Over the past few years, several foreign countries have implemented tax regularization programs which encourage taxpayers to disclose unreported assets to taxing authorities in exchange for limited amnesty. In order to participate in some countries’ tax regularization programs, taxpayers must request that their financial institution submit documentation verifying the value of the newly disclosed assets to the relevant foreign tax authority. As a result of the asset verification requirements, many financial institutions have learned that their customers are participating in their home country tax regularization programs with regard to undeclared assets. Financial institutions have been split as to whether they are obligated to file suspicious activity reports (“SARs”) when they learn that a customer is participating in a tax regularization program. Many financial institutions have been filing SARS under such circumstances.
On February 21, 2018, the Financial Crimes Enforcement Network (“FinCen”) responded to a request for guidance by the Florida International Bankers Association with regard to SAR filing obligations and customers who participate in their home countries’ tax regularization programs. FinCen indicated that a customer’s inquiry into or participation in a tax regularization program does not by itself constitute a suspicious transaction or activity for the purpose of SAR filing rules. FinCen further stated that a customer’s inquiry into or participation in such programs does not constitute, independent of other factors, notice of a past activity that would require a filing of a SAR. FinCen cautioned that a financial institution may choose to undertake a subsequent review of a customer’s accounts when they inquire about or participate in a tax regularization program as part of its overall risk assessment of that customer and their account activity.
The guidance was from FinCen’s Policy Division and was not an administrative ruling. As FinCen notes in its response letter to the Florida International Bankers Association, the substance of the letter should not be considered determinative in any state or federal investigation, litigation, grand jury proceeding or proceeding before any government body. That being said, FinCen is the regulator principally charged with administration and enforcement of federal anti-money laundering laws and regulations and other regulators typically defer to its guidance.