users to complete the form electronically and then 
print a PDF document that can be mailed to the address on the form.
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    The authority to enforce the provisions of 31 U.S.C. 5314 and 
sections 103.24 and 103.32 has been re-delegated from FinCEN to the 
Commissioner of Internal Revenue by means of a Memorandum of Agreement 
between FinCEN and the IRS dated April 2, 2003.\6\ With this 
delegation, FinCEN conferred upon the IRS the authority to enforce the 
FBAR provisions of the BSA and its implementing regulations, 
investigate possible violations, and assess and collect civil penalties 
in connection therewith. The delegation also conferred upon the IRS the 
authority to: (1) Respond to public inquiries and requests for advice; 
(2) issue administrative rulings; and (3) provide related assistance to 
the public with respect to compliance with FBAR requirements. Finally, 
the delegation conferred upon the IRS the authority to revise the FBAR 
form and instructions, and to propose to FinCEN revisions of the 
applicable regulations for the purpose of enhancing FBAR compliance and 
enforcement.
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    \6\ See 31 CFR 103.56(g).
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    A revised Form TD F 90-22.1 that modified several aspects of the 
FBAR form instructions was issued in October 2008. Most notably, the 
revised FBAR form instructions broadened the definition of ``United 
States person'' to conform more closely to the FBAR's authorizing 
statute,\7\ and sought to clarify the scope of foreign financial 
accounts that trigger FBAR filing requirements. In the ensuing months, 
the IRS received a number of questions and comments seeking guidance on 
compliance with the revised FBAR instructions. In response to these 
comments, the IRS published guidance indicating that until further 
notice, all persons may rely on the definition of ``United States 
person'' found in the prior version of the FBAR instructions from 2000. 
The IRS also extended the FBAR filing deadline for the 2008 and earlier 
calendar years to September 23, 2009 for certain filers.\8\
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    \7\ 31 U.S.C. 5314.
    \8\ Announcement 2009-51, 2009-25 I.R.B. 1005.
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    In addition, the IRS published Notice 2009-62 on August 10, 2009, 
which extended the FBAR filing deadline for the 2008 and earlier 
calendar years to June 30, 2010 for certain filers, and requested 
comments from the public regarding several FBAR-related issues. 
Specifically, Notice 2009-62 requested public comment regarding: (1) 
When a person with signature or other authority over, but no financial 
interest in, a foreign financial account should be relieved of filing 
an FBAR for the account; (2) whether to expand the filing exemption 
currently available to officers and employees of banks and certain 
publicly traded domestic companies, where such officers and employees 
have signature or other authority over their employer's accounts; and 
(3) when an interest in a foreign entity should trigger an FBAR filing 
requirement.\9\
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    \9\ In crafting the proposed rule, FinCEN reviewed the public 
comments received in response to Notice 2009-62.
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III. Section-by-Section Analysis

    The proposed rule would include a definition of United States 
persons and definitions of bank, securities, and other financial 
accounts in a foreign country. FinCEN believes that inclusion of these 
definitions will more clearly delineate both the scope of individuals 
and entities that would be required to file the FBAR and the types of 
accounts for which such reports should be made, so that determining a 
person's filing obligations will be more straightforward and 
predictable. In addition, the proposed rule would exempt certain 
persons with signature or other authority from filing the FBAR. 
Finally, the proposed rule would include provisions intended to prevent 
United States persons required to file the FBAR from avoiding this 
reporting requirement.

A. Sec.  103.24(a)--In General

    FinCEN proposes to amend 31 CFR 103.24 by using a new term ``United 
States person'' to indicate persons that would be required to file an 
FBAR.

B. Section 103.24(b)--United States Person

    FinCEN proposes to define a United States person as a citizen or 
resident of the United States, or an entity, including but not limited 
to a corporation, partnership, trust or limited liability company, 
created, organized, or formed under the laws of the United States, any 
state, the District of Columbia, the Territories and Insular 
Possessions of the United States or the Indian Tribes. This definition 
applies to an entity regardless of whether an election has been made 
under 26 CFR 301.7701-2 or 301.7701-3 to disregard the entity for 
federal income tax purposes. The determination of whether an individual 
is a resident of the United States would be made under the rules of the 
Internal Revenue Code, specifically 26 U.S.C. 7701(b) and the 
regulations thereunder except that the definition of the term ``United 
States'' provided in 31 CFR 103.11(nn) will be used instead of the 
definition of ``United States'' in 26 CFR 301.7701(b)-1(c)(2)(ii). 
FinCEN believes that this approach is appropriate because it provides 
for uniformity regardless of where in the United States an individual 
may be. In addition, FinCEN believes this approach takes into account 
that individuals may seek to hide their residency in an effort to 
obscure the source of their income or location of their assets.\10\
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    \10\ See Tax Haven Banks and U.S. Tax Compliance, Staff Report, 
Permanent Subcommittee on Investigations, Senate Comm. on Homeland 
Security and Governmental Affairs at 8 (July 17, 2008).

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[[Page 8846]]

C. Section 103.24(c)--Types of Reportable Accounts

    FinCEN proposes to amend 31 CFR 103.24 by adding definitions of the 
accounts subject to reporting. Section 5314 authorizes the Secretary to 
require records or reports when a person ``makes a transaction or 
maintains a relation for any person with a foreign financial agency.'' 
Although section 5314 authorizes the Secretary to address both 
transactions and relations, FinCEN is focusing in this rulemaking on 
relations. FinCEN believes that when a person maintains an account with 
a foreign financial institution, the person is maintaining a relation 
with a foreign financial agency. For this purpose, an account means a 
formal relationship with such person to provide regular services, 
dealings and other financial transactions. The length of the time for 
which service is being provided does not affect the fact that a formal 
account relationship has been established. For example, in the case of 
an escrow account, an individual may establish a relationship with a 
financial institution to service and maintain that account, albeit for 
a short period of time. However, an account is not established simply 
by conducting transactions such as wiring money or purchasing a money 
order where no relationship has otherwise been established.
    FinCEN has chosen to define bank, securities, and other financial 
accounts with reference to the kinds of financial services for which a 
person maintains an account. FinCEN believes this is necessary because 
while the BSA provides guidance as to the definition of a financial 
institution, financial institutions under the BSA are largely defined 
by reference to United States law and terminology. For example, a 
financial institution is defined in the BSA to include an insured bank 
as defined in section 3(h) of the Federal Deposit Insurance Act.\11\ 
Accordingly, the proposed amendment to section 103.24 would include 
definitions of bank account, securities account, and other financial 
accounts.
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    \11\ See 31 U.S.C. 5312(a)(2)A.
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D. Section 103.24(c)(1)--Bank Account

    The term ``bank account'' means a savings deposit, demand deposit, 
checking, or any other account maintained with a person engaged in the 
business of banking. This definition includes time deposits such as 
certificates of deposit accounts that allow individuals to deposit 
funds with a banking institution and redeem the initial amount, along 
with interest earned after a prescribed period of time.

E. Section 103.24(c)(2)--Securities Account

    The term ``securities account'' means an account maintained with a 
person in the business of buying, selling, holding, or trading stock or 
other securities.

F. Section 103.24(c)(3)--Other Financial Account

    The term ``other financial account'' appears in current section 
103.24. While FinCEN understands that the term ``other financial 
account'' is broad enough to cover a range of relationships with 
foreign financial agencies, FinCEN believes that compliance will be 
enhanced by more clearly delineating the types of relationships that 
must be reported.
    Thus, the proposal would define ``other financial account'' to mean
    <bullet> An account with a person that is in the business of 
accepting deposits as a financial agency;
    <bullet> An account that is an insurance policy with a cash value 
or an annuity policy;
    <bullet> 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; or
    <bullet> An account with a mutual fund or similar pooled fund which 
issues shares available to the general public that have a regular net 
asset value determination and regular redemptions.
    The proposed definition includes an account with a person that 
accepts deposits as a financial agency. FinCEN believes that it is 
necessary to include this provision to ensure that deposit accounts and 
similar relationships will be covered despite differences in 
terminology, operations of financial institutions, and legal frameworks 
in other countries.
    The definition of other financial account also includes an account 
that is an insurance policy with a cash value or an annuity policy. 
Life insurance policies that have a cash surrender value are potential 
money laundering vehicles because cash value can be redeemed by a money 
launderer. Similarly, annuity contracts pose a money laundering risk 
because they allow a money launderer to exchange illicit funds for an 
immediate or deferred income stream or to purchase a deferred annuity 
and obtain clean funds upon redemption.
    The definition of other financial account specifically includes an 
account with a mutual fund or similar pooled fund, or other investment 
fund. FinCEN believes that these types of companies fall within the 
definition of ``investment company,'' which is a financial institution 
under the BSA.\12\
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    \12\ See 31 U.S.C. 5312(a)(2)I.
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    Mutual funds and similar pooled funds are offered to the general 
public and typically are identifiable by the ability of the account 
holder to redeem shares on a daily or otherwise regular basis. FinCEN 
believes that these types of accounts present risks for money 
laundering. As with other types of financial accounts, money launderers 
may use mutual fund accounts to layer their funds by sending and 
receiving money and wiring it quickly through several accounts and 
multiple institutions. Layering could also involve purchasing funds in 
the name of a fictitious corporation or an entity designed to conceal 
the true owner. Most importantly, mutual funds can also be used for 
integrating illegal income into legitimate assets, allowing illegal 
proceeds to appear to have a legitimate source when the shares of the 
fund are redeemed and deposited into a bank account.
    FinCEN recognizes that outside of mutual funds and similar pooled 
funds, individuals may invest in other types of pooled investment 
companies, such as private equity funds, venture capital funds and 
hedge funds. Because these kinds of funds are privately offered funds, 
their characteristics vary greatly. In addition, the lack of functional 
regulation over these kinds of funds makes it difficult to define and 
distinguish certain types of these funds from others. FinCEN is aware, 
however, of pending legislative proposals that would apply additional 
regulation and oversight over the operations of some of these 
investment companies. Accordingly, FinCEN has determined that, at this 
time, the proposal should reserve the treatment of investment companies 
other than mutual funds or similar pooled funds. Treasury remains 
concerned about the use of, for example, hedge funds to evade taxes and 
FinCEN will continue to study this issue.\13\
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    \13\ Concerns about the use of hedge funds to evade taxes is 
discussed in The Report of the President's Working Group on 
Financial Market, Hedge Funds, Leverage, and the Lessons of Long-
Term Capital Management (April 1999). ``In the tax area, the fact 
that a significant number of hedge funds are established in offshore 
financial centers that are tax havens has focused attention on 
whether offshore hedge funds are associated with illegal tax 
avoidance and are taking advantage of their offshore situs for other 
inappropriate purposes.'' Id. at 4. FinCEN is also aware of pending 
legislative proposals that would require United States individuals 
to annually report to the IRS with respect to foreign hedge funds 
and private equity funds, for example.

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[[Page 8847]]

G. Section 103.24(c)(4)--Exceptions for Certain Accounts

    Paragraph (c)(4) includes exceptions for certain accounts for which 
reporting will not be required by persons with a financial interest in 
or signature or other authority over the accounts. The following 
accounts are proposed to be excepted from reporting.
    <bullet> An account of a department or agency of the United States; 
an Indian Tribe; or any State or any political subdivision of a State; 
or a wholly-owned entity, agency, or instrumentality of any of the 
foregoing is not required to be reported. In addition, reporting is not 
required with respect to an account of an entity established under the 
laws of the United States; of an Indian Tribe; of any State; or of any 
political subdivision of any State; or under an intergovernmental 
compact between two or more States or Indian Tribes that exercises 
governmental authority on behalf of the United States, an Indian Tribe, 
or any such State or political subdivision. For this purpose, an entity 
generally exercises governmental authority on behalf of the United 
States, an Indian Tribe, a State, or a political subdivision only if 
its authorities include one or more of the powers to tax, to exercise 
the power of eminent domain, or to exercise police powers with respect 
to matters within its jurisdiction.
    <bullet> An account of an international financial institution of 
which the United States government is a member is not required to be 
reported.
    <bullet> An account in an institution known as a ``United States 
military banking facility'' (or ``United States military finance 
facility'') operated by a United States financial institution 
designated by the United States Government to serve United States 
government installations abroad is not required to be reported even 
though the United States military banking facility is located in a 
foreign country.
    <bullet> Correspondent or nostro accounts that are maintained by 
banks and used solely for bank-to-bank settlements are not required to 
be reported.
    The first three exceptions take into account the governmental 
status and functions of the entities and agencies. The last exception 
for nostro accounts takes into account the limited access to the 
account.

H. Section 103.24(d)--Foreign Country

    Foreign country includes all geographical areas located outside of 
the United States as defined in 31 CFR 103.11(nn).

I. Section 103.24(e)--Financial Interest

Financial Interest When the United States Person Is the Owner of Record 
or Holder of Legal Title
    A United States person has a financial interest in each bank, 
securities, or other financial account in a foreign country for which 
he is the owner of record or holds legal title regardless of whether 
the account is maintained for his own benefit or for the benefit of 
others. If an account is maintained in the name of more than one 
person, each United States person in whose name the account is 
maintained has a financial interest in that account.
Financial Interest When Another Is Acting on Behalf of the United 
States Person
    A United States person also has a 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 a person acting on 
behalf of that United States person such as an attorney, agent or 
nominee with respect to the account.
Other Situations Giving Rise to a Financial Interest
    Further, a United States person is deemed to have a financial 
interest in a bank, securities, or other financial account in a foreign 
country for which the owner of record or holder of legal title is--
    <bullet> A corporation in which the United States person owns 
directly or indirectly more than 50 percent of the voting power or the 
total value of the shares, a partnership in which the United States 
person owns directly or indirectly more than 50 percent of the interest 
in profits or capital, or any other entity (other than a trust) in 
which the United States 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.
    <bullet> A trust, if the United States person is the trust settlor 
and has an ownership interest in the account for United States federal 
tax purposes. See 26 U.S.C. 671-679 to determine if a settlor has an 
ownership interest in a trust's financial account for a year.
    <bullet> A trust in which the United States person either has a 
beneficial interest in more than 50 percent of the assets or from which 
such person receives more than 50 percent of the current income.
    <bullet> A trust that was established by the United States person 
and for which the United States person has appointed a trust protector 
that is subject to such person's direct or indirect instruction.\14\
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    \14\ As described by the Senate Permanent Subcommittee on 
Investigations (PSI), Committee on Homeland Security and 
Governmental Affairs, in its 2006 report, Tax Haven Abuses: the 
Enablers, the Tools and Secrecy, Senate Hearing 109-797, 109th 
Cong., 2d Sess. (August 1, 2006), arrangements such as ``trust 
protectors'' have been employed by United States taxpayers to 
achieve substantial control over assets held in offshore trusts. In 
some cases trust protectors serve to safeguard trust assets from 
misappropriation. However, many offshore trusts are established with 
the intention of maintaining client control. In such cases trust 
protectors can serve as conduits of the client's instructions to the 
trustees, with the trustees merely rubber stamping the protectors' 
directions. Such an arrangement permits greater client control while 
maintaining the appearance of trustee independence.
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    Finally, a United States person that causes an entity to be created 
for a purpose of evading the reporting requirement 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. The term ``evading'' as used in the anti-
avoidance rule is not intended to apply to persons who make a good 
faith effort to comply with the regulations implementing section 5314.
    The definition of financial interest includes certain instances 
where a United States person's ownership or control over the owner of 
record or holder of legal title rises to such a level that the person 
should be deemed to have a financial interest in the account. FinCEN 
believes that these rules are necessary to ensure that these financial 
interests of United States persons are reported on the FBAR regardless 
of how the interest is held or structured. Lastly, FinCEN has included 
an anti-avoidance rule to capture reporting in instances where persons 
seek to evade the requirement to file an FBAR through the use of 
devices such as transfer companies. Such devices have been documented 
in reports by the Senate Permanent Subcommittee on Investigations as 
methods by which United States persons have tried to hide ownership of 
foreign financial accounts.\15\
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    \15\ The PSI reported the use of transfer companies, single 
purpose companies used solely to disguise the transfer of funds from 
an entity controlled by a taxpayer to the account of another entity 
controlled by the taxpayer. See Tax Haven Banks and U.S. Tax 
Compliance, Staff Report, Permanent Subcommittee on Investigations, 
Senate Comm. on Homeland Security and Governmental Affairs, at 4, 65 
(July 17, 2008).
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J. Section 103.24(f)--Signature or Other Authority

    FinCEN has included in proposed section 103.24 provisions that 
would address signature or other authority over

[[Page 8848]]

a bank, securities, or other financial account in a foreign country.
Signature or Other Authority In General
    Current section 103.24 requires reporting by United States persons 
with signature or other authority over bank, securities, or other 
financial accounts in a foreign country. The proposal would continue 
this requirement and would define signature or other authority. 
Signature or other authority means authority of an individual (alone or 
in conjunction with another) to control the disposition of money, 
funds, or other assets held in a financial account by delivery of 
instructions (whether communicated in writing or otherwise) directly to 
the person with whom the financial account is maintained.
Exceptions for Signature or Other Authority
    FinCEN is including in the proposed rule certain exceptions for 
United States persons with signature or other authority over reportable 
accounts. These exceptions generally apply to officers and employees of 
financial institutions that have a federal functional regulator, and 
certain entities that are publicly traded on a United States national 
securities exchange, or that are otherwise required to register their 
equity securities with the Securities and Exchange Commission. FinCEN 
believes that such relief is appropriate in light of the federal 
oversight of these entities. These exceptions apply, however, only 
where the officer or employee has no financial interest in the 
reportable account. These institutions would still be obligated to 
report their financial interest in these reportable accounts. FinCEN is 
proposing the following exceptions.
    <bullet> An officer or employee of a bank that is examined by the 
Office of the Comptroller of the Currency, the Board of Governors of 
the Federal Reserve System, the Federal Deposit Insurance Corporation, 
the Office of Thrift Supervision, or the National Credit Union 
Administration need not report that he has signature or other authority 
over a foreign financial account owned or maintained by the bank if the 
officer or employee has no financial interest in the account.
    This exception is available to officers or employees of banks 
examined by the federal banking agencies. Officers or employees can 
avail themselves of this exemption without receiving notice from the 
bank that the bank has filed an FBAR with respect to the reportable 
accounts over which it has a financial interest.
    <bullet> An officer or employee of a financial institution that is 
registered with and examined by the Securities and Exchange Commission 
or Commodity Futures Trading Commission need not report that he has 
signature or other authority over a foreign financial account owned or 
maintained by such financial institution if the officer or employee has 
no financial interest in the account.
    This exception is available to officers or employees of financial 
institutions such as securities broker dealers or futures commission 
merchants which are registered with and examined by, the Securities and 
Exchange Commission or Commodity Futures Trading Commission. Again, 
officers or employees of such financial institutions can avail 
themselves of this exemption without receiving a notice from the 
employer.
    <bullet> An officer or employee of an Authorized Service Provider 
need not report that he has signature or other authority over a foreign 
financial account owned or maintained by an investment company that is 
registered with the Securities and Exchange Commission if the officer 
or employee has no financial interest in the account. ``Authorized 
Service Provider'' means an entity that is registered with and examined 
by the Securities and Exchange Commission and provides services to an 
investment company registered under the Investment Company Act of 1940.
    This exception has been included to address the fact that mutual 
funds do not have employees of their own. Instead, the day-to-day 
operations of such a fund are performed by individuals who are employed 
by fund service providers, such as investment advisors. Officers or 
employees of an Authorized Service Provider which is registered with 
and examined by the Securities and Exchange Commission may avail 
themselves of this exemption without receiving notice from the employer 
provided that the fund they service is also registered with the 
Securities and Exchange Commission. FinCEN believes that this exception 
is appropriate in light of the requirement that both the service 
provider and the fund are registered with the Securities and Exchange 
Commission.
    <bullet> An officer or employee of an entity with a class of equity 
securities listed on any United States national securities exchange 
need not report that he has signature or other authority over a foreign 
financial account of such entity if the officer or employee has no 
financial interest in the account. An officer or employee of a United 
States subsidiary of such entity need not file a report concerning 
signature or other authority over a foreign financial account of the 
subsidiary if he has no financial interest in the account and the 
United States subsidiary is named in a consolidated FBAR report of the 
parent filed under proposed paragraph (g)(3) of 31 CFR 103.24.
    This exception is available to officers and employees of entities 
which are listed upon a United States national securities exchange, 
regardless of whether the entity is domestic or foreign. Officers and 
employees of a United States subsidiary of such listed entities are 
also covered by this exception if the United States subsidiary is named 
in a consolidated FBAR report of the parent.
    <bullet> An officer or employee of a United States corporation that 
has a class of equity securities registered under section 12(g) of the 
Securities Exchange Act need not report that he has signature or other 
authority over the foreign financial accounts of such corporation if he 
has no financial interest in the accounts.
    This exception applies to officers and employees of United States 
corporations whose size in terms of assets and shareholders \16\ 
requires them to register their stock with the Securities and Exchange 
Commission and makes them subject to reporting under the Securities 
Exchange Act.
---------------------------------------------------------------------------

    \16\ Currently, these are corporations which have more than $10 
million in assets and more than 500 shareholders of record. See 15 
U.S.C. 78l(g) (2006) and the regulations thereunder.
---------------------------------------------------------------------------

K. 103.24(g)--Special Rules

    FinCEN is proposing special rules to simplify FBAR filings in 
certain cases.
    <bullet> 25 or more foreign financial accounts. A United States 
person having a financial interest in 25 or more foreign financial 
accounts need only 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 when so requested by the 
Secretary or his delegate. Similarly, a United States person having 
signature or other authority over 25 or more foreign financial accounts 
need only 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 when so requested by the 
Secretary or his delegate.
    <bullet> Consolidated reports. An entity that is a United States 
person and owns directly or indirectly more than a 50 percent interest 
in an entity required to

[[Page 8849]]

report under this section will be permitted to file a consolidated 
report on behalf of itself and such other entity.
    <bullet> Participants and beneficiaries in certain retirement 
plans. Participants and beneficiaries in retirement plans under 
sections 401(a), 403(a) or 403(b) of the Internal Revenue Code as well 
as owners and beneficiaries of individual retirement accounts under 
section 408 of the Internal Revenue Code or Roth IRAs under section 
408A of the Internal Revenue Code will not be required to file an FBAR 
with respect to a foreign financial account held by or on behalf of the 
retirement plan or IRA. \17\
---------------------------------------------------------------------------

    \17\ This proposed exemption is not intended to affect the 
filing requirements with respect to qualified pension plans or 
individual retirement accounts. FinCEN believes that, in most cases, 
such entities (which are subject to a number of statutory 
requirements and limitations) are in a better position to be aware 
of the presence of a foreign financial account). An IRA is an 
individual retirement account described in section 408 of the 
Internal Revenue Code (i.e., a traditional IRA, IRA annuity, SEP 
IRA, SIMPLE IRA, or deemed IRA) or a Roth IRA (including a Roth IRA 
annuity or a deemed Roth IRA) described in section 408A of the 
Internal Revenue Code.
---------------------------------------------------------------------------

    <bullet> Certain trust beneficiaries. A beneficiary of a trust 
described in proposed paragraph (e)(2)(iv) is not required to report 
the trust's foreign financial accounts if the trust, trustee of the 
trust, or agent of the trust is a United States person that files an 
FBAR disclosing the trust's foreign financial accounts and provides any 
additional information as required by the report.\18\
---------------------------------------------------------------------------

    \18\ FinCEN believes that, in most cases, the trust or its 
trustees are in a better position than the beneficiaries to be aware 
of the presence of a foreign financial account and the information 
needed to file the FBAR as well as whether individual beneficiaries 
exceed the 50 percent threshold.
---------------------------------------------------------------------------

    In addition, FinCEN anticipates that in the case of United States 
persons who are employed in a foreign country and who have signature or 
other authority over foreign financial accounts owned or maintained by 
their employer, the instructions to the FBAR form will prescribe a 
modified form of reporting for such persons.

IV. Proposed Changes to the FBAR Instructions

    The changes proposed by this notice of proposed rulemaking, if 
adopted as a final rule, would also require changes to the instructions 
to the FBAR. A draft of revised changes to the FBAR instructions 
appears as an attachment at the end of this notice of proposed 
rulemaking.

V. Regulatory Flexibility Act

    Pursuant to the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et 
seq.), FinCEN certifies that these proposed regulation revisions will 
not have a significant economic impact on a substantial number of small 
entities. The proposed rule revises an existing rule that requires 
reports to be made to Treasury with respect to certain foreign 
financial accounts. Because this proposal clarifies the existing rules 
and narrows the scope of individuals and entities subject to reporting 
and recordkeeping requirements, we will reduce regulatory obligations 
overall.
    The proposed rule will not affect a substantial number of small 
entities. The proposed rule applies to United States persons, a term 
which includes entities of all sizes, if they have reportable accounts 
under this rule. However, we expect that small entities will be less 
likely to have reportable foreign financial accounts or to have many 
such accounts unlike larger entities, which have a broader base of 
business operations.
    In any event, the proposed rule will not have a significant 
economic impact on small entities. As explained above, the proposed 
rule revises an existing rule that requires reports to be made to 
Treasury with respect to certain foreign financial accounts. Filing the 
reports will require entities to transfer basic information that they 
will have received on account statements from the foreign financial 
institution at which the account is opened and maintained. Those 
statements will provide the entity with the information about the 
account needed to file the FBAR. No special accounting or legal skills 
would be necessary to transfer the basic information required to be 
reported, such as the name of the foreign financial institution, the 
type of account, and the account number, to the FBAR. Furthermore, the 
proposed rule continues a simplified reporting method for persons with 
a financial interest in 25 or more foreign financial accounts and 
extends the relief of this simplified reporting method to persons with 
signature or other authority over 25 or more foreign financial 
accounts. FinCEN requests comments on the accuracy of the statement 
that the regulations in this document will not have a significant 
economic impact on a substantial number of small entities.

VI. Paperwork Reduction Act Notices

    The reporting requirement contained in this proposed rule (31 CFR 
103.24) is being submitted to the Office of Management and Budget for 
review in accordance with the Paperwork Reduction Act of 1995 (44 
U.S.C. 3507(d)). This proposed rulemaking seeks to clarify the scope of 
existing definitions and related rules. By making requirements clearer 
for reporting persons, there is a potential that certain reporting 
persons may see an increase in the collection and reporting of 
information, but any such potential increase may likely be offset by 
the corresponding exceptions and clarifications in the proposal. 
Moreover, to the extent that we have clarified the existing rules and 
narrowed the scope of individuals or entities subject to reporting or 
recordkeeping requirements, we will have reduced regulatory obligations 
overall.\19\
---------------------------------------------------------------------------

    \19\ This proposed amendment to 31 CFR 103.24 clarifies the 
filing requirement for certain foreign persons thereby reducing the 
overall burden of BSA recordkeeping and reporting requirements.
---------------------------------------------------------------------------

    Comments concerning the estimated burden and other questions should 
be sent to the Desk Officer for the Department of the Treasury, Office 
of Information and Regulatory Affairs, Office of Management and Budget, 
Paperwork Reduction Project (1506), Washington, DC 20503 with a copy to 
FinCEN and the IRS SBSE by mail or comments may also be submitted by e-
mail to <a href="/cdn-cgi/l/email-protection#0c63657e6d537f796e61657f7f6563624c63616e2269637c226b637a"><span class="__cf_email__" data-cfemail="5936302b38062a2c3b34302a2a3036371936343b773c3629773e362f">[email protected]</span></a>. Please submit comments by one 
method only. Comments are welcome and must be received by April 27, 
2010.

Amendment to the Bank Secrecy Act Regulations--Reports of Foreign Bank 
and Financial Accounts

    In accordance with requirements of the Paperwork Reduction Act of 
1995, 44 U.S.C. 3506(c)(2)(A), and its implementing regulations, 5 CFR 
part 1320, the following information concerning the collection of 
information of the Amendment to the Bank Secrecy Act Regulations--
Reports of Foreign Bank and Financial Accounts is presented to assist 
those persons wishing to comment on the information collection.
    Description of Affected Filers: Individuals and certain entities 
that maintain foreign financial accounts reportable under 31 CFR 
103.24.
    Estimated Number of Affected Filing Individuals and Entities: 
400,000.
    Estimated Average Annual Burden Hours per Affected Filer: The 
estimated average burden associated with the recordkeeping requirement 
in this proposed rule will vary depending on the number of reportable 
accounts. We estimate that the recordkeeping burden will range from 
five minutes to sixty minutes, and that the average burden will be 
thirty minutes. The estimated average burden associated with the 
reporting requirement (FBAR form completion) will also vary depending 
on the number of reportable accounts and whether the filer will be able 
to take

[[Page 8850]]

advantage of the exceptions provided in this proposed rule. We estimate 
that the average reporting burden will range from approximately twenty 
minutes to one hour and that the average reporting burden will be 
approximately 45 minutes. The reporting burden is reflected in the 
burden listed for completing TD-F 90-22.1 (See OMB Control Number 1506-
0009/1545-2038). The burden associated with reporting a financial 
interest in or signature or other authority over a foreign financial 
account to the Commissioner of Internal Revenue is reflected in the 
burden for the appropriate income tax return or schedule.
    Estimated Total Annual Burden: 500,000 hours.

VII. Unfunded Mandates Act of 1995 Statement

    Section 202 of the Unfunded Mandates Reform Act of 1995 (``Unfunded 
Mandates Act''), Public Law 104-4 (March 22, 1995), requires that an 
agency prepare a budgetary impact statement before promulgating a rule 
that may result in expenditure by state, local, and tribal governments, 
in the aggregate, or by the private sector, of $100 million or more in 
any one year. If a budgetary impact statement is required, section 202 
of the Unfunded Mandates Act also requires an agency to identify and 
consider a reasonable number of regulatory alternatives before 
promulgating a rule. FinCEN has determined that it is not required to 
prepare a written statement under section 202 and has concluded that on 
balance the proposals in the Notice of Proposed Rulemaking provide the 
most cost-effective and least burdensome alternative to achieve the 
objectives of the rule.

List of Subjects in 31 CFR Part 103

    Administrative practice and procedure, Banks, Banking, Brokers, 
Currency, Foreign banking, Foreign currencies, Gambling, 
Investigations, Penalties, Reporting and recordkeeping requirements, 
Securities, Terrorism.

Amendment

    For the reasons set forth above in the preamble, 31 CFR Part 103 is 
proposed to be amended as follows:

PART 103--FINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY AND 
FOREIGN TRANSACTIONS

    1. The authority citation for part 103 is revised to read as 
follows:

    Authority:  12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5314 
and 5316-5332; title III, sec. 314, Pub. L. 107-56, 115 Stat. 307.

    2. Section 103.24 is revised to read as follows:


Sec.  103.24  Reports of foreign financial accounts.

    (a) In general. 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 U.S.C. 5314 
to be filed by such persons. The form prescribed under section 5314 is 
the Report of Foreign Bank and Financial Accounts (TD-F 90-22.1), or 
any successor form. See paragraphs (g)(1) and (g)(2) of this section 
for a special rule for persons with a financial interest in 25 or more 
accounts, or signature or other authority over 25 or more accounts.
    (b) United States person. For purposes of this section, the term 
``United States person'' means--
    (1) A citizen of the United States;
    (2) A resident of the United States. A resident of the United 
States is an individual who is a resident alien under 26 U.S.C. 7701(b) 
and the regulations thereunder but using the definition of ``United 
States'' provided in 31 CFR 103.11(nn) rather than the definition of 
``United States'' in 26 CFR 301.7701(b)-1(c)(2)(ii); and
    (3) An entity, including but not limited to a corporation, 
partnership, trust, or limited liability company created, organized, or 
formed under the laws of the United States, any State, the District of 
Columbia, the Territories and Insular Possessions of the United States, 
or the Indian Tribes.
    (c) Types of reportable accounts--(1) Bank account. The term ``bank 
account'' means a savings deposit, demand deposit, checking, or any 
other account maintained with a person engaged in the business of 
banking.
    (2) Securities account. The term ``securities account'' means an 
account with a person engaged in the business of buying, selling, 
holding or trading stock or other securities.
    (3) Other financial account. The term ``other financial account'' 
means--
    (i) An account with a person that is in the business of accepting 
deposits as a financial agency;
    (ii) An account that is an insurance policy with a cash value or an 
annuity policy;
    (iii) 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; or
    (iv) An account with--
    (A) Mutual fund or similar pooled fund. A mutual fund or similar 
pooled fund which issues shares available to the general public that 
have a regular net asset value determination and regular redemptions; 
or
    (B) Other investment fund. [RESERVED].
    (4) Exceptions for certain accounts.
    (i) An account of a department or agency of the United States, an 
Indian Tribe, or any State or any political subdivision of a State, or 
a wholly-owned entity, agency or instrumentality of any of the 
foregoing is not required to be reported. In addition, reporting is not 
required with respect to an account of an entity established under the 
laws of the United States, of an Indian Tribe, of any State, or of any 
political subdivision of any State, or under an intergovernmental 
compact between two or more States or Indian Tribes that exercises 
governmental authority on behalf of the United States, an Indian Tribe, 
or any such State or political subdivision. For this purpose, an entity 
generally exercises governmental authority on behalf of the United 
States, an Indian Tribe, a State, or a political subdivision only if 
its authorities include one or more of the powers to tax, to exercise 
the power of eminent domain, or to exercise police powers with respect 
to matters within its jurisdiction.
    (ii) An account of an international financial institution of which 
the United States government is a member is not required to be 
reported.
    (iii) An account in an institution known as a ``United States 
military banking facility'' (or ``United States military finance 
facility'') operated by a United States financial institution 
designated by the United States Government to serve United States 
government installations abroad is not required to be reported even 
though the United States military banking facility is located in a 
foreign country.
    (iv) Correspondent or nostro accounts that are maintained by banks 
and used solely for bank-to-bank settlements are not required to be 
reported.
    (d) Foreign country. A foreign country includes all geographical 
areas located outside of the United States as defined in 31 CFR 
103.11(nn).
    (e) Financial interest. A financial interest in a bank, securities 
or other financial account in a foreign country

[[Page 8851]]

means an interest described in this paragraph (e):
    (1) Owner of record or holder of legal title. A United States 
person has a financial interest in each bank, securities or other 
financial account in a foreign country for which he is the owner of 
record or has legal title whether the account is maintained for his own 
benefit or for the benefit of others. If an account is maintained in 
the name of more than one person, each United States person in whose 
name the account is maintained has a financial interest in that 
account.
    (2) Other financial interest. A United States person has a 
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--
    (i) A person acting as an agent, nominee, attorney or in some other 
capacity on behalf of the United States person with respect to the 
account;
    (ii) A corporation in which the United States person owns directly 
or indirectly more than 50 percent of the voting power or the total 
value of the shares, a partnership in which the United States person 
owns directly or indirectly more than 50 percent of the interest in 
profits or capital, or any other entity (other than an entity in 
paragraphs (e)(2)(iii) through (v) of this section) in which the United 
States 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;
    (iii) A trust, if the United States person is the trust settlor and 
has an ownership interest in the account for United States federal tax 
purposes. See 26 U.S.C. 671-679 and the regulations thereunder to 
determine if a settlor has an ownership interest in a trust's financial 
account for a year;
    (iv) A trust in which the United States person either has a 
beneficial interest in more than 50 percent of the assets or from which 
such person receives more than 50 percent of the income; or
    (v) A trust that was established by the United States person and 
for which the United States person has appointed a trust protector that 
is subject to such person's direct or indirect instruction.
    (3) Anti-avoidance rule. A United States person that causes an 
entity, including but not limited to a corporation, partnership, or 
trust, to be created for a purpose of evading this section 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.
    (f) Signature or other authority--(1) In general. Signature or 
other authority means authority of an individual (alone or in 
conjunction with another) to control the disposition of money, funds or 
other assets held in a financial account by delivery of instructions 
(whether communicated in writing or otherwise) directly to the person 
with whom the financial account is maintained.
    (2) Exceptions--(i) An officer or employee of a bank that is 
examined by the Office of the Comptroller of the Currency, the Board of 
Governors of the Federal Reserve System, the Federal Deposit Insurance 
Corporation, the Office of Thrift Supervision, or the National Credit 
Union Administration need not report that he has signature or other 
authority over a foreign financial account owned or maintained by the 
bank if the officer or employee has no financial interest in the 
account.
    (ii) An officer or employee of a financial institution that is 
registered with and examined by the Securities and Exchange Commission 
or Commodity Futures Trading Commission need not report that he has 
signature or other authority over a foreign financial account owned or 
maintained by such financial institution if the officer or employee has 
no financial interest in the account.
    (iii) An officer or employee of an Authorized Service Provider need 
not report that he has signature or other authority over a foreign 
financial account owned or maintained by an investment company that is 
registered with the Securities and Exchange Commission if the officer 
or employee has no financial interest in the account. ``Authorized 
Service Provider'' means an entity that is registered with and examined 
by the Securities and Exchange Commission and that provides services to 
an investment company registered under the Investment Company Act of 
1940.
    (iv) An officer or employee of an entity with a class of equity 
securities listed on any United States national securities exchange 
need not report that he has signature or other authority over a foreign 
financial account of such entity if the officer or employee has no 
financial interest in the account. An officer or employee of a United 
States subsidiary of such entity need not file a report concerning 
signature or other authority over a foreign financial account of the 
subsidiary if he has no financial interest in the account and the 
United States subsidiary is included in a consolidated report of the 
parent filed under this section.
    (v) An officer or employee of a United States entity that has a 
class of equity securities registered under section 12(g) of the 
Securities Exchange Act need not report that he has signature or other 
authority over the foreign financial accounts of such entity if he has 
no financial interest in the accounts.
    (g) Special rules--(1) Financial interest in 25 or more foreign 
financial accounts. A United States person having a financial interest 
in 25 or more foreign financial accounts need only 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 when so requested by the Secretary or his delegate.
    (2) Signature or other authority over 25 or more foreign financial 
accounts. A United States person having signature or other authority 
over 25 or more foreign financial accounts need only 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 when so requested by the Secretary or his delegate.
    (3) Consolidated reports. An entity that is a United States person 
and which owns directly or indirectly more than a 50 percent interest 
in one or more other entities required to report under this section 
will be permitted to file a consolidated report on behalf of itself and 
such other entities.
    (4) Participants and beneficiaries in certain retirement plans. 
Participants and beneficiaries in retirement plans under sections 
401(a), 403(a) or 403(b) of the Internal Revenue Code as well as owners 
and beneficiaries of individual retirement accounts under section 408 
of the Internal Revenue Code or Roth IRAs under section 408A of the 
Internal Revenue Code are not required to file an FBAR with respect to 
a foreign financial account held by or on behalf of the retirement plan 
or IRA.
    (5) Certain trust beneficiaries. A beneficiary of a trust described 
in paragraph (e)(2)(iv) of this section is not required to report the 
trust's foreign financial accounts if the trust, trustee of the trust, 
or agent of the trust is a United States person that files a report 
under this section disclosing the trust's foreign financial accounts.

    Dated: February 23, 2010.
James H. Freis, Jr.,
Director, Financial Crimes Enforcement Network.

    Note:  The following attachment will not appear in the Code of 
Federal Regulations. Attachment: Draft instructions to the Report of 
Foreign Bank and Financial Accounts--Form TDF90-22.1(FBAR)


[[Page 8852]]



General Instructions

    Form TD F 90-22.1 (the ``FBAR'') is used to report a financial 
interest in or signature authority over a foreign financial account. 
The FBAR must be received by the Department of the Treasury on or 
before June 30th of the year immediately following the calendar year 
being reported. Unlike the filing date for an income tax return, the 
June 30th filing date for the FBAR may not be extended.

Who Must File an FBAR.

    The following persons are required to file an FBAR:

A United States citizen;
A United States resident;
An entity, including but not limited to, a corporation, partnership, 
or limited liability company created or organized in the United 
States or under the laws of the United States; and
A trust or estate formed under the laws of the United States.

    See definition of United States below.
    If the person has:
    A financial interest in or signature authority over any foreign 
financial account and the aggregate value of the financial 
account(s) exceeds $10,000 at any time during the calendar year. See 
Part II, Item 15, regarding the $10,000 threshold.
    The tax treatment of an entity does not determine whether the 
entity has an FBAR filing requirement. For example, an entity that 
is disregarded for purposes of Title 26 of the United States Code 
must still file an FBAR, if otherwise required to do so. Similarly, 
a trust for which the trust income, deductions, or credits are taken 
into account by another person for purposes of Title 26 of the 
United States Code must file an FBAR, if otherwise required to do 
so.
    See Exceptions below.

General Definitions

    Financial Account. A financial account includes, but is not 
limited to, a securities, brokerage, savings, demand, checking, 
deposit, time deposit, or other account maintained with a financial 
institution (or other person performing the services of a financial 
institution). A financial account also includes a commodity futures 
or options account, an insurance policy with a cash surrender value 
(such as a variable annuity or a whole life insurance policy), an 
annuity, and shares in a mutual fund or similar pooled fund (i.e., a 
fund with a regular net asset value determination and redemptions).
    Foreign Financial Account. A foreign financial account is a 
financial account that is located outside of the United States. For 
example, an account maintained with a foreign branch of a United 
States bank is a foreign financial account. An account maintained 
with a United States branch of a foreign bank is not a foreign 
financial account. An insurance or annuity policy that is purchased 
outside of the United States, as defined in 31 CFR Sec.  103.11(nn), 
from a non-United States issuer is a foreign financial account.
    Financial Interest. A person has a financial interest in each 
financial account for which
    (1) the person is the owner of record or holder of legal title, 
regardless of whether the account is maintained for that person's 
benefit or for the benefit of another person; or
    (2) the owner of record or holder of legal title is one of the 
following:
    (a) An agent, nominee, attorney, or a person authorized to act 
on behalf of the person with respect to the account;
    (b) A corporation in which the person owns directly or 
indirectly: (i) more than 50 percent of the total value of shares of 
stock or (ii) more than 50 percent of the voting power of all shares 
of stock;
    (c) A partnership in which the person owns directly or 
indirectly: (i) an interest in more than 50 percent of the 
partnership's profits (distributive share of partnership income 
taking into account any special allocation agreement) or (ii) an 
interest in more than 50 percent of the partnership capital;
    (d) A trust, if the person: (i) is the trust settlor; and (ii) 
has an ownership interest in the trust for United States federal tax 
purposes. See 26 U.S.C. Sec. Sec.  671 through 679 to determine if a 
person has an ownership interest in a trust for a year for United 
States federal tax purposes;
    (e) A trust, if the person has more than a 50 percent beneficial 
interest in the assets or income of the trust for the calendar year, 
as determined under all of the facts and circumstances, including 
the terms of the trust and any accompanying documents;
    (f) A trust that was established by the person and for which the 
person has appointed a trust protector that is subject to such 
person's direct or indirect instruction; or
    (g) Any other entity, if the person owns directly or indirectly 
more than 50 percent of the voting power, total value of equity 
interest or assets, or interest in profits.
    Person. A person includes an individual and all legal entities 
including, but not limited to, limited liability companies, 
corporations, partnerships, trusts, and estates.
    Signature Authority. Signature authority is the authority (alone 
or in conjunction with any other individual) to control the 
disposition of money, funds, or other assets held in a financial 
account by delivery of instructions (whether communicated in writing 
or otherwise) directly to the financial institution (or other person 
performing the services of a financial institution), with which the 
financial account is maintained. See Exception for Signature 
Authority.
    United States. For FBAR purposes, the United States includes the 
States, the District of Columbia, all territories and possessions 
(for example American Samoa, the Commonwealth of the Northern 
Marianas Islands, the Commonwealth of Puerto Rico, Guam, and the 
United States Virgin Islands), and the Indian lands as defined in 
the Indian Gaming Regulatory Act. References to the laws of the 
United States include the laws of the United States federal 
government and the laws of all places listed in this definition.
    United States Resident. A United States resident is an alien 
residing in the United States. To determine if the filer is a 
resident of any place listed in the definition of United States, 
apply the residency tests in 26 U.S.C. Sec.  7701(b).

Exceptions

    Certain Accounts Jointly Owned by Spouses. 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 spouse is required to report are jointly owned with the 
filing spouse; (2) the filing spouse reports the jointly owned 
accounts on a timely filed FBAR; and (3) both spouses sign the FBAR 
in Item 44. See Explanations for Specific Items, Part III, Items 25-
33. If the filer's spouse is required to file an FBAR for any 
account that is not jointly owned with the filer, the filer's spouse 
must file a separate FBAR for all accounts, including those owned 
jointly with the filing spouse.
    Consolidated FBAR. If a person is named in a consolidated FBAR 
filed by a more than 50 percent owner, the person is not required to 
file a separate FBAR. See Explanations for Specific Items, Part V.
    Correspondent/Nostro Account. Correspondent or nostro accounts 
(which are maintained by banks and used solely for bank-to-bank 
settlements) are not required to be reported on an FBAR.
    Governmental Entity. A foreign financial account of any 
governmental entity is not required to be reported on an FBAR by any 
person. For purposes of this form, governmental entity includes: (1) 
a college or university that is an agency or instrumentality of, or 
owned or operated by, a governmental entity; and (2) an employee 
retirement or welfare benefit plan of a governmental entity.
    International Financial Institution. A foreign financial account 
of any international financial institution of which the United 
States is a member is not required to be reported on an FBAR by any 
person.
    IRA Owners and Beneficiaries. An owner or beneficiary of an IRA 
is not required to file an FBAR with respect to a foreign financial 
account held in the IRA.
    Participants in and Beneficiaries of Tax-Qualified Retirement 
Plans. A participant in or beneficiary of a retirement plan 
described in Internal Revenue Code Sec.  401(a), 403(a), or 403(b) 
is not required to file an FBAR with respect to a foreign financial 
account held by or on behalf of the retirement plan.
    Signature Authority. Signature authority over a foreign 
financial account need not be reported on an FBAR by an individual 
with no financial interest in the foreign financial account in the 
following situations:
    (1) An officer or employee of a bank that is examined by the 
Office of the Comptroller of the Currency, the Board of Governors of 
the Federal Reserve System, the Federal Deposit Insurance 
Corporation, the Office of Thrift Supervision, or the National 
Credit Union Administration need not report signature authority over 
a foreign financial account owned or maintained by the bank.
    (2) An officer or employee of a financial institution that is 
registered with and regulated or examined by the Securities and 
Exchange Commission or Commodity Futures Trading Commission need not 
report

[[Page 8853]]

signature authority over a foreign financial account owned or 
maintained by the financial institution.
    (3) An officer or employee of an Authorized Service Provider 
need not report signature authority over a foreign financial account 
that is owned or maintained by an investment company that is 
registered with the Securities and Exchange Commission. Authorized 
Service Provider means an entity that is registered with and 
examined by the Securities and Exchange Commission and provides 
services to an investment company registered under the Investment 
Company Act of 1940.
    (4) An officer or employee of an entity whose class of equity 
securities is listed on any United States national securities 
exchange need not report signature authority over a foreign 
financial account in which the entity has a financial interest. An 
officer or employee of a United States subsidiary of such entity 
need not report signature authority over a foreign financial account 
of the subsidiary.
    (5) An officer or employee of a United States entity that has a 
class of securities registered under section 12(g) of the Securities 
and Exchange Act need not report signature authority over a foreign 
financial account of such corporation.
    Trust Beneficiaries. A trust beneficiary with a financial 
interest described in section (2)(f) 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 United States citizen, 
a United States resident, an entity created or organized in the 
United States or under the laws of the United States, or a trust 
formed under the laws of the United States; and (2) files an FBAR 
disclosing the trust's foreign financial accounts.
    United States Military Banking Facility. An FBAR need not be 
filed for a financial account maintained with a financial 
institution located on a United States military installation, even 
if that military installation is outside of the United States.
    Filing Information--Do NOT file with Federal Income Tax Return
    When and Where to File. The FBAR is an annual report and must be 
received by the Department of the Treasury on or before June 30th of 
the year following the calendar year being reported.
    File by mailing the FBAR to:

Department of the Treasury, Post Office Box 32621, Detroit, MI 
48232-0621

    If an express delivery service is used, file by mailing to:

IRS Enterprise Computing Center, ATTN: CTR Operations Mailroom, 4th 
Floor, 985 Michigan Avenue, Detroit, MI 48226

The FBAR may be hand delivered to any local office of the Internal 
Revenue Service for forwarding to the Department of the Treasury, 
Detroit, MI. The FBAR may also be delivered to the Internal Revenue 
Service's tax attaches located in United States embassies and 
consulates for forwarding to the Department of Treasury, Detroit, 
MI. The FBAR is not considered filed until it is received by the 
Department of the Treasury in Detroit, MI.
    No Extension of Time to File. There is no extension of time 
available for filing an FBAR. Extensions of time to file federal tax 
returns do NOT extend the time for filing an FBAR. If a delinquent 
FBAR is filed, attach a statement explaining the reason for the late 
filing.
    Verification of Filing. Ninety days after the date of filing, 
the filer can request verification that the FBAR was received. An 
FBAR filing verification request may be made by calling 1-800-800-
2877 and selecting option 2. Up to five documents may be verified 
over the phone. There is no fee for this verification. 
Alternatively, an FBAR filing verification request may be made in 
writing and must include the filer's name, taxpayer identification 
number, and the filing period. There is a $5.00 fee for verifying 
five or fewer FBARs and a $1.00 fee for each additional FBAR. A copy 
of the filed FBAR can be obtained at a cost of $0.15 per page. Check 
or money order should be made payable to the United States Treasury.
    The request and payment should be mailed to:

IRS Enterprise Computing Center/Detroit, ATTN: Verification, P.O. 
Box 32063, Detroit, MI 48232

    Record Keeping Requirements. Persons required to file an FBAR 
must retain records that contain the name in which each account is 
maintained, the number or other designation of the account, the name 
and address of the foreign financial institution that maintains the 
account, the type of account, and the maximum account value of each 
account during the reporting period. The records must be retained 
for a period of five years from June 30th of the year following the 
calendar year reported and must be available for inspection as 
provided by law. Persons filing an FBAR should retain a copy for 
their records.

Explanations for Specific Items

Part I

    Item 1. The FBAR is an annual report. Enter the calendar year 
being reported.
    To amend a filed FBAR, check the ``Amended'' box in the upper 
right hand corner of the first page of the FBAR, make the needed 
additions or corrections, attach a statement explaining the 
additions or corrections, and staple a copy of the original FBAR to 
the amendment. An amendment should not be made until at least 90 
calendar days after the FBAR is filed. Follow the instructions in 
``When and Where to File'' to file an amendment.
    Item 2. Check the appropriate box describing the filer. Check 
only one box. Individuals filing based on signature authority, check 
box ``a.'' If filing a consolidated FBAR, check box ``d.'' To 
determine if a consolidated FBAR can be filed, see Part V. If the 
type of filer is not listed in boxes ``a'' through ``c,'' check box 
``e'' and enter type of filer. Persons that should check box ``e'' 
include, but are not limited to, trusts, estates, limited liability 
companies, and tax-exempt entities (even if the entity is organized 
as a corporation). A disregarded entity must check box ``e'' and 
enter its type of person and the term ``(D.E.).'' For example, a 
limited liability company that is disregarded for United States 
federal tax purposes would enter ``limited liability company 
(D.E.).''
    Item 3. Provide the filer's taxpayer identification number. 
Generally, this is the filer's United States social security number 
(SSN), United States individual taxpayer identification number 
(ITIN), or employer identification number (EIN). Numbers should be 
entered with no spaces, dashes, or other punctuation throughout the 
FBAR. If the filer does NOT have a United States taxpayer 
identification number, complete Item 4.
    Item 4. Complete Item 4 only if the filer does NOT have a United 
States taxpayer identification number. Item 4 requires the filer to 
provide information from an official foreign government document to 
verify the filer's nationality or residence. Enter the document 
number followed by the country of issuance, check the appropriate 
type of document, and if ``other'' is checked, provide the type of 
document.
    Item 5. If the filer is an individual, enter the filer's date of 
birth, using the month, day, and year convention.
    Items 9, 10, 11, 12 and 13. Enter the filer's address. An 
individual residing in the United States must enter the street 
address of the individual's United States residence, not a post 
office box. An individual residing outside the United States must 
enter the individual's United States mailing address. If the 
individual does not have a United States mailing address, the 
individual must enter a foreign residence address.
    An entity must enter its United States mailing address. If the 
entity does not have a United States mailing address, the entity 
must enter its foreign mailing address.
    Item 14. If the filer has a financial interest in 25 or more 
foreign financial accounts, check ``Yes'' and enter the number of 
accounts. Do not complete Part II (Continuation of Separate 
Accounts) or Part III (Joint Accounts) of the Report.
    If filing a consolidated FBAR, only complete Part V, Items 34 
through 42, for each person included in the consolidated FBAR.
    Note: If the filer has signature authority over 25 or more 
foreign financial accounts, only complete Part IV (for signature 
authority), Items 34-43, for each person for which the filer has 
signature authority, and check ``No'' in Part I, Item 14.
    The filer must retain the detailed account information otherwise 
required by the FBAR for five years from June 30th of the year 
following the calendar year reported. The information must be 
available for inspection. See Filing Information, Record Keeping 
Requirements.

Part II

    Enter information in the applicable parts of the form only. If 
there is not enough space to provide all account information, copy 
and complete additional pages of the required Part as necessary. Do 
not use any attachments unless otherwise specified in the 
instructions.
    Item 15.
    Determining Maximum Account Value. Step 1. Determine the maximum 
value of

[[Page 8854]]

each account (in the currency of that account) during the calendar 
year being reported. The maximum value of an account is a reasonable 
approximation of the greatest value of currency or nonmonetary 
assets in the account during the calendar year. Periodic account 
statements may be relied on to determine the maximum value of the 
account provided that the statements fairly reflect the maximum 
account value during the calendar year. For Item 15, if the filer 
had a financial interest in more than one account, each account is 
to be valued separately.
    Step 2. In the case of non-United States currency, convert the 
maximum account value for each account into United States dollars. 
Convert foreign currency by using the Treasury's Financial 
Management Service rate (this rate may be found at 
www.fms.treas.gov) from the last day of the calendar year. If no 
Treasury Financial Management Service rate is available, use another 
verifiable exchange rate and provide the source of that rate. In 
valuing currency of a country that uses multiple exchange rates, use 
the rate that would apply if the currency in the account were 
converted into United States dollars on the last day of the calendar 
year.
    If the aggregate of the maximum account values exceeds $10,000, 
an FBAR must be filed. An FBAR is not required to be filed if the 
person did not have $10,000 of aggregate value in foreign financial 
accounts at any time during the calendar year.
    For persons with a financial interest in or signature authority 
over fewer than 25 accounts that are unable to determine if the 
aggregate maximum account values of the accounts exceeded $10,000 at 
any time during the calendar year, complete Part II, III, IV, or V, 
as appropriate, for each of these accounts and enter ``value 
unknown'' in Item 15.
    If a foreign financial account is jointly owned by two or more 
persons, each person must report the entire value of the account.
    Item 16. Indicate the type of account. Check only one box. If 
``Other'' is selected, describe the account.
    Item 17. Provide the name of the financial institution with 
which the account is held.
    Item 18. Provide the account number that the financial 
institution uses to designate the account.
    Items 19-23. Provide the complete mailing address of the 
financial institution where the account is located.
    If the foreign address does not include a state (e.g., province) 
or postal code, leave the box(es) blank.

Part III

    Enter information in the applicable parts of the form only. If 
there is not enough space to provide all account information, copy 
and complete additional pages of the required Part as necessary. Do 
not use any attachments unless otherwise specified in the 
instructions.
    For Items 15-23, see Part II.
    Item 24. Enter the number of joint owners for the account. If 
the exact number is not known, provide an estimate. Do not count the 
filer when determining the number of joint owners.
    Items 25-33. Use the identity information of the principal joint 
owner (excluding the filer) to complete Items 25-33. Leave blank 
items for which no information is available. A spouse having an 
interest in a jointly owned account with the filing spouse is the 
principal joint owner. Enter the term ``(spouse)'' on Line 26 after 
the last name of the joint spousal owner.
    If the filer's spouse is required to report only jointly owned 
financial accounts that are reported on the filer's FBAR, the 
filer's spouse need not file a separate FBAR but must also sign the 
filer spouse's FBAR to fulfill his or her reporting obligation. See 
Items 44-46 on page one. If the filer's spouse is required to file 
an FBAR for any account that is not jointly owned with the filer, 
the filer's spouse must file a separate FBAR for all of the 
accounts, including those owned jointly with the other spouse.

Part IV--Signature Authority

    Enter information in the applicable parts of the form only. If 
there is not enough space to provide all account information, copy 
and complete additional pages of the required Part as necessary. Do 
not use any attachments unless otherwise specified in the 
instructions.
    25 or More Foreign Financial Accounts. Filers with signature 
authority over 25 or more financial accounts must complete only 
Items 34-43 for each person on whose behalf the filer has signature 
authority.
    For Items 15-23, see Part II.
    Items 34-42. Provide the name, address, and identifying number 
of the owner of a foreign financial account for which the individual 
has signature authority but no financial interest. If there is more 
than one owner of the account for which the individual has signature 
authority, provide the information in Items 34-42 for the principal 
joint owner (excluding the filer). If account information is 
completed for more than one account of the same owner, identify the 
owner only once and write ``Same Owner'' in Item 34 for the 
succeeding accounts of the same owner.
    Item 43. Enter filer's title for the position that provides 
signature authority (e.g., treasurer).
    A United States person who is employed in a foreign country and 
who has signature authority over a foreign financial account that is 
owned or maintained by the individual's employer should only 
complete Part 1 and Part IV, Items 34-43 of the FBAR. Part IV, Items 
34-43 should only be completed one time with information about the 
individual's employer.

Part V--Consolidated FBAR

    Enter information in the applicable parts of the form only. If 
there is not enough space to provide all account information, copy 
and complete additional pages of the required Part as necessary. Do 
not use any attachments.
    Who Can File a Consolidated FBAR. An entity that owns directly 
or indirectly more than a 50 percent interest in a legal entity that 
is required to file an FBAR is permitted to file a consolidated FBAR 
on behalf of itself and such other legal entity. Check box ``d'' in 
Part I, Item 2 and complete Part V. If filing a consolidated FBAR 
and reporting 25 or more financial accounts, complete only Items 34-
42 for each person included in the consolidated FBAR.
    For Items 15-23, see Part II.
    Items 34-42. Provide the name, taxpayer identification number, 
and address of the owner of the foreign financial account as shown 
on the books of the financial institution. If account information is 
completed for more than one account of the same owner, identify the 
owner only once and write ``Same Owner'' in Item 34 for the 
succeeding accounts of the same owner.

Signatures

    Items 44-46. The FBAR must be signed by the filer named in Part 
I. If the FBAR is being filed on behalf of a partnership, 
corporation, limited liability company, trust, estate, or other 
legal entity, it must be signed by an authorized individual. The 
authorized individual's title is entered in Item 45. An authorized 
official of the person filing the consolidated FBAR must sign the 
FBAR.
    An individual must leave ``Filer's Title'' blank, unless the 
individual is filing an FBAR due to the individual's signature 
authority. If an individual is filing because the individual has 
signature authority over a foreign financial account, the individual 
should enter the title upon which his or her authority is based in 
Item 45.
    A spouse included as a joint owner, who does not file a separate 
FBAR in accordance with the instructions in Part III, must also sign 
the FBAR (in Item 44) for the jointly owned accounts. See the 
instructions for Part III.

Penalties

    A person who is required to file an FBAR and fails to properly 
file may be subject to a civil penalty not to exceed $10,000. If 
there is reasonable cause for the failure and the balance in the 
account is properly reported, no penalty will be imposed. A person 
who willfully fails to report an account or account identifying 
information may be subject to a civil monetary penalty equal to the 
greater of $100,000 or 50 percent of the balance in the account at 
the time of the violation. See 31 U.S.C. Sec.  5321(a)(5). Willful 
violations may also be subject to criminal penalties under 31 U.S.C. 
Sec.  5322(a), 31 U.S.C. Sec.  5322(b), or 18 U.S.C. Sec.  1001.

[FR Doc. 2010-4042 Filed 2-25-10; 8:45 am]
BILLING CODE 4810-02-P


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