FBAR Reporting Requirements for US Persons: FinCEN 114 Explained

The FBAR Obligation

The Report of Foreign Bank and Financial Accounts (FBAR), filed on FinCEN Form 114, is a disclosure required by the Bank Secrecy Act (31 U.S.C. § 5314) and its implementing regulations at 31 C.F.R. § 1010.350. Despite being a Treasury requirement rather than an IRS requirement, failure to file is a federal offense.

The FBAR must be filed by any US person who:

1. Has a financial interest in, or signature authority over, one or more financial accounts located outside the United States
2. The aggregate value of those foreign accounts exceeded $10,000 at any point during the calendar year

The $10,000 threshold is aggregate across all foreign accounts. A person with three foreign accounts each holding $5,000 has an aggregate of $15,000 and must file. A person with one account that briefly reached $10,001 during the year before falling back below $10,000 must file.

Who Is a "US Person" for FBAR Purposes

For FBAR purposes, a "US person" is:

• A US citizen (regardless of where they live)
• A US lawful permanent resident (green card holder), regardless of where they live
• A US resident alien (someone who meets the substantial presence test under Section 7701(b) of the Internal Revenue Code)
• A domestic entity (US corporation, US LLC, US trust, US estate) that has a financial interest in or signature authority over foreign accounts

US persons living abroad — including Americans who have lived outside the United States for decades — are subject to FBAR. The United States is one of only two countries in the world (alongside Eritrea) that taxes its citizens on worldwide income regardless of residence, and the FBAR obligation flows from this citizenship-based taxation system.

What Counts as a Foreign Financial Account

A "foreign financial account" is defined broadly. It includes:

• Foreign bank accounts (checking, savings, current accounts)
• Foreign securities accounts (brokerage, investment accounts)
• Foreign mutual fund accounts
• Foreign hedge fund interests held through a financial institution
• Foreign private equity interests held through a financial institution
• Foreign insurance policies with cash surrender value
• Foreign annuity contracts
• Foreign pension plans (including UK PAYE-based workplace pensions and SIPPs)

The definition extends to any account at a foreign financial institution where the institution "commingles its assets with that of its clients." This captures pooled investment vehicles maintained at a custodian bank.

Foreign real estate owned directly (not through a foreign entity) is not a foreign financial account. However, a foreign bank account used to collect rent from foreign property is a foreign financial account and must be reported.

Joint Accounts and Signature Authority

Joint accounts: Where a US person holds a joint account with a foreign spouse or family member, the entire account balance is counted towards the US person's FBAR threshold — not just their proportionate share. If a US citizen and their non-US spouse hold a joint account with €50,000, the full €50,000 counts for the US citizen's FBAR threshold.

Signature authority: A US person who has signature authority over a foreign account — but no financial interest in it — must report that account. This commonly affects US employees of foreign companies who are authorised to operate the company's foreign bank accounts for business purposes.

The signature authority reporting obligation can catch US employees of foreign employers who did not know they had an FBAR obligation. A US citizen employed by a Cayman Islands fund manager who is an authorised signatory on the fund's bank accounts must report those accounts on their personal FBAR, even though they have no ownership interest in the accounts.

Account Type	Financial Interest?	Signature Authority?	Reportable?
Personal foreign bank account	Yes	Yes	Yes
Joint account with foreign spouse	Yes (full balance)	Yes	Yes
Company account (authorised signatory)	No	Yes	Yes
Foreign pension (employer-held)	Yes	No	Yes
Foreign property (direct ownership)	No	No	No

Voluntary Disclosure Options

The IRS and FinCEN have historically offered voluntary disclosure programmes for individuals with unfiled FBARs and unreported foreign accounts. As of 2026, the main options are:

Streamlined Filing Compliance Procedures: Available for non-wilful failures. Two versions exist:

• Streamlined Domestic Offshore (for US residents): 5% penalty on the highest aggregate account balance in the three-year lookback period
• Streamlined Foreign Offshore (for non-US residents): No FBAR penalty

Delinquent FBAR Submission Procedures: For individuals who have reported all foreign income on their US returns but simply failed to file FBARs. No penalty if the IRS has no record of prior contact about the accounts.

Criminal Voluntary Disclosure Programme: For individuals with potentially criminal exposure. Requires full cooperation and negotiation with the Department of Justice.

The Offshore Voluntary Disclosure Programme (OVDP) closed in September 2018. The streamlined procedures remain the primary route for most individuals with non-wilful failures.

Civil and Criminal Penalties

The penalty regime for FBAR violations is among the most severe in the US tax system.

Civil penalties:

• Non-wilful failure: Up to $10,000 per violation per year (adjusted for inflation — approximately $16,500 as of 2025)
• Wilful failure: The greater of $100,000 or 50% of the account balance per violation per year

The US Supreme Court's decision in Bittner v United States (2023) held that the non-wilful failure penalty applies per report (per year), not per account per year. However, the wilful penalty may still be applied per account per year, creating potential penalties that exceed the account balance.

Criminal penalties:

• Non-wilful failure: Fine up to $250,000 and/or up to 5 years imprisonment
• Wilful failure: Fine up to $500,000 and/or up to 10 years imprisonment

Criminal prosecutions for FBAR failures have been pursued against individuals with substantial undisclosed foreign accounts, typically where there is also evidence of tax evasion on the underlying income.

Interaction with Form 8938

As noted in the companion FATCA article, both FinCEN 114 and Form 8938 must be filed where the thresholds are independently met. Filing one does not satisfy the other. However, because the Form 8938 threshold is higher ($50,000 for US residents, $200,000 for overseas residents) than the FBAR threshold ($10,000 aggregate), many individuals who must file FBARs will not also be required to file Form 8938.

The statute of limitations for FBAR violations is 6 years from the date of the violation (i.e., the date the FBAR was due). For tax return violations where a Form 8938 was required but not filed, the statute of limitations for the tax return does not begin to run until the return is filed.

HPT Group assists US citizens and green card holders with FBAR compliance, streamlined voluntary disclosure procedures, and the broader challenge of managing US filing obligations alongside their country of residence's requirements. Americans living in the UK, UAE, or elsewhere who have not previously filed FBARs — or who have filed incorrectly — should seek specialist advice before the limitation period closes or HMRC/CRS data exchange creates IRS visibility. Contact our international tax team or apply for a consultation.