A Florida federal court jury found an 87-year old U.S. citizen guilty of failing to file required Reports of Foreign Bank and Financial Accounts (FBARs) for a Swiss bank account that he controlled. (Click HERE for a copy of the Department of Justice press release.) The fate of the defendant is now in the hands of the judge, who could apply a cumulative penalty as high as $2.1 Million (150% of the bank account balance, which was at least $1.4 Million).
DOJ wants the world to know of its focus on — and success in — prosecuting individuals with undisclosed foreign bank accounts. The U.S. is also actively negotiating agreements with foreign countries to obtain more information about such accounts, and it is increasingly likely that such accounts will be discovered. Unfortunately, the disclosure rules are sufficiently complex and broad that they apply to many individuals who would seemingly have no reporting obligation, such as professors, doctors or other professionals coming to the U.S. from foreign countries that retain mere signatory authority over a foreign financial account which they do not even use.
The release states that Carl Zwerner, in connection with two different foundations he created, opened a Swiss bank account. The account was opened for his foundation, but evidence indicated that Mr. Zwerner used the proceeds of the account for personal expenses. Although Mr. Zwerner apparently hired an accountant to complete his tax returns, Mr. Zwerner filled out a tax organizer provided to him by his accountant by answering “no” to questions asking whether “you have an interest in or signature authority over a financial account in a foreign country, such as a bank account, securities account or other financial account” and whether “you have any foreign income or pay any foreign taxes.” He also failed to file the FBARs for those years. The balance of the bank account during each of the years at issue exceeded $1.4 million. Mr. Zwerner apparently attempted to file the FBARs late through a “quiet disclosure.” The late filing did not absolve Mr. Zwerner of penalty liability.
Deadline Looming. The form used to report a financial interest in, or signature authority over, a foreign financial account is FinCEN Report 114, Report of Foreign Bank and Financial Accounts (FBAR). The FBAR must be received by the Department of the Treasury annually by June 30th following each calendar year during which the foreign account is maintained. The June 30 filing deadline cannot be extended. If you think that the FBAR requirements might apply to you, most likely they do. With one month left on the reporting deadline, now is the time to act. As the above case demonstrates, a late “quiet” filing of the FBAR form will not protect you from penalties.