Demystifying FBAR compliance for corporate users.

• Author: Schmidt, Jeanne Castro
• Position: TREASURY - Report of Foreign Bank and Financial Accounts

In response to new regulations, executives and managers with approval authority over their company's foreign bank accounts face personal disclosure requirements involving potentially lengthy and unfamiliar Internal Revenue Service forms.

The regulations apply to those authorized to sign checks and approve transfers of funds, even if they have no financial interest in the accounts or don't actually act on their authority. Executives need to focus on the requirements now, especially if they've changed companies within the year, to ensure past and current employers provide required documentation to complete forms concurrent with the filing of their personal tax returns in 2012

The regulatory changes are the result of an amendment to the Foreign Bank Account Reporting (FBAR) provisions of the Bank Secrecy Act, through the Financial Crimes Enforcement Network (FinCEN)The amendment, effective March 28, stipulated that any person with a financial interest in or signatory authority over a bank, securities or other financial account in a foreign country had to report it to the IRS for each year the relationship exists.

Approval authority is not limited to check signers. It also includes persons authorized to execute electronic payments or send faxed, written or verbal instructions to their banks. Temporary employees, contractors or employees who've subsequently left the companies where they held signing authority may not realize a reporting obligation exists, nor are they likely to have the information needed to prepare the requisite forms.

Determining who must comply is a difficult task for companies that don't maintain centralized records of accounts and authorized signatories. Even companies that do track physical signatories may not track persons authorized to approve electronic transfers.

Consider an employee working overseas who is a citizen of the country in which he works, but also has U.S. citizenship or holds a U.S. green card. He or she must file a form. In a straight-through accounts payable process, with payments to a foreign bank for electronic processing, the question is: who is the approver? The supervisor who initiates payments via FTP to the bank, or the person who authorizes purchase orders against which the payments are automatically matched and queued for payment in the ERP system? Or someone else?

The new reporting mandates have proven challenging for many leading financial executives. During his term as vice president and...