The Financial Crimes Enforcement Network (FinCEN) announced that it has amended a Bank Secrecy Act (BSA) regulation to remove obsoleted civil penalty language.
Generally, a U.S. person having a financial interest in, or signature or other authority over a foreign financial account must report that account to FinCEN every year the account exists. A U.S. person required to report a foreign account files a Foreign Bank Account Report (FBAR) to report the account to FinCEN. (Reg §1010.350)
In addition, specified financial institutions must file a foreign financial agency report to notify FinCEN of certain transactions with designated foreign financial agencies. (Reg §1010.360)
Willful failure to file the above reports is subject to a civil penalty. (31 USC 5321(a)(5) and Reg §1010.820(g))
In 2004, 31 USC 5321(a)(5) was amended to increase the maximum account of the penalty for willful failure to report foreign financial accounts or foreign financial agency transactions. However, Reg §1010.820(g) was not amended to reflect the statutory change.
According to FinCEN, Reg §1010.820(g), which provides civil penalty language for willful failure to file an FBAR or foreign financial agency transaction report, is obsolete and superseded by the 2004 statutory amendments. Therefore, FinCEN is rescinding Reg §1010.820(g) and redesignating paragraphs (h) and (i) as (g) and (h).
This should clear up the discrepancies in court rulings regarding the maximum FBAR penalty haven't been increased, now that the rags are revised to reflect the 2004 changes to the maximum FBAR penalty.
Have Undeclared Income from an Offshore Bank Account?
Read more at: Tax Times blog