Report of Foreign Bank & Financial Accounts (FBAR)

FBAR – Foreign Bank Account Reporting (FinCEN Form 114)

General Information Only – Not Legal or Tax Advice

The Foreign Bank Account Report (“FBAR”), formally titled the Report of Foreign Bank and Financial Accounts, is a federal reporting requirement established under the Bank Secrecy Act of 1970 (31 U.S.C. §5314).

FBAR is filed electronically with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) on FinCEN Form 114. The purpose of FBAR is financial transparency — not taxation. It is separate from income tax reporting.

What Is FBAR?

An FBAR is an annual information report required when a U.S. person has:

• A financial interest in, or
• Signature authority over, or
• Other authority over

one or more foreign financial accounts, and the aggregate value exceeds $10,000 at any time during the calendar year. The $10,000 threshold applies to the combined total of all foreign accounts.

Who Is a “U.S. Person”?

A U.S. person includes:

• U.S. citizens
• U.S. residents (including green card holders and those meeting substantial presence tests)
• Corporations, partnerships, and LLCs formed in the United States
• Trusts and estates created under U.S. law

What Is a Financial Interest?

A U.S. person has a financial interest in a foreign account if:

• They are the owner of record or hold legal title
• The account is held by an agent, nominee, or attorney on their behalf
• They own more than 50% of a corporation, partnership, or trust that holds the account

Signature Authority
Signature authority exists when a person can control the disposition of assets in a foreign account through direct communication with the financial institution, even without ownership.

Example: A corporate officer who can direct transfers from a foreign subsidiary’s bank account.

“Other Authority” (Constructive Authority)
Other authority may exist where a person can indirectly cause funds to be moved without being a signatory. Example: An individual who instructs a foreign investment manager who then executes transactions on their behalf.

What Is a Foreign Financial Account?

A foreign financial account is generally an account located outside the United States. Location is determined by where the financial institution is physically situated — not by currency used or online access.

Reportable Financial Accounts
FinCEN broadly defines financial accounts as:

• Bank accounts (checking, savings, demand deposits, CDs)
• Brokerage or securities accounts
• Mutual funds with regular net asset value determination
• Commodity futures or options accounts
• Foreign pension or retirement accounts
• Life insurance or annuity policies with cash value
• Accounts where the filer has signature authority

Generally Non-Reportable Assets
The following are typically not considered financial accounts for FBAR purposes:

• Directly held foreign real estate
• Physical stocks or bonds held directly
• Precious metals held personally
• Safety deposit boxes (unless the institution can access the contents)
• Private equity or hedge funds (under current regulations)

FBAR Filing Deadline
Due April 15 of the following year
Automatic extension to October 15 (no separate request required)

Recordkeeping Requirement
FBAR-related records must generally be retained for five years from the due date of the filing.

FBAR Penalties
Failure to file a complete and correct FBAR may result in:

• Civil penalties up to $10,000 per non-willful violation
• For willful violations: up to the greater of $100,000 or 50% of the account balance
• Potential criminal exposure in certain circumstances

Penalty determinations are fact-specific and often hinge on intent, disclosure history, and surrounding documentation.

Cryptocurrency & FBAR
The treatment of digital assets in offshore reporting remains an evolving area of federal regulation.

Under FinCEN Notice 2020-2, foreign accounts holding only virtual currency are not currently expressly defined as reportable accounts under 31 C.F.R. §1010.350. However, FinCEN has publicly indicated its intention to amend regulations to address virtual currency.

Key analytical issues include:

• Whether foreign custodial exchanges constitute “financial accounts”
• Hybrid accounts holding both fiat and cryptocurrency
• Stablecoin structures
• Multi-signature wallet authority
• Corporate entities holding digital assets offshore

Cross-border digital asset reporting requires both regulatory and technical understanding.

Zaher Fallahi holds an MIT Executive Certificate in Blockchain and Digital Assets, which informs the firm’s analytical approach to:

• Custodial vs. non-custodial wallet distinctions
• Exchange-based account characterization
• Interaction between FBAR, FATCA (Form 8938), and digital asset taxation
• AML and Bank Secrecy Act compliance considerations

FBAR vs. FATCA (Form 8938)
FBAR (FinCEN Form 114) is filed with the U.S. Treasury’s FinCEN.

FATCA (Form 8938) is filed with a federal income tax return.

The filing thresholds, definitions, and penalty structures differ. In some cases, both filings are required.

Corrective Filing Options
Where FBAR filings were missed, corrective pathways may include:

• Delinquent FBAR submission procedures
• Streamlined Offshore Procedures
• IRS Voluntary Disclosure Practice
• Reasonable Cause statements

Each situation requires individualized legal analysis.

Important Notice
This material is provided for general educational purposes only and does not constitute legal or tax advice. FBAR reporting obligations depend on specific facts and circumstances.

Professional Background
Zaher Fallahi is a dual-licensed Attorney at Law and Certified Public Accountant with experience in international tax compliance, offshore reporting matters, and digital asset regulation. His academic and technical background includes an MIT Executive Certificate in Blockchain and Digital Assets, which informs analytical work on cryptocurrency and cross-border reporting.

Consultation is available for fact-specific analysis of offshore compliance matters.