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8 J. Tax'n Fin. Products 25 (2009-2010)
FBAR - Where We Are and How We Got There

handle is hein.journals/jrlfin8 and id is 153 raw text is: Volume 8 Issue 3 2009

FBAR-Where We Are and
How We Got There
By Eschrat Rahimi-Laridjani
Eschrat Rahimi-Laridjani undertakes a thorough review of the
requirements to report foreign bank and financial accounts.

In recent months there has been a heightened fo-
cus on Form TD F 90-22.1, the Report of Foreign
Bank and Financial Accounts (FBAR) among tax-
payers and tax practitioners who previously may have
been relatively unfamiliar with the details of foreign
bank and financial account reporting. The issuance
of a revised FBAR form and instructions in October
2008, the ever increasing enforcement pressure with
respect to offshore activity generally, the specter of
severe civil and criminal penalties for FBAR viola-
tions, and pronouncements earlier this year by the
IRS dramatically expanding the universe of accounts
potentially subject to these reporting requirements
have sharply increased interest in, and attention
paid to, the FBAR. This article aims to familiarize the
reader with the current FBAR form and instructions
as well as with their history and to highlight some of
the areas of greatest uncertainty.
History of the FBAR
The requirement to report foreign bank and financial
accounts dates back to the Currency and Foreign
Transactions Reporting Act (Bank Secrecy Act) en-
acted in 1970.' The overall purpose of the statutory
framework of which the FBAR requirement forms part
is to require records and reports with a high degree
of usefulness that can assist various government
agencies in criminal, tax or regulatory investigations
or proceedings and in the conduct of intelligence or
counterintelligence activities, including anti-terrorist
activities.2 The original aim of the FBAR thus was to
aid the U.S. Department of theTreasury in combating
money laundering involving international criminal
Eschrat Rahimi-Laridjani is Counsel in the New York office
of Freshfields Bruckhaus Deringer US LLP'.

networks, without, as the statute itself states, burden-
ing unreasonably persons who legitimately engage in
international financial transactions., In keeping with
the focus on money laundering, enforcement author-
ity for the FBAR was delegated to the director of the
Financial Crimes Enforcement Network (FinCEN), a
government-wide financial intelligence and analysis
network established within the Treasury.4
In 2003, FinCEN redelegated FBAR-related enforce-
ment authority to the IRS.' This redelegation occurred
in the context of the IRS's investigations into offshore
bank payment cards and its Offshore Voluntary Com-
pliance Initiative, and represented a significant step
in adapting the FBAR from a tool to combat money
laundering to a weapon in the IRS's international tax
enforcement arsenal. Granting enforcement authority
to the IRS was seen as a natural fit, in particular
since the FBAR applies to individuals and is closely
related to questions about foreign bank and financial
accounts on the individual, trust, estate, tax-exempt,
partnership and corporate income tax return forms.
It is important to note, however, that unlike tax re-
turn information, FBARs can and are shared among
government agencies.!
The current political climate is marked by the U.S.
government's increased efforts to crack down on
offshore tax evasion, the controversy surrounding
bank secrecy in general and UBS in particular,9 and
various proposals by the Obama Administration and
members of Congress aimed at combating offshore
tax avoidance and evasion.0 Some of these propos-
als relate directly to existing FBAR requirements.
For example, the Obama Administration's fiscal year
2010 budget proposal (Green Book) includes a
provision that would require individual taxpayers to
provide the information required by the FBAR on their
individual income tax returns in addition to filing the

02009 E. Rahimi-Laridjani


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