Disclaimer: The following is for informational purposes only. It is not intended to constitute legal advice, or to recommend a course of action, and does not create an attorney-client relationship between the reader and Renuka Somers, or Somers Tax Law, PLLC.

All U.S. persons (citizens and residents) who have a financial interest in, or signature or other authority over, a bank, securities, or other financial account in a foreign country are required to report such accounts on an FBAR each year, where the aggregate value of such accounts exceeds USD $10,000 at any time during the calendar year. “Signature or other authority over” includes authority held under a Power of Attorney. U.S. persons are also required to file Schedule B with their federal income tax return (Forms 1040) to disclose whether, at any time during that tax year, they had a financial interest in or signatory authority over a financial account located in a foreign country.

Non-compliance with these requirements can carry significant penalties.¹ For example, the non-willful violation of these requirements can carry a penalty of $10,000 for each tax year. Willful violation (which can include recklessness) carries a maximum civil penalty of the greater of $100,000 or 50% of the account balance at the time of the violation, as well as interest and other penalties, and can also result in criminal sanctions of a fine of up to $250,000, or five-years imprisonment, or both.²

The Statute of Limitations for a FBAR filing is six years. The IRS may assess a civil penalty for FBAR violations (failure to file or filing a false FBAR) at any time before the end of the six-year period from the due date of FBAR.  Once a civil penalty is assessed, there is an additional two-year period to commence an enforcement action to collect the penalty.³  The limitations period can be waived by the parties – in certain circumstances, the limitations period can be extended if both parties agree to it. Further, the United States District Court for the Southern District of New York has previously ruled that there is no limitations period where there has been a conspiracy to defraud the United States.⁴

The case of U.S. v. Meline B. Le Lievre is an important reminder of the significance of the FBAR penalties. It also highlights how important it is to seek legal advice and take appropriate remediation action where there has been non-compliance. In this case, Ms. Le Lievre, a U.S. citizen believed to be living in Switzerland, held three accounts personally, and had a financial interest in, signature authority over, and/or otherwise controlled two other accounts held in a BVI LLC owned by a BVI trust.  Following her husband’s death in 2008, she continued his practice of only disclosing some of her foreign financial accounts to their long-term tax preparer, who filed FBARs reporting only the accounts disclosed. The combined highest balances in 2012 of the four undisclosed accounts exceeded $12.8 million. In the complaint filed in the U.S. District Court for the District of Columbia⁵ on January 17,2025, the government alleges that Ms. Le Lievre,  willfully failed to file reports of foreign bank and financial accounts (FBARs) for four Swiss bank accounts, and requests judgment in favor of the U.S. for a $6.87 million willful failure penalty (calculated as of February 16, 2024), accrued interest, late payment penalties, and further statutory additions from February 16, 2024, onwards. It is alleged that Ms. Le Lievre was aware of, or was willfully blind to, her obligation to file an FBAR with the IRS that disclosed all foreign financial accounts in 2012.

It will be interesting to see how this case is determined.

Renuka Somers

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Endnotes

1. IRC s.5321(a)(5)
2. IRC s.5322
3. IRC s.5321
4. United States v. Canale, 14 Cr. 713 (KBF) (S.D.N.Y. Jun. 17, 2015)
5. Case number 1:25-cv-156