Forced Repatriation of Overseas Money to Pay FBAR Penalties
The FBAR case of Schwarzbaum is a very important foreign accounts compliance case, due to the fact that it reflects the length that the US Justice System will go to require a US Person who has been assessed FBAR penalties in order to require that person to pay a judgment — even if it means repatriating foreign money. In Schwarzbaum, the key issue was whether or not Defendant should be required to repatriate money that is located outside of the United States in order to satisfy several millions of dollars worth of FBAR fines. With his back against the wall, the Defendant tried to throw up several arguments as to why it would be unjust, improper — or just plain unfair to require him to repatriate money from outside the United States in order to satisfy the FBAR Judgment, especially when a subsequent appeal would be coming down the pipeline. In a previous posting, we summarized the defendant’s position, which was simply that repatriation for FBAR penalty should not apply because the FBAR is not a tax liability and that because there is no issue of fraud nor deception — it was merely a monetary penalty for noncompliance with foreign account reporting — and therefore forced repatriation should not apply.
Court Rules in Favor of Government
The court sided with the US government and determined that it had the authority to require Defendant to repatriate his foreign money to the United States to satisfy the judgment. The ruling explains that because the court has jurisdiction over the defendant — that by extension, the court can require the defendant to repatriate money sufficient to satisfy the judgment. The court went on to explain that defendant’s argument that the All Writs Act is the only applicable procedure for this type of enforcement was rejected (as the court could act on its own in order to effectuate enforcement). In addition, the Court was not moved by Defendant’s argument that requiring him to repatriate money to satisfy the FBAR Judgment when he planned on appealing amounted to forcing him to involuntary post a bond.
Offshore Walls are Closing In
An important takeaway from this case is that simply moving money offshore does not protect that money from the US courts when the court already has jurisdiction over the Defendant — and that the courts will go to great lengths to ensure the taxpayers satisfy money judgments against them.
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