FBAR Regulations

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10234 Federal Register / Vol. 76, No. 37 / Thursday, February 24, 2011 / Rules and Regulations

1On October 26, 2010, FinCEN issued a final rule(the Chapter X Final Rule), creating a new ChapterX in title 31 of the Code of Federal Regulations(CFR) for BSA regulations. (See 75 FR 65806(October 26, 2010) (Transfer and Reorganization ofBank Secrecy Act Regulations Final Rule)). Asdiscussed in the Chapter X Final Rule, FinCENreorganized its regulations that previously appearedat 31 CFR part 103 in the new Chapter X. TheChapter X reorganization is effective as of March 1,2011, and is not intended to have any substantive

effect on the BSA regulations. The notice ofproposed rulemaking (NRPM) that preceded todaysfinal rule (amending the BSA regulations related toreports of foreign bank and financial accounts) waspublished prior to the effective date of the ChapterX reorganization. Accordingly, the NPRM used the31 CFR part 103 numbering system. References intodays final rule generally use the 31 CFR part 103numbering system. However, the text of the finalrule itself is renumbered using the Chapter Xnumbering system.

2See 31 U.S.C. 5312(a)(1) which excepts from thedefinition of financial agency a person acting for acountry, a monetary or financial authority acting asa monetary or financial authority or an internationalfinancial institution of which the United Statesgovernment is a member.

1201). The February-March 2010proposal called for a two-stage increase.The consumptive use rate was proposedto increase from $60 to $90 per milliongallons, effective January 1, 2011, andfrom $90 to $120 per million gallons,effective January 1, 2012; and the non-consumptive use rate was proposed toincrease from $.60 to $.90 per million

gallons, effective January 1, 2011, andfrom $.90 to $1.20 per million gallons,effective January 1, 2012. A publichearing on the proposed rate increaseswas held on April 13, 2010 and writtencomments were accepted through April16, 2010.

On September 15, 2010, theCommission approved a single-stageincrease of $20 per million gallons inthe consumptive use rate and $.20 permillion gallons in the non-consumptiveuse rate. Accordingly, effective January1, 2011, the Commissions watercharging rates are $80 per million

gallons for consumptive use and $.80per million gallons for non-consumptiveuse. No change to the list of uses exemptfrom charges was proposed or adopted.The Commission also authorized theExecutive Director to establish a WaterCharges Advisory Committee and toidentify and develop proposals forstudies to address issues affecting watercharges. A comment and responsedocument setting forth theCommissions responses in detail wasapproved by the Commissionsimultaneously with adoption of thefinal rule.

Resolution No. 20109, the text of the

final rule, and a copy of the commentand response document are available onthe Commissions Web site, drbc.net.

List of Subjects in 18 CFR Part 420

Incorporation by reference, Waterresources, Water reservoirs, Watersupply, Watersheds.

For the reasons set forth in thepreamble, the Delaware River BasinCommission amends 18 CFR part 420 asfollows:

PART 420BASIN REGULATIONSWATER SUPPLY CHARGES

1. The authority citation for part 420continues to read as follows:

Authority: Delaware River Basin Compact,75 Stat. 688.

2. Amend 420.41 by revisingparagraphs (a) and (b) to read as follows:

420.41 Schedule of water charges.

* * * * *(a) $80 per million gallons for

consumptive use; and(b) $.80 per million gallons for

nonconsumptive use.

Dated: February 16, 2011.

Pamela M. Bush,

Commission Secretary and Assistant GeneralCounsel.

[FR Doc. 20113969 Filed 22311; 8:45 am]

BILLING CODE 636001P

DEPARTMENT OF THE TREASURY

Financial Crimes Enforcement Network

31 CFR Part 1010

RIN 1506AB08

Amendment to the Bank Secrecy ActRegulationsReports of ForeignFinancial Accounts

AGENCY: Financial Crimes EnforcementNetwork (FinCEN), Treasury.

ACTION: Final rule.

SUMMARY: FinCEN is issuing this final

rule to amend the Bank Secrecy Act(BSA) regulations regarding reports offoreign financial accounts. The ruleaddresses the scope of the persons thatare required to file reports of foreignfinancial accounts. The rule furtherspecifies the types of accounts that arereportable, and provides filing relief inthe form of exemptions for certainpersons with signature or otherauthority over foreign financialaccounts. Finally, the rule adoptsprovisions intended to prevent personssubject to the rule from avoiding theirreporting requirement.

DATES

: Effective Date: This rule iseffective March 28, 2011.Applicability Date: This rule applies

to reports required to be filed by June30, 2011 with respect to foreignfinancial accounts maintained incalendar year 2010 and for reportsrequired to be filed with respect to allsubsequent calendar years.

FOR FURTHER INFORMATION CONTACT:FinCEN, Regulatory Policy andPrograms Division at (800) 9492732and select Option 1.

SUPPLEMENTARY INFORMATION:

I. Statutory and Regulatory Background

The BSA, Titles I and II of Public Law91508, as amended, codified at 12U.S.C. 1829b, 12 U.S.C. 19511959, and31 U.S.C. 53115314 and 53165332,authorizes the Secretary of the Treasury(Secretary), among other things, to issueregulations requiring persons to keeprecords and file reports that aredetermined to have a high degree ofusefulness in criminal, tax, regulatory,and counter-terrorism matters. Theregulations implementing the BSAappear at 31 CFR part 103 (31 CFR

Chapter X, effective March 1, 2011).1The Secretarys authority to administerthe BSA has been delegated to theDirector of FinCEN.

Under 31 U.S.C. 5314 the Secretaryshall require a resident or citizen of theUnited States or a person in, and doingbusiness in, the United States, to * * *keep records and file reports, when the

resident, citizen, or person makes atransaction or maintains a relation forany person with a foreign financialagency. For this purpose, foreignfinancial agency means a person actingfor a person as a financial institution,bailee, depository trustee, or agent, oracting in a similar way related tomoney, credit, securities, gold, or atransaction in money, credit, securities,or gold. 2 The Secretary is authorized toprescribe exemptions to the reportingrequirement and to prescribe othermatters the Secretary considersnecessary to carry out section 5314.

The regulations implementing 31U.S.C. 5314 appear at 31 CFR 103.24,103.27, and 103.32. Section 103.24generally requires each person subject tothe jurisdiction of the United Stateshaving a financial interest in orsignature or other authority over a bank,securities, or other financial account ina foreign country to report suchrelationship to the Commissioner ofInternal Revenue for each year in whichsuch relationship exists, and * * *provide such information as shall bespecified in a reporting form prescribedby the Secretary to be filed by suchpersons. Section 103.27 requires the

form to be filed with respect to foreignfinancial accounts exceeding $10,000.The form must be filed on or before June30 of each calendar year for accountsmaintained during the previous

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10235Federal Register / Vol. 76, No. 37 / Thursday, February 24, 2011 / Rules and Regulations

3See 75 FR 8844 (February 26, 2010).

475 FR 8851 (February 26, 2010) (Emphasisadded).

5A revised FBAR form that modified severalaspects of the form instructions was issued inOctober 2008. That revision eliminated the wordsdirect communication from the definition ofsignature or other authority.

calendar year. Section 103.32 requiresrecords of accounts to be maintained foreach person having a financial interestin or signature or other authority oversuch account. The records must bemaintained for a period of five years.

The form used to file the reportrequired by section 103.24 is the Reportof Foreign Bank and Financial

AccountsForm TDF 9022.1 (FBAR).The instructions to the FBAR specifywhich persons must file as well as thetypes of accounts that must be reported.

II. Notice of Proposed Rulemaking

On February 26, 2010, FinCENpublished in the Federal Register aNotice of Proposed Rulemaking (NPRM)that proposed changes to the rules forthe reporting of foreign financialaccounts.3 Most significantly, the NPRMproposed to (1) Define the scope ofindividuals and entities required to filethe FBAR, (2) delineate the types of

reportable accounts, and (3) exemptcertain persons and accounts from thereporting requirement and providecertain additional relief. The changesproposed in the NPRM wereaccompanied by proposed changes tothe FBAR form instructions, a draft ofwhich appeared in the Federal Registeras an attachment to the NPRM.

Comments on the NPRMOverview andGeneral Issues

In response to the NPRM, FinCENreceived a total of 42 timely filedcomment letters from individuals,entities, and representatives of various

groups and industries whose membersare affected by FBAR requirements. Thecomments were generally supportive ofthe NPRM but sought broaderexemptions than in the NPRM and oftenasked for clarification of the NPRM. Inparticular, commenters were uncertainabout when an account was reportableunder the FBAR and the scope ofindividuals covered by the signatureauthority definition. To this end, thisfinal rulemaking document

Clarifies whether an account isforeign and therefore reportable as aforeign financial account and addresses

the treatment of custodial accounts inthis context; Revises the definition of signature

or other authority to more clearly applyto individuals who have the authority tocontrol the disposition of assets in theaccount by direct communication(whether in writing or otherwise) to theforeign financial institution;

Clarifies that officers or employeeswho file an FBAR because of signatureor other authority over the foreign

financial account of their employers arenot expected to personally maintain therecords of the foreign financial accountsof their employers;

Clarifies that filers may rely onprovisions of this final rule in order todetermine their filing obligation forFBARs in those cases where filing wasproperly deferred under prior Treasury

guidance.FinCEN believes that these

clarifications and changes shouldaddress many of the concerns expressedin the public comments regardinguncertainty about the scope of theNPRM and therefore should make iteasier for filers to determine whetherthe FBAR must be filed.

A. Reportable Accounts

FinCEN received a large number ofcomments requesting clarification as towhen an account is deemed foreign forpurposes of triggering the FBAR filingrequirement. Commenters requestedclarification on this issue with respectto holdings of securities accounts,pension fund accounts, and covered lifeinsurance policies and annuities.FinCEN wishes to clarify that, as ageneral matter, an account is not aforeign account under the FBAR if it ismaintained with a financial institutionlocated in the United States. Forexample, individuals may purchasesecurities of a foreign company througha securities broker located in the UnitedStates as part of their investmentportfolio. The mere fact that the accountmay contain holdings or assets of

foreign entities does not render theaccount foreign for purposes of theFBAR. In this instance, the individualmaintains the account with a financialinstitution in the United States.

FinCEN received a number ofcomments asking for clarificationregarding specific custodialarrangements. Commenters explainedthat in some cases a United Statesperson may have an account with afinancial institution located in theUnited States, such as a bank.According to the commenters, that U.S.bank may act as a global custodian and

hold the persons assets outside theUnited States. In many cases, thecustody bank creates pooled cash andsecurities accounts in the non-U.S.market to hold the assets of multipleinvestors. These accounts, commonlycalled omnibus accounts, are in thename of the global custodian. Typically,the U.S. customer does not have anylegal rights in the omnibus account andcan only access their holdings outside ofthe United States through the U.S.global custodian bank. FinCEN wishesto clarify that in this situation, the U.S.

customer would not have to file anFBAR with respect to assets held in theomnibus account and maintained by theglobal custodian. In this situation, theU.S. customer maintains an accountwith a financial institution located inthe United States.

However, if the specific custodialarrangement permits the United States

person to directly access their foreignholdings maintained at the foreigninstitution, the United States personwould have a foreign financial account.

B. Signature or Other Authority,Generally

FinCEN received a large number ofcomments generally regarding thesignature authority requirement. Somecommenters sought further clarificationof the definition, while othercommenters recommended anelimination of the requirement. In theNPRM, FinCEN proposed to define

signature or other authority

as theauthority of an individual (alone or inconjunction with another) to control thedisposition of money, funds or otherassets held in a financial account bydelivery of instructions (whethercommunicated in writing or otherwise)directlyto the person with whom thefinancial account is maintained. 4 Toavoid confusion, FinCEN inserted theword directly into the definitionproposed in the NPRM to place thefiling requirement on an individual onlyif the individual has the authority todirectly deliver instructions to theforeign financial institution.5

Nonetheless, commenters stated thatthey were unsure whether the proposeddefinition of signature authority wouldapply to an individual who merelyparticipates in the decision to allocateassets or has the ability to instruct orsupervise others with signatureauthority over a reportable account. Inlight of these comments, FinCEN hasdecided to revise the proposeddefinition of signature or other authorityas follows:

Signature or other authority means theauthority of an individual (alone or inconjunction with another) to control the

disposition of money, funds or other assetsheld in a financial account by directcommunication (whether in writing orotherwise) to the person with whom thefinancial account is maintained.

The test for determining whether anindividual has signature or other



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authority over an account is whether theforeign financial institution will actupon a direct communication from thatindividual regarding the disposition ofassets in that account. The phrase inconjunction with another is intended toaddress situations in which a foreignfinancial institution requires a directcommunication from more than one

individual regarding the disposition ofassets in the account.

Some commenters requested thatFinCEN eliminate the requirement toreport signature or other authority overa foreign financial account. Commentersexpressed concern about perceivedduplication of reporting as well as aperceived lack of utility to lawenforcement when both individualswith signature authority and those witha financial interest file FBARs withrespect to the same account. Somecommenters suggested that investigatorscould obtain the relevant information if

FinCEN were to modify the FBAR formto enable the person with a financialinterest in a reportable account to list allof the individuals with signature orother authority over the account.Another commenter suggested thatFinCEN provide an exemption for allemployees who have signature authorityover but no financial interest in theiremployers foreign financial accounts ifthe employer provides notice to theemployees that the employer has filedan FBAR for its accounts.

Although FinCEN has considered theconcerns raised by these commenters,FinCEN has decided not to eliminate the

signature authority reportingrequirement or revise the obligations assuggested by these commenters. Lawenforcement agencies have indicated toFinCEN that FBARs filed by individualswith only signature authority arevaluable tools in investigations. Lawenforcement representatives disagreedwith commenters that the signatureauthority requirement results induplication of information. AlthoughFinCEN may receive more than oneFBAR with respect to the same foreignfinancial account, the reports containinformation about different individuals

with access to the account (eitherthrough financial interest or signatureauthority). Moreover, if FinCEN were toadopt a modified reporting systemwhich relies upon the person withfinancial interest to report thoseindividuals having signature authorityover the account, there would be anincreased opportunity to evadereporting because the signatureauthority requirement also acts as anindependent check on FBAR reporting.For example, a person with financialinterest may not report the FBAR at all,

or may not identify all individuals withsignature authority over the account. Insuch a case, law enforcement and otheragencies would be deprived of valuableinformation regarding the full range ofindividuals with access to the account.Likewise, if FinCEN were to adopt anexemption for employees who receivenotice from their employers regarding

the filing of the FBAR, and the employerfalsely provides the notice, lawenforcement again would be deprived ofvaluable information. By adopting anindependent reporting requirement forindividuals with signature authority, thefinal rule maintains the check andbalance that has existed since 1972,making it more difficult for the accountand the individuals having access tothat account to escape detection. Thesignature authority filing requirement isa necessary component of an effectiveFBAR regulatory regime. Thus, in thisfinal rule, FinCEN continues to require

reporting by individuals with signatureor other authority.Finally, FinCEN received one

comment that pointed to a discrepancybetween the NPRM definition ofsignature authority and the definitioncontained in the draft form instructions,which accompanied the NPRM. Thiscomment noted that the draft forminstructions slightly varied from theregulatory definition leaving thecommenter unclear whether thedefinition of signature authority wasintended to apply more broadly thanjust to individuals. FinCEN wishes toclarify that the signature authority

definition contained in this final ruleonly applies to individuals. Theinstructions to the FBAR form havebeen revised to reflect the language inthe final rule.

C. Recordkeeping and Truncated FilingRelated to Signature or Other Authority

Commenters sought relief from therecordkeeping provisions of 31 CFR103.32 for individuals with signatureauthority over their employersaccounts. These commenters argued thatthe recordkeeping rules presentchallenges in such cases, because these

individuals do not own the records ofthe employing firm. Further, thesecommenters argued that they should notbe expected to personally maintain therecords of that employer for five years.FinCEN wishes to clarify that in the caseof officers or employees who file anFBAR because of signature or otherauthority over the foreign financialaccounts of their employer, we do notexpect such officers or employees topersonally maintain the records of theforeign financial accounts of theiremployers.

The preamble of the NPRM noted thata modified form of reporting would beavailable in the case of United Statespersons who are employed in a foreigncountry and who have signature or otherauthority over foreign financial accountsowned or maintained by their employer.FinCEN received two commentsrecommending that this modified form

of reporting be available to UnitedStates persons employed in the UnitedStates with respect to foreign financialaccounts over which they havesignature authority. One of thesecommenters cited the difficulties incomplying with the recordkeepingobligation, while the other commenterdid not believe that United Statespersons should be treated differentlybased on the location of theiremployment. As noted above, FinCENhas clarified the recordkeepingobligations of officers and employeeswith only signature authority over the

foreign financial accounts of theiremployers. FinCEN also wishes to notethat in providing the modified reportingfor United States persons who areemployed overseas, FinCEN wasattempting to balance the need forinformation contained in the FBAR witha recognition that United States personsworking overseas are subject to bothU.S. law and foreign law. FinCEN hasnot provided United States personsemployed in the United States by aforeign employer with the modifiedform of reporting. In such cases, FinCENbelieves that the foreign employershould expect that U.S. law will apply

to these U.S. employees.Finally, FinCEN received a comment

asking that the modified reporting beexplicitly available to officersemployed overseas. The forminstructions have been amended toreflect this change. The commenter alsoasked that FinCEN incorporate themodified reporting into the text of thefinal rule. FinCEN does not believe thatit is necessary to include this form ofrelief in the text of the final rule itself.

D. General Exemptions

The NPRM proposed exemptions from

the reporting requirements for certaintypes of persons and accounts. FinCENreceived a number of comments askingfor broader exemptions. One commenterrequested that FinCEN exempt from thereporting requirement accounts locatedin jurisdictions that are not consideredto be tax havens or that have highlyfunctional bank regulation andinformation exchange with the UnitedStates. FinCEN also received commentsfrom individuals living abroad whoobjected to the FBAR filing requirement.Some of these commenters were married



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6The CIP rules require certain financialinstitutions to collect identifying information abouta customer at account opening and implementprocedures for verifying the customers identity thatare sufficient to enable the financial institution toform a reasonable belief that it knows the trueidentity of the customer. See, e.g., 31 CFR 103.121.

731 U.S.C. 5311.8FinCEN wishes to note that the final rule

eliminates the proposed trust protector provision;see the discussion in the Section-by-SectionAnalysis.

9A few commenters raised other issuesconcerning the filing of the FBAR such as

increasing the filing threshold and changing the duedate of the FBAR. The threshold and the due dateare established under a regulation section, 31 CFR103.27 that was not proposed to be amended by theNPRM. Thus, changes suggested by those commentsare not addressed in this final rulemaking.

10As a result of changes that were made to theFBAR form instructions in October 2008, the IRSextended the FBAR filing deadline for certain filers.See IRS Notice 200962 and IRS Notice 201023.

individuals who raised concerns thattheir non-U.S. spouses did not wantinformation regarding joint financialaccounts to be reported to U.S.government authorities. Anothercommenter requested that FinCENexempt regulated financial institutions,such as those that qualify for exemptrecipient status for purposes of filing an

IRS 1099 series form, to report interestincome and dividends.

Finally, FinCEN received severalcomments requesting a broad exemptionfor pension plans and welfare benefitplans, or at least for large ERISA plans.These commenters argued that pensionplans and welfare benefit plans alreadyare subject to comprehensive regulationand believed that the FBAR filingobligations would be undulyburdensome and duplicative in light ofexisting reporting requirements,particularly Form 5500, Annual Return/Report of Employee Benefit Plan.

Commenters also pointed to the tax-exempt status of certain ERISA plantrusts, and a provision in the customeridentification program (CIP) rules whichexempts from the CIP rules an accountestablished for the purpose ofparticipating in an ERISA plan asindicating that an exemption from theFBAR rules would be appropriate in thecase of ERISA pension and welfarebenefit plans.6 Alternatively, thesecommenters stated that many of theirconcerns would be addressed if FinCENwere to clarify the scope of a number ofdefinitions in the NPRM such assignature authority and reportable

accounts.Section 5314 of the BSA mandates

that the Secretary require each residentor citizen of the United States or aperson in, and doing business in, theUnited States to keep records and filereports that disclose informationregarding their foreign financialaccounts. Section 5314 authorizes theSecretary to prescribe a reasonableclassification of persons subject to orexempt from the reportingrequirements.

FinCEN does not believe itappropriate to expand the exemptions

as recommended by the commenters.Although the commenters noted thatcertain countries may have a robust setof anti-money laundering laws, theFBAR places the obligation of reportingon the United States person, andindividuals and businesses can commit

financial abuses and other crimes usingfinancial institutions in those countries.By requiring United States persons toidentify foreign financial accounts, theFBAR creates a financial trail thatassists law enforcement and otheragencies to identify accounts outside ofthe United States.

With respect to the comments raised

by United States persons living abroad,FinCEN does not believe that anexemption is appropriate simplybecause a United States person choosesto live outside of the United States.With respect to commenters whorecommended exempting certainregulated entities, such as those thatqualify for exempt recipient status forpurposes of reporting on IRS Form 1099,FinCEN has carefully considered thecomments and has decided not to adoptthem. While these entities may beentitled to some measure of specialtreatment under the Federal tax rules,

FinCEN wishes to note that the purposeof the FBAR is broader than taxadministration.7

Finally, FinCEN has considered theconcerns raised by commentersregarding the treatment of pension andwelfare benefit plans. FinCEN has notadopted the recommendation for abroad exemption for such plans.Because the purpose of the FBAR isbroader than tax administration,FinCEN does not believe that it isappropriate to exempt entities from theFBAR requirement based on their tax-exempt status. In addition, while theCIP rule exempts accounts of certain

entities, FinCEN does not believe thatthose CIP provisions which apply in thecase of accounts established ormaintained at a financial institutionlocated in the United States, aredeterminative in the case of accountsmaintained with a foreign financialinstitution. However, in response tothese commenters request for greaterclarification of the NPRM, the final rulehas provided a number of clarificationsthat address their concerns regardingthe scope of foreign financial accountsthat are reportable, and the definitionsof signature authority and financial

interest.8

E. Other Issues

Commenters raised a number of issuesrelated to the process of filing the FBAR.Specifically, they requested the optionto file the form electronically.9 As noted

in the NPRM, the FBAR form currentlyavailable on both the FinCEN and IRSWeb sites allows users to complete theform electronically and print a PDFdocument that can be mailed to theaddress on the form. FinCEN is in theprocess of modernizing its IT systemand has plans to include the ability tofile FBARs electronically.

Commenters requested clarification ofthe draft instructions regarding how todetermine the value of an account. Thedraft instructions to the FBAR formwhich accompanied the NPRM providethat periodic account statements may berelied on to determine the maximumvalue of the account provided that thestatements fairly reflect the maximumaccount value during the calendar year.The commenters were uncertainwhether it is possible to rely on periodicstatements that provide the value in theaccount at the end of the statementperiod. Where bona fide statements are

prepared in the ordinary course ofbusiness, FinCEN believes that suchperiodic account statements may berelied on for this purpose.

F. Applicability Date

The final rules contained in thisdocument apply to FBARs required tobe filed by June 30, 2011 with respectto foreign financial accounts maintainedin calendar year 2010 and for reportsrequired to be filed with respect to allsubsequent calendar years.

FinCEN received several commentsregarding the applicability date for thefinal rule. These commentersspecifically asked whether filers wouldbe permitted to rely on favorableprovisions of the final rule with respectto foreign financial accounts maintainedin calendar years beginning before 2010.We recognize that in certain instances,United States persons might havedeferred filing the FBAR for priorreporting years in accordance withguidance issued by Treasury.10Although this final rule is notretroactive, filers who properly deferredfiling obligations pursuant to IRS Notice201023 may, if they wish, apply the

provisions of this final rule indetermining their FBAR filingrequirements for reports due June 30,2011, with respect to foreign financial



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1175 FR 65806, Oct. 26, 2010.

accounts maintained in calendar yearsbeginning before 2010.

G. Coordination With Chapter X

On October 26, 2010, FinCENfinalized a reorganization of all the BSAregulations appearing in part 103 ofTitle 31 of the Code of FederalRegulations, effective March 1, 2011.11

As discussed in the preamble of thatfinal rule, BSA regulations thatpreviously appeared in part 103 of Title31 now appear in new Chapter X ofTitle 31. The reorganization is notintended to have any substantive effecton the BSA regulations.

Because the NRPM was publishedprior to the effective date of the ChapterX reorganization, the NPRM used the 31CFR part 103 numbering system. Forconsistency with the NPRM, referencesin this final rule generally continue touse the 31 CFR part 103 numberingsystem. However, because the effective

date of this final rule is March 28, 2011,the text of the regulations finalizedtoday must use the Chapter Xnumbering system. Thus, instead ofbeing numbered 31 CFR 103.24, todaysfinal rule is numbered 31 CFR 1010.350.

III. Section-by-Section Analysis

The NPRM set forth generalrequirements for filing the FBAR andspecific definitions applicable to suchreporting. The final rule continues thesegeneral requirements and includesdefinitions of United States person, andbank, securities, and other financialaccounts in a foreign country. These

definitions delineate both the scope ofindividuals and entities that would berequired to file the FBAR and the typesof accounts for which such reportsshould be made. In addition, the finalrule exempts certain persons withsignature or other authority from filingthe FBAR. Finally, the final ruleincludes provisions intended to preventUnited States persons required to filethe FBAR from avoiding this reportingrequirement.

A. Section 103.24(a)In General

FinCEN received no comments on

proposed paragraph (a) of section 103.24of the NPRM. Accordingly, the final ruleadopts this paragraph without change.

B. Section 103.24(b)United StatesPerson

The NPRM defined a United Statesperson as a citizen or resident of theUnited States, or an entity, includingbut not limited to a corporation,partnership, trust or limited liabilitycompany, created, organized, or formed

under the laws of the United States, anyState, the District of Columbia, theTerritories, and Insular Possessions ofthe United States or the Indian Tribes.The NPRM provided that thedetermination of whether an individualis a resident of the United States wouldbe made under the rules of the InternalRevenue Code, specifically, 26 U.S.C.

7701(b) and the regulations thereunder,except that the definition of the termUnited States provided in 31 CFR103.11(nn) will be used instead of thedefinition of United States in the rulesunder the Internal Revenue Code.

FinCEN received a number ofcomments about the proposed definitionof United States person. Commentersraised questions about the part of thedefinition of United States personconcerning trusts. They also raisedquestions about the application of theprovisions of the Internal Revenue Codewith respect to the term resident.

Commenters generally objected to theinclusion of trust in the definition. Theyargued that trusts should not have aseparate filing obligation in light of thefact that a U.S. trustee would also havean obligation to file an FBAR withrespect to the trust. Commenters alsobelieved that the NPRM is unclear aboutwhether a trust that is treated as whollyowned by another person under theInternal Revenue Code would berequired to file an FBAR. Finally,commenters believed that the final ruleshould define trust with reference to therules of the Internal Revenue Code,specifically section 7701(a)(30), rather

than considering whether a trust hasbeen created, organized, or formedunder the laws of the United States* * *.

FinCEN acknowledges that in the caseof trusts, a U.S. trustee must file theFBAR for the trust. However, FinCENhas decided to retain trust under thedefinition of United States person in thesame manner that it has retained otherentities such as corporations andlimited liability companies.

FinCEN does not believe itappropriate to define trust under section7701(a)(30) of the Internal Revenue

Code because that definition mightallow trusts formed under the law of aState to be excluded from the scope ofFBAR obligations. For example, if atrust is formed under New York law andhas one trustee who is a United Statesperson and two trustees who are notUnited States persons, under section7701(a)(30) the trust would not beconsidered a U.S. trust if all substantialtrust decisions were not controlled byits U.S. trustee.

Commenters also raised questionswith respect to the term resident in the

definition of United States person.These commenters sought clarificationon the treatment of individuals whomake certain elections under section7701(b) of the Internal Revenue Code.FinCEN believes that individuals whoelect to be treated as residents for taxpurposes under section 7701(b) shouldfile FBARs only with respect to foreignaccounts held during the period coveredby the election. A legal permanentresident who elects under a tax treaty tobe treated as a non-resident for taxpurposes must still file the FBAR.Commenters also sought clarificationabout the interaction of elections undersection 6013(g) and (h) of the InternalRevenue Code and the definition ofresident. FinCEN wishes to clarify thatthe determination of whether anindividual is a United States residentshould be made without regard toelections under section 6013(g) or

6013(h) of the Internal Revenue Code. Inthe same vein, a commenter askedwhether foreign corporations holding aU.S. real property interest and electingto be treated as a U.S. corporation forU.S. income tax purposes under section897(i) of the Internal Revenue Code arerequired to file FBARs. FinCEN wishesto reiterate that, for purposes of FBARreporting, a corporation is a UnitedStates person only if it is created,organized, or formed under the laws ofthe United States, any State, the Districtof Columbia, the Territories and InsularPossessions of the United States, or the

Indian Tribes.C. Section 103.24(c)Types ofReportable Accounts

FinCEN proposed to amend 31 CFR103.24 by adding definitions of theaccounts subject to reporting. FinCENhas chosen to define the terms bankaccount, securities account, and otherfinancial account with reference to thekinds of financial services for which aperson maintains an account.

D. Section 103.24(c)(1)Bank Account

The NPRM defined bank account as

a savings deposit, demand deposit,checking, or any other accountmaintained with a person engaged inthe business of banking. The proposeddefinition would include time depositssuch as certificates of deposit accountsthat allow individuals to deposit fundswith a banking institution and redeemthe initial amount along with interestearned after a prescribed period of time.FinCEN received no comments on theproposed definition and, therefore, isadopting this definition without change.



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12A comma is added before the word that.13FinCEN reaffirms that the FBAR requirement

addressed in this document is a requirement undertitle 31 of the United States Code rather than underthe Internal Revenue Code.

E. Section 103.24(c)(2)SecuritiesAccount

The NPRM defined securitiesaccount as an account maintained witha person in the business of buying,selling, holding, or trading stock orother securities. FinCEN received nocomments on the proposed definition

and, therefore, is adopting thisdefinition without change.

F. Section 103.24(c)(3)Other FinancialAccount

The term other financial accountappears in current section 103.24. Inorder to enhance compliance, the NPRMproposed certain types of accounts thatwould fall within the meaning of thisterm. Specifically, the NPRM definedother financial account to mean

An account with a person that is inthe business of accepting deposits as afinancial agency;

An account that is an insurance

policy with a cash value or an annuitypolicy;

An account with a person that actsas a broker or dealer for futures oroptions transactions in any commodityon or subject to the rules of acommodity exchange or association; or

An account with a mutual fund orsimilar pooled fund which issues sharesavailable to the general public that havea regular net asset value determinationand regular redemptions.

FinCEN received comments on theparts of the proposed definitionaddressing life insurance and annuity

policies and mutual funds. With respectto life insurance and annuity policies,one commenter was concerned that thetreatment of life insurance policies asaccounts under the FBAR rule wouldcause these policies to be treated asaccounts under other BSA regulations.The final rule clarifies that thisdefinition is limited to the FBARrequirement.

The commenter also asked FinCEN torevise the definition with respect to lifeinsurance and annuity policies so thatthe FBAR reporting requirement wouldapply only to such policies with a cash

value or only at the time of the paymentof an income stream to the policyholder. FinCEN has considered thiscomment. We are amending thedefinition with respect to life insuranceand annuities to clearly reflect that onlythose life insurance or annuity policieswith a cash value are covered under thisdefinition. However, we do not believeit appropriate to limit the FBARrequirement to situations in which thereis payment of an income stream. Aswith other types of reportable accounts,such as bank accounts, which are

included in this final rule, the reportingof the FBAR is not limited to situationsin which there is payment from theaccount. FinCEN also received acomment seeking clarification as towhether the obligation to file the FBARin the case of life insurance rests withthe policy holder or the beneficiary.FinCEN would like to clarify that the

obligation in such a case rests with thepolicy holder.

With respect to mutual funds, FinCENreceived a number of comments seekingclarification of the definition.Commenters noted that the termmutual fund may have a differentmeaning outside of the United Statesand might potentially cover hedge fundsand private equity funds that haveperiodic redemptions. FinCEN wishes toreiterate that the definition of mutualfund includes a requirement that theshares be available to the general publicin addition to having a regular net asset

value determination and regularredemption feature. FinCEN believesthat some of the concerns ofcommenters arose because the draftinstructions to the form published withthe proposed rule did not include thewords which issues shares available tothe general public. The instructionshave been revised to reflect the languageof the definition contained in the finalrule. As such, FinCEN does not believeit necessary to amend the proposeddefinition with respect to mutual funds.Accordingly, FinCEN is retaining thispart of the definition as proposed.Furthermore, FinCEN notes that the

NPRM specifically reserved thetreatment of investment companiesother than mutual funds or similarpooled funds, and the final rulecontinues to do so.

G. Section 103.24(c)(4)Exceptions forCertain Accounts

Section 103.24(c)(4) of the NPRMproposed exceptions for certainaccounts for which reporting will not berequired by persons with a financialinterest in or signature or otherauthority over the accounts. Thefollowing accounts were proposed to be

excepted from reporting: An account of a department oragency of the United States, an IndianTribe, or any State or any politicalsubdivision of a State, or a wholly-owned entity, agency, or instrumentalityof any of the foregoing is not requiredto be reported. In addition, reporting isnot required with respect to an accountof an entity established under the lawsof the United States, of an Indian Tribe,of any State, or of any politicalsubdivision of any State, or under anintergovernmental compact between

two or more States or Indian Tribes[,]that exercises governmental authorityon behalf of the United States, an IndianTribe, or any such State or politicalsubdivision. For this purpose, an entitygenerally exercises governmentalauthority on behalf of the United States,an Indian Tribe, a State, or a politicalsubdivision only if its authorities

include one or more of the powers totax, to exercise the power of eminentdomain, or to exercise police powerswith respect to matters within itsjurisdiction.

A few commenters soughtclarification as to the meaning ofproposed section 103.24(c)(4)(i). Inparticular, the commenters askedFinCEN to clarify whether the lastsentence of the paragraph concerningthe exercise of governmental authorityapplied to the entire paragraph or onlythe second sentence of the paragraph. Inresponse, FinCEN clarifies that the last

sentence should be read in conjunctionwith the second sentence of theparagraph, which contains a specificrequirement concerning the exercise ofgovernmental authority. FinCEN is alsomaking a minor editorial change to thesecond sentence so that it will be clearerthat the exercise of governmentalauthority requirement applies to theentire second sentence.12

Commenters recommended that thefinal rule provide an exception for theaccounts of foreign insurancecompanies that elect under section953(d) of the Internal Revenue Code to

be treated as U.S. companies. Theirrecommendation appears to be based, inpart, on a reading of the secondsentence of proposed section103.24(c)(4)(i) as providing an exceptionfor the accounts of any entity organizedin the United States. As explainedabove, the second sentence of proposedsection 103.24(c)(4)(i) would onlyexempt the accounts of certain entitiesorganized under the laws of the UnitedStates (or the law of other levels ofgovernment, such as State and localgovernments) if the entities exercisegovernmental authority. Thecommenters also indicate that bymaking a section 953(d) election, thesecompanies are agreeing to comply withU.S. tax law. FinCEN wishes to clarifythat making such an election does notrender the entity a United States personfor purposes of the FBAR.13Accordingly, the final rule does notadopt this recommendation.



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14This exception does not limit the operation ofthe International Organization Immunities Act ofDecember 29, 1945 (22 U.S.C. 288).

15See, the Senate Permanent Subcommittee onInvestigations (PSI), Committee on HomelandSecurity and Governmental Affairs 2006 reporttitled, Tax Haven Abuses: the Enablers, the Toolsand Secrecy, Senate Hearing 109797, 109th Cong.,2d Sess. (August 1, 2006).

The last three exceptions contained inproposed 31 CFR 103.24(c)(4) were asfollows:

An account of an internationalfinancial institution of which the UnitedStates government is a member is notrequired to be reported.14

An account in an institution knownas United States military banking

facility (or United States militaryfinance facility) operated by a UnitedStates financial institution designatedby the United States Government toserve United States governmentinstallations abroad is not required to bereported even though the United Statesmilitary banking facility is located in aforeign country.

Correspondent or nostro accountsthat are maintained by banks and usedsolely for bank-to-bank settlements arenot required to be reported.

FinCEN received no comments on theseproposed exceptions and, therefore, is

adopting these exceptions withoutchange.

H. Section 103.24(d)Foreign Country

The term foreign country includes allgeographical areas located outside of theUnited States as defined in 31 CFR103.11(nn). FinCEN received nocomments on the proposed definitionand, therefore, is adopting thisdefinition without change.

I. Section 103.24(e)Financial Interest

The NPRM proposed a definition offinancial interest. The proposeddefinition covered situations in whichthe United States person is the owner ofrecord or holder of legal title, as well assituations in which the United Statespersons ownership or control over theowner of record or holder of legal titlerises to such a level that the personshould be deemed to have a financialinterest in the account.

Section 103.24(e)(1) proposed thefollowing:

A United States person has afinancial interest in each bank,securities, or other financial account ina foreign country for which he is theowner of record or has legal title

regardless of whether the account ismaintained for his own benefit or for thebenefit of others. If an account ismaintained in the name of more thanone person, each United States personin whose name the account ismaintained has a financial interest inthat account.

Section 103.24(e)(2) proposed that aUnited States person also has a financial

interest in each bank, securities, or otherfinancial account in a foreign countryfor which the owner of record or holderof legal title is one of the following:

A person acting on behalf of thatUnited States person such as anattorney, agent, or nominee with respectto the account. (Section 103.24(e)(2)(i)).

A corporation in which the United

States person owns directly or indirectlymore than 50 percent of the votingpower or the total value of the shares,a partnership in which the United Statesperson owns directly or indirectly morethan 50 percent of the interest in profitsor capital, or any other entity (otherthan a trust) in which the United Statesperson owns directly or indirectly morethan 50 percent of the voting power,total value of the equity interest orassets, or interest in profits. (Section103.24(e)(2)(ii)).

A trust, if the United States personis the trust settlor and has an ownershipinterest in the account for United StatesFederal tax purposes. See 26 U.S.C.671679 to determine if a settlor has anownership interest in a trusts financialaccount for a year. (Section103.24(e)(2)(iii)).

A trust in which the United Statesperson either has a beneficial interest inmore than 50 percent of the assets orfrom which such person receives morethan 50 percent of the income. (Section103.24(e)(2)(iv)).

A trust that was established by theUnited States person and for which theUnited States person has appointed atrust protector that is subject to such

persons direct or indirect instruction.(Section 103.24(e)(2)(v)).

FinCEN received one commentseeking clarification on the scope ofproposed section 103.24(e)(2)(iii). Thecommenter noted that although FinCENincorporates the provisions of 26 U.S.C.671679 for determining ownershipinterest, section 103.24(e)(2)(iii)references the interests of the trustsettlor, while the provisions of 26U.S.C. 671679 refer to grantor. Thecommenter noted that FinCEN did notdefine the term settlor. FinCEN agreeswith the commenter and has revised

section 103.24(e)(2)(iii) to replace theword settlor with the word grantor.In addition, the NPRM inadvertentlyused the word account instead oftrust in section 103.24(e)(2)(iii). Thefinal rule revises the section by usingthe word trust.

FinCEN received a few commentsrelated to the application of thedefinition of financial interest in thecontext of trusts, including trusts forpension plans. With respect to trustsgenerally, commenters raised concernsabout determining whether a person has

more than a 50 percent beneficialinterest in the trust, when the trust is adiscretionary trust. FinCEN recognizesthat in the case of trusts, determinationsregarding beneficial interest forpurposes of filing the FBAR may bedifficult if the person is a beneficiary ofa discretionary trust or has a remainderinterest in a trust. After considering this

comment, FinCEN has revised section103.24(e)(2)(iv) to change the termbeneficial interest to presentbeneficial interest. FinCEN does notintend for a beneficiary of adiscretionary trust to have a financialinterest in a foreign account simplybecause of his status as a discretionarybeneficiary. Further, FinCEN does notintend to include a remainder interestwithin the scope of the term presentbeneficial interest for purposes of filingan FBAR. Finally, the final rule adds theword current before the wordincome which was inadvertently

omitted from the text of the NPRM.FinCEN also received comments

regarding the trust protector provisionin section 103.24(e)(2)(v). Commenterswere concerned that the trust protectorprovision could be read in an overlybroad manner, particularly in the case ofpension plans, and another commenterbelieved that the trust protectorprovision would not adequately addresssituations in which the grantor hasretained control over the trust. AlthoughFinCEN has considered these commentsand is removing the trust protectorprovision from the final rule, FinCEN

remains concerned with the potentialfor abuse when a trust protector isappointed.15 FinCEN believes thatinstances of abuse or arrangementsdesigned to obfuscate ownership in thecontext of trusts, including the use of atrust protector to evade an FBARreporting obligation, are sufficientlycaptured through the anti-avoidanceprovision discussed below.

Finally, the NPRM provided that aUnited States person that causes anentity to be created for a purpose ofevading the FBAR reportingrequirement would have a financialinterest in any bank, securities, or otherfinancial account in a foreign countryfor which the entity is the owner ofrecord or holder of legal title. The termevading as used in the anti-avoidancerule is not intended to apply to personswho make a good faith effort to complywith the final rule.



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FinCEN received one comment on theproposed anti-avoidance provision,which recommended that the provisionspecifically incorporate rules found in26 CFR 1.6712(e)(4), relating to thetreatment of transfer companies used todisguise the fact that a trust had aUnited States grantor. FinCEN believesthat the anti-avoidance rule is

sufficiently broad as to make itunnecessary to specifically incorporate26 CFR 1.6712(e)(4) because the rulecaptures all situations in which entities,including trusts, are used to evade anFBAR reporting obligation.

J. Section 103.24(f)Signature or OtherAuthority

Current section 103.24 requiresreporting by United States persons withsignature or other authority over bank,securities, or other financial accounts ina foreign country. The NPRM proposedto continue this requirement and todefine signature or other authority. Asdiscussed in Section II.B above, the finalrule revises the definition and continuesthe signature authority filingrequirement.

K. Signature Authority Exceptions

The NPRM proposed to grant relieffrom the obligation to report signatureor other authority over a foreignfinancial account to the officers andemployees of five categories of entitiessubject to specific types of Federalregulation. These exceptions wouldapply, however, only where the officersor employees have no financial interest

in the reportable account. These entitieswould still be obligated to report theirfinancial interest in these reportableaccounts. Officers and employees wouldbe able to avail themselves of theseexceptions without receiving notice thatthe entities had filed an FBAR withrespect to these accounts.

FinCEN received a number ofcomments on the signature authorityexceptions. Some commenters soughtadditional relief in the form of newexceptions. FinCEN received commentsrequesting relief from the signatureauthority filing requirement for the

officers and employees of entitieslocated in countries that FinCEN woulddesignate as low-risk, of entities listedon a foreign securities exchange, offoreign-located banks that have enteredinto a Qualified Intermediary agreementwith the IRS, and of 501(c)(3) privatecolleges and universities. FinCENwishes to reiterate that although certaincountries may have a robust set of anti-money laundering laws, the FBARplaces the obligation of reporting on theUnited States person, and the purposeof the FBAR is to create a financial trail

of foreign accounts. Likewise, the factthat a foreign bank may have enteredinto a Qualified Intermediary agreementwith the IRS for tax purposes or that anentity is exempt from tax under theInternal Revenue Code does noteliminate the need for law enforcementand other agencies to have informationabout the existence of foreign financial

accounts of United States persons.Commenters also submitted specific

comments on the proposed exceptions.We are addressing these concerns belowin connection with the specificprovisions of the NPRM.

The NPRM provided the followingexceptions:

31 CFR 103.24(f)(2)(i). An officer oremployee of a bank that is examined bythe Office of the Comptroller of theCurrency, the Board of Governors of theFederal Reserve System, the FederalDeposit Insurance Corporation, theOffice of Thrift Supervision, or theNational Credit Union Administrationneed not report that he has signature orother authority over a foreign financialaccount owned or maintained by thebank if the officer or employee has nofinancial interest in the account.

This exception would be available toofficers or employees of banks examinedby the Federal banking agencies. Severalcommenters asked that the exemptionbe expanded to cover officers andemployees of trust companies and creditunions that lack a Federal functionalregulator. We proposed this exceptionfor officers and employees of entitiesthat are subject to functional regulation

by Federal agencies that also examinethem for compliance with the BSA.Limiting the exemption as proposedprovides for a degree of uniformity infunctional regulation and BSAexamination and compliance that maynot necessarily exist on the part of Stateor even other Federal agencies withlittle or no involvement in BSAcompliance.

31 CFR 103.24(f)(2)(ii). An officer oremployee of a financial institution thatis registered with and examined by theSecurities and Exchange Commission orCommodity Futures Trading

Commission need not report that he hassignature or other authority over aforeign financial account owned ormaintained by such financial institutionif the officer or employee has nofinancial interest in the account.

This exception would be available toofficers or employees of financialinstitutions which are registered with,and examined by, the SEC or CFTC. Aswith the first exception, this is availableto officers and employees of entities thatare subject to functional regulation byFederal agencies that also examine such

entities for compliance with the BSA.Commenters sought clarification onwhether this exception would apply toSEC registered investment adviserswhen they are providing advisoryservices to clients that are not registeredinvestment companies. FinCEN wishesto clarify that this exception does notapply in this situation. The exception

applies to officers and employees offinancial institutions, which is adefined term under 31 CFR 103.11(n).Investment advisers are not included inthat definition of financial institution.

31 CFR 103.24(f)(2)(iii). An officeror employee of an Authorized ServiceProvider need not report that he hassignature or other authority over aforeign financial account owned ormaintained by an investment companythat is registered with the Securities andExchange Commission if the officer oremployee has no financial interest inthe account. Authorized Service

Provider

means an entity that isregistered with and examined by theSecurities and Exchange Commissionand provides services to an investmentcompany registered under theInvestment Company Act of 1940.

The NPRM included this exception toaddress the fact that mutual funds donot have employees of their own.Instead, the day-to-day operations ofsuch a fund are performed byindividuals who are employed by fundservice providers, such as investmentadvisors. This exception would beavailable to officers or employees of anAuthorized Service Provider that is

registered with and examined by theSEC, provided that the fund serviced bythe Authorized Service Provider is alsoregistered with the SEC.

Commenters sought clarification onthe scope of this exception andspecifically asked how this exceptionrelates to the exception provided in theNPRM under section 103.24(f)(2)(ii).FinCEN wishes to reiterate that theexception in 103.24(f)(2)(ii) applies toofficers and employees of financialinstitutions as defined in 31 CFR103.11(n) that are registered with andexamined by the SEC or CFTC. Thus,

section 103.24(f)(2)(ii) does not apply toofficers and employees of investmentadvisers. These commenters also soughtclarification as to the scope of accountscovered by the exception contained insection 103.24(f)(2)(iii). FinCEN wishesto clarify that officers and employees ofan Authorized Service Provider mayavail themselves of this exception onlywith respect to the reportable accountsof those clients which are investmentcompanies registered under theInvestment Company Act of 1940 andare managed by the Authorized Service



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16To make the application of the exceptionclearer in the context of the special rule forconsolidated FBARs, the final rule revises thesecond sentence of the exception by deleting thewords such entity and adding the words a UnitedStates entity with a class of equity securities listedon a United States security exchange. FinCENbelieves that this change will clarify that the second

sentence of the exception does not apply in the caseof parent companies that are not U.S. entities.

17FinCEN also received comments requestingthat we adopt a provision in the instructions to the2008 version of the FBAR that provided officers andemployees of a foreign subsidiary with an exceptionto the signature authority obligation. In light of thebroader set of changes made with respect to thesignature authority provisions, FinCEN has decidednot to adopt this recommendation.

Provider. If FinCEN were to expand theexception as requested beyond clientsthat are registered investmentcompanies, the exception would applyeven in situations where the officer andemployee is providing service toindividuals. FinCEN does not believethat such a change is appropriate.

Likewise, commenters asked that

FinCEN consider expanding the scopeof the proposed exception to coverservice providers to registeredinvestment companies even when theservice providers are not registered withthe SEC. These commenters noted thatthe preamble to the anti-moneylaundering rules for mutual fundspermits the fund contractually todelegate the implementation andoperation of their AML program to aservice provider that is not registeredwith the SEC. FinCEN has consideredthis comment but declined to expandthe exception as requested by these

commenters. First, FinCEN believes thatthis exception is appropriate not onlybecause the service provider and thefund are registered with the SEC, butalso because the investment companiesregistered under the 1940 Act haveobligations under the BSA. Further, wenote that under the AML rules, themutual fund remains responsible forAML compliance. Under this exception,however, officers and employees of theAuthorized Service Provider would berelieved of the reporting obligations ofthis rule.

31 CFR 103.24(f)(2)(iv). An officer

or employee of an entity with a class ofequity securities listed on any UnitedStates national securities exchange neednot report that he has signature or otherauthority over a foreign financialaccount of such entity if the officer oremployee has no financial interest inthe account. An officer or employee ofa United States subsidiary of such entityneed not file a report concerningsignature or other authority over aforeign financial account of thesubsidiary if he has no financial interestin the account and the United Statessubsidiary is named in a consolidatedFBAR report of the parent filed underproposed paragraph (g)(3) of 31CFR103.24.

This exception would be available toofficers and employees of entities witha class of equity securities listed upona U.S. national securities exchange,regardless of whether the entity isdomestic or foreign. Officers andemployees of a U.S subsidiary of suchlisted U.S. entities are also covered bythis exception if the U.S subsidiary isnamed in a consolidated FBAR report ofthe parent.

FinCEN received a number ofcomments on this exception. Most ofthese comments addressed theinteraction between the exception forofficers and employees of corporationslisted on a United States nationalsecurities exchange and the special rulefor consolidated FBARs. Somecommenters questioned whether the

exception contained in section103.24(f)(2)(iv), which discussesconsolidated FBARs filed by a parent,enables a foreign listed parent to file aconsolidated report on behalf of itsUnited States subsidiaries. FinCENnotes that by its terms the special rulefor consolidated FBAR reporting onlyapplies to United States persons.

FinCEN received a number ofcomments regarding the treatment ofU.S. subsidiaries of foreign parents.Some commenters noted that a foreignlisted parent cannot file a consolidatedFBAR report, and, therefore, the officers

and employees of its U.S. subsidiariescannot avail themselves of the signatureauthority exceptions. Commentersrecommended that in the case of foreignentities listed on a U.S. nationalsecurities exchange, the U.S. subsidiaryof that foreign entity be permitted to filea consolidated report for other U.S.subsidiaries. Other commentersrecommended that the exception berevised to apply to the officers andemployees of U.S. subsidiaries whoseforeign parent is listed on a foreignexchange, provided that FinCENdetermined that the foreign exchangewas subject to suitable regulation. Someof these commenters suggested thatFinCEN allow the foreign parent tovoluntarily file a consolidated FBAR onbehalf of its U.S. subsidiaries.

FinCEN has considered thesecomments but has decided to retain theexception as originally proposed. In theNPRM, FinCEN considered itappropriate to provide an exception forofficers and employees of a U.S.subsidiary when the U.S. parent files aconsolidated FBAR in light of both thelisted parents regulation by the SECand its legal obligation to file the FBAR.In the case of a U.S. subsidiary with a

foreign parent listed on a U.S. nationalsecurities exchange, the parent has nolegal obligation to file the FBAR, andthe subsidiary is not required to file thesame reports with the SEC as the U.S.listed parent.16 For similar reasons,

FinCEN has decided not to extend theexception to U.S. subsidiaries of foreignparents listed on foreign exchanges.Furthermore, because the FBAR rulesapply only to United States persons,FinCEN will not permit voluntary filingby the foreign parent to satisfy the filingobligations of the officers andemployees of U.S. subsidiaries.17

Finally, commenters asked that a U.S.subsidiary be permitted to rely on thisexception if its U.S. listed parent doesnot file a consolidated FBAR. While therules permit the parent to file aconsolidated FBAR, if it chooses not todo so for its own reasons, FinCEN doesnot believe it necessary to provide aspecial treatment for such U.S.subsidiaries.

FinCEN received two commentsseeking an expansion of the exceptionwhen an employee of a U.S. parent alsohas signature authority over the foreignaccounts of a U.S. parents subsidiary

which have been included in theconsolidated FBAR report. Thesecommenters noted that under theproposed exception, officers oremployees of the parent who havesignature authority over the foreignaccounts of the subsidiary would notbenefit from the exception, which islimited to the accounts of the employer.The commenter further noted that inthis situation, officers or employees ofthe subsidiary would benefit from theexception with respect to thesubsidiarys foreign accounts. Likewise,one of the commenters asked for similar

treatment when the officers andemployees of the subsidiary havesignature authority over the accounts ofthe listed parent.

FinCEN has considered thesecomments and has decided not to revisethe exception as recommended. Giventhe revision in the final rule to thesignature authority definition, theclarifications provided regarding thescope of the signature authority filingrequirement and the recordkeepingrules, FinCEN does not believe that afurther relaxation of the rule isappropriate.

FinCEN also received a commentrecommending that the exception beextended to employees with respect tothe accounts of an employee benefittrust established by an entity listed



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18Currently, these are corporations which havemore than $10 million in assets and more than 500shareholders of record. See 15 U.S.C. 78l(g) (2006)and the regulations thereunder.

19One commenter recommended that we providefor consolidated filing where the listed parentsownership in the subsidiary exceeds 20 percent sothat a broader range of officers and employees maytake advantage of the signature authority exception.We believe that 20 percent is too low of anownership interest for purposes of the consolidatedfiling.

upon a U.S. national securitiesexchange. The commenter argued thatin this situation, the entity is requiredto report the assets and liabilities of itsemployee benefit plans on its ownfinancial statements filed with the SEC,and the trust accounts are subject tooversight and examination by theDepartment of Labor. FinCEN has

considered this comment and decidednot to adopt the recommendationbecause an employee benefit trust itselfis not a listed entity. Further, FinCENbelieves that the clarificationspreviously discussed concerning thescope of foreign financial accounts thatare reportable and the definitions ofsignature authority and financialinterest should address some of theconcerns regarding FBAR filingobligations.

31 CFR 103.24(f)(2)(v)An officeror employee of a United Statescorporation that has a class of equity

securities registered under section 12(g)of the Securities Exchange Act need notreport that he has signature or otherauthority over the foreign financialaccounts of such corporation if he hasno financial interest in the accounts.

This exception as proposed wouldapply to officers and employees of U.S.corporations whose size in terms ofassets and shareholders 18 requires themto register their stock with the SEC andmakes them subject to reporting underthe Securities Exchange Act. FinCENreceived a comment requesting a similarexception for officers or employees of amutual insurance company with assetsof more than $10 million and more than500 policy holders. FinCEN has decidednot to adopt such an exception becausethese companies are not subject to theSEC regulation that applies tocompanies covered by the exception.

FinCEN also received commentsseeking an amendment to the proposedexceptions contained in sections103.24(f)(2)(iv) and 103.24(f)(2)(v) toinclude listed American DepositoryReceipts (ADRs), unlisted ADRs that aretraded over-the-counter if they are listedon the Designated Offshore SecuritiesMarket, ADRs with unlisted trading

privileges on a national securitiesexchange, ADRs registered undersection 12(g) or ADRs with unlistedtrading privileges under section 12(f) ofthe Securities Exchange Act. Afterconsidering these comments, FinCENbelieves that listed ADRs would becovered by the first sentence of theexception in section 103.24(f)(2)(iv). In

addition, if a foreign issuer hasregistered under section 12(g) a class ofequity securities underlying ADRs,FinCEN believes it should be covered bythe exception under section103.24(f)(2)(v). The final rule makesappropriate changes to reflect thiscoverage. FinCEN does not believe thatother ADRs are subject to the same

requirements as listed entities on a U.S.national securities exchange or entitiesregistered under section 12(g), and,therefore, we have not adopted therecommendations to include other typesof ADRs.

Accordingly, the final rule adoptsthese exceptions as revised.

L. 103.24(g)Special Rules

The NPRM proposed the followingspecial rules to simplify FBAR filings incertain cases.

25 or more foreign financialaccounts. A United States person havinga financial interest in 25 or more foreignfinancial accounts need only providethe number of financial accounts andcertain other basic information on thereport, but will be required to providedetailed information concerning eachaccount when so requested by theSecretary or his delegate. Similarly, aUnited States person having signature orother authority over 25 or more foreignfinancial accounts need only providethe number of financial accounts andcertain other basic information on thereport, but will be required to providedetailed information concerning eachaccount when so requested by the

Secretary or his delegate.Commenters raised concerns that thesimplified reporting requirements forfilers having signature authority over 25or more foreign financial accountsrequires more information than thesimplified reporting for persons havingfinancial interest in 25 or more foreignfinancial accounts. In the case ofsimplified reporting for persons with afinancial interest, filers are required toprovide identifying information aboutthemselves and indicate that they havea financial interest in 25 or more foreignfinancial accounts. Where persons have

signature authority over 25 or more suchaccounts, filers are required to provideidentifying information aboutthemselves as well as those who have afinancial interest in the accounts.FinCEN notes that where filers haveonly signature authority, the FBARrequires identifying information aboutthe persons with a financial interest toensure that law enforcement receivesmeaningful information about theseaccounts.

Consolidated reports. An entity thatis a United States person and owns

directly or indirectly more than a 50percent interest in an entity required toreport under this section will bepermitted to file a consolidated reporton behalf of itself and such otherentity.19

One commenter urged additionalconsolidated filing relief be available tofunds organized by the same fund

manager, specifically all foreignfinancial account information for allfunds in the same fund family should bereportable in a single consolidatedFBAR filing. FinCEN believes that thisissue is better addressed in the form ofspecific guidance because the factualsituations may vary.

Participants and beneficiaries incertain retirement plans. Participantsand beneficiaries in retirement plansunder sections 401(a), 403(a) or 403(b)of the Internal Revenue Code as well asowners and beneficiaries of individualretirement accounts under section 408

of the Internal Revenue Code or RothIRAs under section 408A of the InternalRevenue Code will not be required tofile an FBAR with respect to a foreignfinancial account held by or on behalfof the retirement plan or IRA.

FinCEN received one commentproposing an across-the-boardexemption for all pension planparticipants and beneficiaries. Thecommenter was concerned about thefiling obligations of participants andbeneficiaries of other types of plans notcovered by the exemption. In proposingthis exemption, FinCEN considered thatparticipants and beneficiaries of theseplans were less likely to be aware of theexistence of foreign financial accountsbecause they were unlikely to exceedthe 50 percent ownership threshold.Participants and beneficiaries that arenot covered by this exemption shouldlook to the 50 percent ownership indiciato determine whether a filing obligationexists.

Certain trust beneficiaries. Abeneficiary of a trust described inproposed paragraph (e)(2)(iv) is notrequired to report the trusts foreignfinancial accounts if the trust, trustee ofthe trust, or agent of the trust is a United

States person that files an FBARdisclosing the trusts foreign financialaccounts and provides any additionalinformation as required by the report.

This provision is intended to providerelief to beneficiaries of trusts if the



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trust, trustee of the trust, or agent of thetrust is a United States person and hasfiled the FBAR as required. FinCEN isadopting this provision without change.

IV. Regulatory Flexibility Act

Pursuant to the Regulatory FlexibilityAct (RFA) (5 U.S.C. 601 et seq.), FinCENcertifies that this final rule will not have

a significant economic impact on asubstantial number of small entities.The final rule revises a rule in existencesince 1972 that requires reports to bemade to Treasury with respect to certainforeign financial accounts. Because thisfinal rule addresses the scope ofreportable accounts and financialinterest, and revises the definition ofsignature authority and narrows thescope of individuals and entities subjectto reporting and recordkeepingrequirements, the final rule will reduceregulatory obligations overall.

The final rule will not affect asubstantial number of small entities.The final rule applies to United Statespersons, a term that includes entities ofall sizes, if they have reportableaccounts under this rule. However, weexpect that small entities will be lesslikely to have reportable foreignfinancial accounts or to have many suchaccounts unlike larger entities, whichhave a broader base of businessoperations.

In any event, the final rule will nothave a significant economic impact onsmall entities. As explained above, thefinal rule revises an existing rule thatrequires reports to be made to Treasury

with respect to certain foreign financialaccounts. Filing the reports will requireentities to transfer basic informationthat they will often have received onaccount statements from the foreignfinancial institution at which theaccount is opened and maintained.Those statements will provide the entitywith the information about the accountneeded to file the FBAR. No specialaccounting or legal skills are necessaryto transfer the basic informationrequired to be reported, such as thename of the foreign financial institution,the type of account, and the account

number, to the FBAR. Furthermore, thefinal rule continues a simplifiedreporting method for persons with afinancial interest in 25 or more foreignfinancial accounts and also provides asimilar simplified reporting method topersons with signature or otherauthority over 25 or more foreignfinancial accounts.

In the NPRM, FinCEN requestedcomments on the accuracy of thestatement that the proposed rule wouldnot have a significant economic impacton a substantial number of small

entities. FinCEN received no commentsthat directly challenged the accuracy ofthat statement.

V. Executive Order 12866

It has been determined that the finalrule is a significant regulatory actionfor purposes of Executive Order 12866(although not economically significant)

and has been reviewed by the Office ofManagement and Budget.

VI. Paperwork Reduction Act Notices

The collection of information burdencontained in this rule (31 CFR 1010.350)has been approved by the Office ofManagement and Budget (OMB) inaccordance with the PaperworkReduction Act of 1995 (44 U.S.C.3507(d)) (Paperwork Reduction Act)under control number (15060009). Anagency may not conduct or sponsor, anda person is not required to respond to,a collection of information unless itdisplays a valid control numberassigned by OMB.

Estimate Number of Affected FilingIndividuals and Entities: 400,000.

Estimate Average Annual BurdenHours Per Affected Filer: The estimatedaverage burden associated with therecordkeeping requirement in this rulewill vary depending on the number ofreportable accounts. We estimate thatthe recordkeeping burden will rangefrom five minutes to sixty minutes, andthat the average burden will be thirtyminutes. The estimated average burdenassociated with the reportingrequirement (FBAR form completion)

will also vary depending on the numberof reportable accounts and whether thefiler will be able to take advantage of theexceptions provided in this rule. Weestimate that the average reportingburden will range from approximatelytwenty minutes to one hour and that theaverage reporting burden will beapproximately 45 minutes. Thereporting burden is reflected in theburden listed for completing TDF9022.1 (See OMB Control Number15060009/15452038). The burdenassociated with reporting a financialinterest in or signature or other

authority over a foreign financialaccount to the Commissioner of InternalRevenue is reflected in the burden forthe appropriate income tax return orschedule.

Estimated Total Annual Burden:500,000 hours.

FinCEN received one comment on theestimated number of filers. Thecommenter believed that the number offilers should be higher. The commenterstated that estimates of Americans livingabroad may be as high as 5 million, andthat approximately 2 million of those

Americans might be affected by theFBAR rules. The commenter did notprovide a verifiable source ormethodology for arriving at thoseestimates. As stated above, the rulecontained in this document addressesthe FBAR rules that have been inexistence since 1972. FinCENs estimateof the number of affected filing

individuals and entities (400,000) isbased on the number of FBARs annuallyfiled in recent previous years.

One commenter noted that several ofits clients had spent considerably moretime than the NPRM estimated forcomplying with the FBAR requirement.FinCEN believes that changes made bythe NPRM and incorporated in thisdocument, such as addressing the scopeof persons that are required to filereports of foreign financial accounts,specifying the types of reportableaccounts, and providing relief in theform of exemptions for certain persons

with signature or other authority overforeign financial accounts from filingreports, will assist filers in complyingwith the rule. Further, clarifications inthis document regarding the scope ofterms in the NPRM, such as reportableaccounts and financial interest, as wellas revisions to the definition ofsignature authority and the provision oftruncated filing, will assist filers incomplying with the rule. Accordingly,FinCEN has not increased the averageestimated burden.

Finally, several commentersrecommended that filers be allowed tofile the FBAR electronically. As noted

earlier in this document, FinCEN is inthe process of modernizing its IT systemand has plans to include the ability tofile FBARs electronically.

VII. Unfunded Mandates Act of 1995Statement

Section 202 of the UnfundedMandates Reform Act of 1995(Unfunded Mandates Act), Public Law1044 (March 22, 1995), requires that anagency prepare a budgetary impactstatement before promulgating a rulethat may result in expenditure by State,local, and Tribal governments, in theaggregate, or by the private sector, of$100 million or more in any one year.If a budgetary impact statement isrequired, section 202 of the UnfundedMandates Act also requires an agency toidentify and consider a reasonablenumber of regulatory alternatives beforepromulgating a rule. FinCEN hasdetermined that it is not required toprepare a written statement undersection 202 and has concluded that onbalance the proposals in the Notice ofProposed Rulemaking provide the mostcost-effective and least burdensome



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alternative to achieve the objectives ofthe rule.

List of Subjects in 31 CFR Part 1010

Administrative practice andprocedure, Banks, Banking, Brokers,Currency, Foreign banking, Foreigncurrencies, Gambling, Investigations,Penalties, Reporting and recordkeeping

requirements, Securities, Terrorism.

Amendment

For the reasons set forth above in thepreamble, 31 CFR part 1010, publishedOctober 26, 2010 (75 FR 65812), isamended as follows:

PART 1010GENERAL PROVISIONS

1. The authority citation for part 1010continues to read as follows:

Authority: 12 U.S.C. 1829b and 19511959;31 U.S.C. 53115314 and 53165332; title III,sec. 314, Pub. L. 10756, 115 Stat. 307.

2. Section 1010.350 is revised to readas follows:

1010.350 Reports of foreign financialaccounts.

(a) In general. Each United Statesperson having a financial interest in, orsignature or other authority over, abank, securities, or other financialaccount in a foreign country shall reportsuch relationship to the Commissionerof Internal Revenue for each year inwhich such relationship exists and shallprovide such information as shall bespecified in a reporting form prescribed

under 31 U.S.C. 5314 to be filed by suchpersons. The form prescribed undersection 5314 is the Report of ForeignBank and Financial Accounts (TDF9022.1), or any successor form. Seeparagraphs (g)(1) and (g)(2) of thissection for a special rule for personswith a financial interest in 25 or moreaccounts, or signature or other authorityover 25 or more accounts.

(b) United States person. For purposesof this section, the term United Statesperson means

(1) A citizen of the United States;(2) A resident of the United States. A

resident of the United States is anindividual who is a resident alien under26 U.S.C. 7701(b) and the regulationsthereunder but using the definition ofUnited States provided in 31 CFR1010.100(hhh) rather than the definitionofUnited States in 26 CFR301.7701(b)1(c)(2)(ii); and

(3) An entity, including but notlimited to, a corporation, partnership,trust, or limited liability companycreated, organized, or formed under thelaws of the United States, any State, theDistrict of Columbia, the Territories and

Insular Possessions of the United States,or the Indian Tribes.

(c) Types of reportable accounts. Forpurposes of this section

(1) Bank account. The term bankaccount means a savings deposit,demand deposit, checking, or any otheraccount maintained with a personengaged in the business of banking.

(2) Securities account. The termsecurities account means an accountwith a person engaged in the businessof buying, selling, holding or tradingstock or other securities.

(3) Other financial account. The termother financial account means

(i) An account with a person that isin the business of accepting deposits asa financial agency;

(ii) An account that is an insurance orannuity policy with a cash value;

(iii) An account with a person thatacts as a broker or dealer for futures oroptions transactions in any commodityon or subject to the rules of acommodity exchange or association; or

(iv) An account with(A) Mutual fund or similar pooled

fund. A mutual fund or similar pooledfund which issues shares available tothe general public that have a regularnet asset value determination andregular redemptions; or

(B) Other investment fund. [Reserved](4) Exceptions for certain accounts.(i) An account of a department or

agency of the United States, an IndianTribe, or any State or any politicalsubdivision of a State, or a wholly-owned entity, agency or instrumentality

of any of the foregoing is not requiredto be reported. In addition, reporting isnot required with respect to an accountof an entity established under the lawsof the United States, of an Indian Tribe,of any State, or of any politicalsubdivision of any State, or under anintergovernmental compact betweentwo or more States or Indian Tribes, thatexercises governmental authority onbehalf of the United States, an IndianTribe, or any such State or politicalsubdivision. For this purpose, an entitygenerally exercises governmentalauthority on behalf of the United States,

an Indian Tribe, a State, or a politicalsubdivision only if its authoritiesinclude one or more of the powers totax, to exercise the power of eminentdomain, or to exercise police powerswith respect to matters within itsjurisdiction.

(ii) An account of an internationalfinancial institution of which the UnitedStates government is a member is notrequired to be reported.

(iii) An account in an institutionknown as a United States militarybanking facility (or United States

military finance facility) operated by aUnited States financial institutiondesignated by the United StatesGovernment to serve United Statesgovernment installations abroad is notrequired to be reported even though theUnited States military banking facility islocated in a foreign country.

(iv) Correspondent or nostro accounts

that are maintained by banks and usedsolely for bank-to-bank settlements arenot required to be reported.

(d) Foreign country. A foreign countryincludes all geographical areas locatedoutside of the United States as definedin 31 CFR 1010(hhh).

(e) Financial interest. A fina

FBAR Regulations

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