The U.S. Financial Crimes Enforcement Network (“FinCEN”) released a notice on December 31, 2020 (the “December 31 Notice”) stating that it will propose amendments to regulations of the Bank Secrecy Act (“BSA”) bearing on non-U.S. account holdings of virtual currency. FinCEN is a bureau of the U.S. Department of Treasury that, among other things, collects and analyzes information about financial transactions in order to combat domestic and international money laundering, terrorist financing, and other financial crimes. Among the information collected by FinCEN are annual reports from U.S. persons about their financial interests or signatory authorities over non-U.S. bank, securities and “other financial” accounts. Generally, U.S. persons—including citizens, residents, corporations, partnerships, limited liability companies, trusts and estates—must report annually their financial interests and signatory authorities over non-U.S. reportable accounts if the aggregate value of the non-U.S. reportable accounts exceeds US$10,000 at any time during the calendar year. This reporting is made on a Report of Foreign Bank and Financial Accounts—often referred to as an FBAR.
Fines for failing to file an FBAR can reach 50% of the account’s value.
Prior to issuance of the December 31 Notice, comments from FinCEN indicated that it did not expect FBARs for non-U.S. virtual currency accounts because the applicable regulations do not define a foreign account holding virtual currency as a type of account reportable on an FBAR. However, the December 31 Notice makes clear that FinCEN intends to expand the definition to include virtual currency accounts.
The Notice is consistent with other recent FinCEN proposals to expand reporting requirements for virtual currency transactions. Additionally, failures to fulfill FBAR filing obligations have historically been part of the basis on which the U.S. government pursues enforcement actions overseas against individual taxpayers and institutions accused of facilitating criminal offenses in connection with undeclared accounts (see, e.g., the Swiss Bank Program).
