Private Asset Management

FBAR Compliance: Keeping Offshore Accounts Legal 08/28/2009

By Bradford Cohen and Charles Kolstad, Venable LLP

High-net-worth individuals have offshore accounts for many reasons: the account was established before they moved to the US; they own a vacation house or rental property in Europe or Asia; they travel on business frequently to a particular country; or they are concerned about the financial stability of the U.S. banking system and want to keep some of their assets outside of the U.S. Overlooked in much of the current press coverage over the disputes between UBS and the IRS is the fact that it is entirely legal for a US person to have such an offshore account; yes, entirely legal provided that the appropriate information reports are filed to disclose the existence of such accounts.

The Importance of FBAR

The U.S. Treasury has for a long time required individuals and other types of entities to file Form 90-22.1 (“FBAR”) by June 30 of the following year to report their financial interests in, or signatory authority over, foreign accounts during the prior year. Other IRS forms must be filed to report ownership of foreign corporations (Form 5471) or partnerships, beneficial or grantor interests in offshore trusts (Form 3520), etc.

There are significant penalties that apply for failure to file the forms. For example, in the case ...

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