Treasury Practices. FBAR Reporting. May 23, Craig S. ( Sandy ) Saxer Senior Vice President PNC Bank Treasury Services

Transcription

1 Treasury Practices 2016 FBAR Reporting May 23, 2016 Craig S. ( Sandy ) Saxer Senior Vice President PNC Bank Treasury Services

2 Session Purpose US laws mandate a broad basis of anti-money laundering requirements. This session is about the practical application of these and other mandated practices such as FBAR. Please plan to join in the discussion with your own views and experiences.

3 Anti-Money Laundering ( AML ) & Bank Secrecy Act ( BSA ) AML: Anti-Money Laundering Money laundering is the criminal practice of filtering money obtained via illegal activities through a series of transactions so that the funds appear to have come from legitimate activities AML, then, is a set of laws, regulations, policies, and procedures designed to stop the practice of money laundering BSA: Bank Secrecy Act Enacted in 1970; Established reporting and recordkeeping requirements for financial institutions to combat money laundering FinCEN the Financial Crimes Enforcement Network, a section of the U.S. Treasury Department responsible for administration and enforcement of the BSA USA PATRIOT Act Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 Greatly expanded U.S. anti-money laundering laws and regulations 3

4 Know Your Customer ( KYC ) Not a specific regulation or law, but it is mandatory Responsibility to understand a customer s business well enough to know if the products and services used, as well as account activity, fit that business KYC is critical for completion of AML reporting and filing obligations For example, Suspicious Activity Reporting we can t detect and report what s suspicious unless we know what s normal and expected for a customer KYC provides us with an understanding of our customer, its business, and the risks that the customer poses to us Contrast this with the goal of CIP which is to collect information and documentation to verify the customer: CIP is performed at the outset of a customer relationship; KYC is an ongoing process 4

5 Foreign Account Tax Compliance Act ( FATCA ) FATCA targets tax non-compliance by U.S. taxpayers with foreign accounts enacted March, 2010 FATCA focuses on reporting: By U.S. taxpayers about certain foreign financial accounts and offshore assets By foreign financial institutions about financial accounts held by U.S. taxpayers or foreign entities in which U.S. taxpayers hold a substantial ownership interest The objective of FATCA is the reporting of foreign financial assets; withholding is the cost of not reporting.

6 FACTA Filing Requirements Taxpayers with a total value of specified foreign financial assets below a certain threshold do not have to file Form 8938 If the total value is at or below $50,000 at the end of the tax year, there is no reporting requirement for the year, unless the total value was more than $75,000 at any time during the tax year The threshold is higher for individuals who live outside the United States Thresholds are different for married and single taxpayers Application to domestic entities: The IRS issued regulations that require a domestic entity to file Form 8938 if the entity is formed or used to hold specified foreign financial assets and the total asset value exceeds the appropriate reporting threshold. This reporting requirement applies to tax years beginning after December 31, 2015.

7 So What is Foreign Bank Account Reporting (FBAR)? Currently known as Financial Crimes Enforcement Network (FinCEN) Form 114- FBAR Required filing for non-u.s. bank accounts that aggregate over $10,000 at any time during the year Used as Anti-Money Laundering and Anti-terrorism targeting tools Distinct from tax return; must report ANY income from accounts on 1040 AND file an FBAR (FinCEN Form 114) From IRS.gov 7

8 Who needs to file? United States person who had a financial interest in or signature authority over at least one financial account located outside the U.S.; and, The aggregate value of all foreign financial accounts exceeded $10,000 at any given time during the calendar year reported From IRS.gov 8

9 Key Definitions United States Person: Citizen or resident of U.S. Entity created or organized in U.S. or under U.S. laws (e.g. corporation, partnership, LLC) Trusts Estates Financial Account Considered foreign when physically located outside the U.S. Signature Authority Authority of individual (alone or in conjunction with another individual) to control disposition of assets held in foreign financial account by direct communication (writing or otherwise) to the bank or other financial institution that maintains the financial account. Abbreviated filing for individuals with signature authority over 25 or more Foreign Financial Accounts From IRS.gov 9

10 Key Deadlines May 31, 2011: FinCEN extends filing deadline to Jun 30, 2012 Feb 14, 2012: FinCEN extends filing deadline to Jun 30, 2013 Dec 26, 2012: FinCEN further extends deadline to Jun 30, 2014 Dec 17, 2013: FinCEN extends deadline to Jun 30, 2015 Nov 24, 2014: FinCEN extends deadline to Jun 30, 2016 Dec 15, 2015: FinCEN extends deadline to April 15, 2017 From IRS.gov 10

11 Requirements Comparison Topic Form 8938 Who? Individuals with foreign asset interests FinCEN #114 FBAR US persons with interests in foreign assets that meet thresholds Include US Territories? No Yes Reporting Threshold Individuals $50k Married - $100K Out of US: $200,000 individual; $400k Married $10,000 or more When do you have an interest? Income, gains, losses, deductions, credits, proceeds, dispositions, distributions Financial interest, ownership, legal title, signature authority How are the assets valued? Fair market value of assets in US dollars, with conversion from foreign currencies Use of periodic statements to determine maximum value, with conversion at Y/E rates to US dollars When Due? Attached to annual income tax return and filed on due date or prior File electronically through FinCENs BSA E-Filing System by June 30 From IRS.gov 11

12 Reportable Asset Examples Topic Form 8938 FinCEN #114 FBAR Foreign Bank Deposits? Yes Yes US Bank foreign branch? No Yes Foreign account with signature authority No Yes, subject to exceptions Indirect Interest in foreign accounts No Yes, if ownership is >50% Foreign Partnerships Yes no Foreign Mutual Funds Foreign accounts held by your grantor trust Foreign-issued life insurance with cash value Yes Yes Yes Yes Yes Yes From IRS.gov. Note: Not All are Shown on this slide 12

13 FBAR Penalties Violation Civil Penalties Criminal Penalties Negligent Violation Up to $500 N/A Comments Does not apply to Individuals Non-Willful Violation Up to $10,000 for each negligent violation N/A Pattern of Negligent Activity In addition to penalty with respect to any such violation, not more than $50,000 N/A Does not apply to individuals Willful Failure to File FBAR or retain records of account Up to the greater of $100,000, or 50% of the amount in the account at the time of the violation Up to $250,000 or 5 Years or both Applies to all U.S. persons Willful Failure to File FBAR or retain records of account while violating certain other laws Up to the greater of $100,000, or 50% of the amount in the account at the time of the violation Up to $500,000 or 10 years or both Applies to all U.S. persons Knowingly and Willfully Filing False FBAR Up to the greater of $100,000, or 50% of the amount in the account at the time of the violation $10,000 or 5 years or both Applies to all U.S. persons From IRS.gov 13

14 Penalties (cont d.) IRS will not impose a penalty for the failure to file delinquent FBARs if : - Income from the foreign financial accounts reported on the delinquent FBARs is properly reported and taxes are paid on your U.S. tax return, and - You have not previously been contacted regarding and income tax examination or a request for delinquent returns for the years for which the delinquent FBARs are submitted From IRS.gov 14

15 War Stories & Issues Does CEO/CFO have to file? Yes if a signatory Does a clerk have to file? Yes, if a signatory or in control How will the fines apply to a third party? Unknown Proof of willfulness? Adjudicating penalties? Admission that personally owned foreign bank accounts exist?

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