Canada: Treasury Department Proposes Regulations To Clarify US Foreign Bank Account Report (FBAR) Requirements

The Treasury Department's Financial Crimes Enforcement Network (FinCEN)1 bureau has issued proposed regulations regarding the US foreign bank account report (FBAR) annual filing requirements. Among other changes, the proposed regulations would eliminate FBAR filing requirements for non-US persons. In the wake of the ongoing investigation of UBS clients reportedly numbering in the tens of thousands who failed to report their Swiss bank accounts, the IRS and taxpayers have begun paying more attention to these rules, but currently, the only real authoritative source of guidance on these requirements is the IRS instructions to the FBAR form, which is known officially as Form TD F 90-22.1.

The FBAR form and the accompanying instructions were updated by the IRS in October 2008. The 2008 revisions significantly expanded the scope of the filing requirements as well as the information required to be disclosed. Notably, while the authorizing statute only imposes on United States persons the requirement to file FBARs, the revised instructions require certain non-US resident individuals and entities to file FBARs by treating them as US persons for this purpose. In addition, in a series of conference call presentations following the issuance of the new instructions, senior IRS officials informally advised practitioners that the requirement in the instructions to report interests in a "commingled fund" applies not only to interests in foreign mutual funds, as indicated by the instructions, but also to interests in private vehicles such as hedge funds, private equity funds, and even private family investment companies.

Following a host of complaints by practitioners regarding the scope of these rules, the IRS announced last year that for purposes of FBAR filings that were due in 2009, filers should ignore the rule in the new instructions requiring certain non-US persons to file FBARs and should instead rely on the definitions contained in the prior instructions to the FBAR form. In addition, the IRS issued a notice extending the FBAR filing deadline for 2008 and earlier calendar years to June 30, 2010, for persons with signature authority over, but no financial interest in, a foreign account and for persons with financial interests in, or signature authority over, a commingled fund.

With the 2010 filing deadline approaching, the proposed regulations are an important step by the Treasury Department toward clearing up the confusion surrounding FBAR filings. FinCEN also issued a draft of a new set of instructions for the FBAR form which would replace the existing instructions if the proposed rules are finalized. In many respects, the proposed regulations would codify the guidance contained in the existing instructions to the FBAR form, but they include a number of significant changes and clarifications.

One important change the rules would make is to eliminate the 2008 amendment to the instructions that required certain non-US person to file FBARs. Another important change is the elimination of the troublesome "commingled fund" requirement, which would be replaced with a narrower requirement that would apply only to mutual funds or similar funds that issue shares to the general public that have a regular net asset value determination and regular redemptions. This definition would exclude hedge funds and private equity funds and other private investment vehicles.2 The proposed regulations' filing requirements would continue to apply to ordinary brokerage accounts. The new rules would, for the first time, also require filing a report for foreign issued insurance policies that have a cash value feature and for foreign annuities.

The proposed rules also include new exceptions for employees that have signature authority over foreign financial accounts of their employer. These exceptions would exempt officers and employees of financial institutions, registered investment companies (such as hedge funds) or their investment advisors, and publicly traded or other SEC registered companies from FBAR filing requirements.

Another aspect of the existing rules that has proved to be controversial is the requirement that beneficiaries of trusts (among other indirect holders of financial interests) are required to file an FBAR with respect to foreign financial accounts of the trust if the beneficiary either has a beneficial interest in more than 50% of the assets of the trust or is entitled to receive more than 50% of the trust's income. In informal guidance, IRS officials took the position that this rule also requires discretionary beneficiaries of trusts to file FBARs if the trustee has the power to allocate more than 50% of the trust's assets to the beneficiary. The proposed rules would leave the 50% test for trust beneficiaries in place (and unfortunately do not provide any clarification on the treatment of discretionary beneficiaries), but would relieve the beneficiary of the requirement to file an FBAR if the trustee of the trust files one with respect to the trust's accounts.

Pending finalization of the proposed rules, the IRS issued temporary relief for the upcoming June 2010 filing deadline for calendar year 2009 FBARs. This relief came in the form of an announcement and a notice issued at the same time as the proposed regulations. Announcement 2010-16 continues the suspension of the rule in the 2008 revisions that would require FBAR filings by certain non-US persons. (As noted, the proposed rules would permanently eliminate that requirement.) Notice 2010-23 extends the deadline for filing FBARs for 2009 and prior years with respect to filers that have signature authority only but no financial interest in a foreign account. The deadline for such filers, which was previously extended to June 30, 2010, is now extended until June 30, 2011. Notice 2010-23 also provides that for 2009 and prior years, the IRS has determined that it will not apply its enforcement authority adversely in the case of persons with a financial interest in, or signature authority over, a foreign commingled fund other than a mutual fund. Specifically, this relief is intended to cover interests in hedge funds and private equity funds.


1. The IRS is charged with administering and enforcing the FBAR filing requirements, but FinCEN retains the authority to promulgate regulations interpreting the relevant statutory provisions of the Bank Secrecy Act.

2. The preamble to the proposed regulations notes that Treasury remains concerned about the use of, for example, hedge funds to evade taxes and that FinCEN will continue to study this issue.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.