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Analysis of the Meaning of “Willful” in the FBAR Context

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Author(s): Rufus Rhoades and Alexey Manasuev
Date: September 2013

Introduction.

In this Emerging Issues Analysis, we review the meaning of “willful” in the FBAR context.1 Treasury’s enforcement of the Foreign Bank Account Reporting (FBAR) rules has grown aggressively over the last few years. It is chasing both known and suspected taxpayers who Treasury believes hold funds in undisclosed off-shore accounts. Many times, the pursuit of those taxpayers generates legal action to collect a penalty or exact jail time. All of those cases turn on the statute, the key word of which is “willfully.”

Criminal Penalties.

31 USC § 5322(a): A person willfully violating this subchapter or a regulation prescribed or order issued under this subchapter (except section 5315 or 5324 of this title or a regulation prescribed under section 5315 or 5324), or willfully violating a regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91–508, shall be fined not more than $250,000, or imprisoned for not more than five years, or both.

Civil Penalties31 USC § 5321(a)(5)(C) Willful violations. — In the case of any person willfully violating, or willfully causing any violation of, any provision of section 5314 —

  • (i) the maximum penalty under subparagraph (B)(i) shall be increased to the greater of —
    • (I) $100,000, or
    • (II) 50 percent of the amount determined under subparagraph
      • (D) Amount. — The amount determined under this subparagraph is
        • (i) in the case of a violation involving a transaction, the amount of the transaction, or
        • (ii) in the case of a violation involving a failure to report the existence of an account or any identifying information required to be provided with respect to an account, the balance in the account at the time of the violation. …

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