What Is the History of the FBAR?

2025-08-12 13:58:41

 Understand the FBAR's history from its 1970s origins to modern-day enforcement. Learn why this form matters for Americans with foreign accounts.

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The Origins: Bank Secrecy Act and the Birth of the FBAR (1970s)

The Foreign Bank and Financial Accounts Report (FBAR) may be a modern compliance concern for U.S. taxpayers, but it has roots stretching back over five decades. It was born out of the Bank Secrecy Act (BSA) of 1970, a law designed to prevent money laundering and unreported income transfers to foreign bank accounts.

The Treasury Department began requiring U.S. persons to disclose foreign bank accounts through a then-obscure form—TDF 90-22.1. There was no minimum threshold at the time. If you had a foreign account, it had to be reported. Still, few people knew about the requirement, and enforcement was minimal.

The purpose was simple but powerful: create a paper trail for offshore funds. The government wanted insight into assets flowing out of the U.S., whether for tax evasion, organized crime, or capital flight.

2004: FBAR Gets Real – Thresholds and Penalties

For decades, the FBAR remained relatively unknown, until the American Jobs Creation Act of 2004. That legislation made key changes:

• Set the $10,000 reporting threshold into law (previously handled via regulation).
  
  

• Created a civil penalty structure for violations:
  
  

• Non-willful violations: Up to $10,000 per year.
  
  

• Willful violations: Up to the greater of $100,000 or 50% of the account balance.
  
  

This marked a turning point. The IRS now had clearer legal authority to impose steep fines. The message from Congress: the FBAR is not optional—and it will be enforced.

The Offshore Crackdown: 2008–2012 and the UBS Scandal

FBAR enforcement exploded in 2008 following the UBS scandal. The Swiss bank was found to be actively helping Americans hide assets offshore. In response, the U.S. government launched a sweeping campaign to clamp down on offshore tax evasion.

The IRS rolled out the Offshore Voluntary Disclosure Program (OVDP), offering reduced penalties for those who came clean. But participants had to:

• File multiple years of back FBARs
  
  

• Pay steep penalties (often 20–27.5% of account balances)
  
  

• Cooperate fully with the IRS
  
  

This campaign brought billions in revenue and dramatically increased FBAR awareness. Previously unknown, the form became a centerpiece of IRS enforcement and a looming threat for anyone with unreported accounts.

2010–2014: FATCA Shines a Spotlight on FBARs

Congress passed the Foreign Account Tax Compliance Act (FATCA) in 2010, which took full effect in 2014. It required foreign banks to report American-owned accounts directly to the IRS.

Now, even if an individual didn’t disclose a foreign account, the bank likely would. The IRS could cross-reference foreign financial institution reports with FBAR filings to catch non-filers.

This put the FBAR on a new level:

• Global compliance became a reality
  
  

• Filing became routine for expats, dual citizens, and international business owners
  
  

• The IRS could pursue enforcement using data from overseas banks
  
  

High-Profile Leaks and Investigations: FBAR in the Headlines

As FATCA took effect, global media uncovered leaks like the Panama Papers (2016) and Paradise Papers, exposing offshore financial structures used to hide assets. The U.S. Department of Justice responded with aggressive action:

• John Doe summonses were issued to courier companies like FedEx and DHL to find out who was receiving mail from known offshore banks
  
  

• Banks, trust companies, and even law firms became targets
  
  

• FBAR non-filers were identified using shipping records, leaked documents, and FATCA disclosures
  
  

The goal: find every U.S. person with undisclosed foreign accounts—and penalize them accordingly.

Enforcement Gets Real: Million-Dollar Penalties

Gone were the days of warnings or minor penalties. A wave of headline-making FBAR enforcement cases changed everything:

• Ty Warner, creator of Beanie Babies, paid $53 million in FBAR penalties.
  
  

• In Zwerner v. U.S., an elderly man faced fines totaling 150% of his account balance (50% per year for three years).
  
  

• Countless smaller cases showed FBAR fines were no longer theoretical.
  
  

Now, failing to file an FBAR—whether by accident or intent—carried serious risks.

Electronic Filing, Modern Awareness, and Growing Compliance

By the late 2010s, the FBAR had become a standard compliance requirement. Key developments included:

• Electronic filing through FinCEN’s BSA E-Filing System
  
  

• A due date aligned with Tax Day (April 15), with an automatic extension to October 15
  
  

• Filing volume growing past 1 million FBARs annually
  
  

• Tax professionals routinely checking for foreign account disclosures during client intake
  
  

The message had sunk in: if you have more than $10,000 in foreign accounts combined at any point in the year, you must file.

Recent Developments: The Courts Enter the Chat

The FBAR continues to evolve through the courts:

• In Bittner v. United States (2023), the Supreme Court ruled that non-willful penalties apply per year, not per account—potentially saving taxpayers thousands.
  
  

• In U.S. v. Monica Toth, another case raised the question of whether massive FBAR fines could be considered excessive under the Eighth Amendment. The Court declined to hear the case, but similar challenges may arise.
  
  

These cases show that while the government maintains a strong FBAR enforcement posture, judicial oversight matters—especially when penalties threaten constitutional protections.

Why FBAR Still Matters Today

If you’re a U.S. citizen, green card holder, or tax resident with foreign accounts, here’s what you should know:

• FBAR is not optional—even seemingly small accounts may trigger filing requirements
  
  

• Non-filing can lead to serious penalties, even for accidental mistakes
  
  

• The U.S. government continues to gather data globally, making hiding accounts nearly impossible
  
  

• Criminal penalties remain on the table for willful violations, including up to five years in prison
  
  

Final Takeaway: Know Your FBAR Obligations

The FBAR has evolved from a footnote in a 1970 law into one of the most aggressively enforced financial reporting tools in the U.S. tax code. It’s part of the global tax transparency movement, and it’s not going away.

Whether you’re an expat, dual citizen, investor, or someone with family assets overseas, understanding FBAR rules is essential.

Need help filing your FBAR or reviewing your past compliance? Visit eFileFBAR.com to get started with secure, expert support. When it comes to foreign accounts, filing is always safer than guessing.

M.Daniyal