US Treasury To Beef Up Detection Of Offshore Bank Accounts

by Mike Godfrey, Tax-News.com, New York

30 April 2002

In parallel with its pursuit of offshore bank account holders through the credit card companies, the US Treasury Department is intending to increase enforcement of an existing law which requires taxpayers to disclose foreign bank accounts totalling more than US$10,000. The disclosure is supposed to be made both on annual tax returns and on separate Foreign Bank and Financial Accounts Reports (FBAR). The Treasury says that the IRS received fewer than 200,000 such reports last year, but estimates that more than one million taxpayers probably have qualifying accounts.

Reporting to Congress in accordance with Section 361 of the USA PATRIOT Act last week, the Treasury said that while more than 2.5 million taxpayers have been audited in the last three years, the audits discovered and addressed very few FBAR failure-to-file issues. The report says that the number of IRS investigations and referrals for prosecution has dwindled to significantly low proportions. Inaction, says the Treasury, is partly because prosecutors don't like to bring such cases because a jury may find them "hyper-technical."

The report also noted that, due mostly to limited resources, the Treasury's Financial Crimes Enforcement Network (FinCEN) hasn't been very active in pursuing cases. In 12 referrals since 1993, FinCEN has issued only two fines and four letters of warning. Only FinCEN has the power to impose fines for failing to disclose foreign accounts, yet FinCEN's budget totals only $50 million as against the IRS's $10 billion. The report suggests moving responsibility for enforcement to the IRS "in light of the disparity of resources between IRS and FinCEN."

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