FBAR Violation Standards: Willfulness and a Preponderance of Evidence

Aug 31, 2018

wilfulness standard change in FBAR cases

What is FBAR?

U.S. taxpayers with overseas accounts that cumulatively equal or exceed $10,000 at any point during the year must submit an annual accounting to Uncle Sam.  It’s known as the FBAR — Foreign Bank Account Reporting — standard and authorities take it very seriously. Why? In short, cross-border finances are a matter of national security.

Failure to properly submit FBAR paperwork can lead to criminal charges. Often, violators must remit sizable fines. And in the most egregious cases, judges hand down jail time.

What is the Bank Secrecy Act?

The Bank Secrecy Act outlines several financial regulation parameters, like the difference between “willfulness” and “negligence” — as it relates to banking violations — and associated penalties.

Willful v. Negligent: Why The Difference Matters

The exact definition of “willfulness” vs. “negligent” is central in an FBAR cases because penalties for the former far outweigh the latter.

“Willfulness” Definitions and Proof Standards Are Shifting; Comply ASAP

Lately, the courts are adopting a broader willfulness standard. In the past, “recklessness” more often qualified as “negligent” as opposed to “willful” behavior. That’s changing, and judges are increasingly interpreting “recklessness” as “willfulness” in FBAR cases.

Additionally, the standard of proof for civil willfulness has switched to “a preponderance of the evidence” from “clear and convincing evidence.” In other words: the state doesn’t have to present as much evidence as it once did to win.

What does all that mean in plain English: It’s now easier for courts to slap FBAR violators with higher financial penalties. How can you avoid this? Come forward voluntarily. Contact the Gordon Law Group today. We’ve guided countless individuals and businesses through the FBAR process. If you’ve been delinquent in complying, then don’t wait. IRS agents are laser-focused on the issue. Enlist help to avoid potential criminal charges.

Legal Advice: Three FBAR Compliance Tips

So, how can people or businesses with overseas accounts stay compliant? Here are a few tips.

  • Bookkeeping: According to the Banking Secrecy Act, every U.S. entity that engages in international transactions is required “to keep records and file reports” whenever they make “a transaction or [maintain] a relation for any person with a foreign financial agency.” To put it another way, according to the law, any citizen with “a financial interest in, or signature or other authority over, a bank, securities [with a cumulative total of $10,000 or more] or other financial account in a foreign country” must report certain details to authorities annually. Click here to read more about this regulation. (link)
  • Responsibility: The “I didn’t know” defense doesn’t work well when it comes to FBAR and FACTA cases. In a seminal FBAR ruling (United States v. Norman), the court judged that willfulness “can be inferred from a conscious effort to avoid learning about reporting requirements.”  Stated differently: “Oops, I didn’t know about FBAR requirements” isn’t a solid defense.
  • Intent: “Recklessness” which the courts have defined as “conscious avoidance” can fall under the “willful” umbrella in FBAR cases.

Connect With An FBAR Lawyer

The Gordon Law Group regularly works with individuals and businesses on FBAR filings, negotiations, and settlements. Our FBAR lawyers have helped countless parties resolve their international financial challenges.

Our team members typically secure the lowest possible FBAR settlement agreements for clients.

Bottom line: We have the experience and know-how you need.

Get in touch today to begin the conversation.

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