Signature Authority for FBAR: What is it? (2021)

Signature Authority for FBAR

Signature Authority for FBAR 

Signature Authority for FBAR: One main distinction for the FBAR as opposed to other international information reporting forms is that a US person may have to file the form not only if they don’t have a tax return filing requirement — but even if they do not have any interest in the account. For example, FATCA Form 8938 — which is a similar form to the FBAR — requires taxpayers to both have to actually file a tax return in the current year and have an interest in the account. Thus, in the common situation in which an employee has signature authority over a corporate account (unless they own the underlying company or have an interest in it) they generally will not have to include that account on the Form 8938 — but they will include the account on the FBAR.

What is Required for the FBAR?

In order to get a baseline understanding of what the IRS agents will seek to enforce in accordance with signature authority, a good place to start is the IRM (Internal Revenue Manual). Even though the IRM does not have the force of law, it is a good starting point to give insight as to what may be considered signature authority by the IRS Examiners and Agents.

4.26.16.3.4: Signature or Other Authority Over an Account

1. 1. “An individual has signature or other authority over an account if that individual (alone or in conjunction with another) can control the disposition of money, funds or other assets held in a financial account by direct communication (whether in writing or otherwise) to the person with whom the financial account is maintained.
   2. Individuals not considered as having signature authority:
      • Individuals with only the authority to buy or sell investments within the account, but no authority to disburse assets from the account.
      • Individuals with supervisory authority over the individuals who actually communicate with the person with whom the account is maintained. FinCEN clarified, in the preamble to the regulations at 31 CFR 1010.350, that approving a disbursement that a subordinate actually orders is not considered signature authority.
   3. Only individuals can have signature authority. Signature Authority attributed to entities must be exercised by individuals.”

4.26.16.3.4.1: Signature Authority Exceptions

1. 1. “An officer or employee of the following institutions need not report signature or other authority over a foreign financial account owned or maintained by the institution if the officer or employee has no financial interest in the account:
      • A bank that is examined by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, or the National Credit Union Administration.
      • A financial institution that is registered with and examined by the Securities and Exchange Commission or Commodity Futures Trading Commission.
      • An Authorized Service Provider for a foreign financial account owned or maintained by an investment company that is registered with the Securities and Exchange Commission. Note: Authorized Service Provider is an entity that is registered with and examined by the Securities and Exchange Commission and that provides services to an investment company registered under the Investment Company Act of 1940.
      • An entity with a class of equity securities listed (or American depository receipts listed) on any U.S. national securities exchange. Note: Previously, instructions to the form allowed a “large corporation” exception for listed corporations. That exception was expanded to include all listed entities.
      • An entity that has a class of equity securities registered (or American depository receipts registered) under section 12(g) of the Securities Exchange Act.
2. An officer or employee of a U.S. subsidiary of an entity in (d) above need not report signature authority over accounts of the subsidiary if the entity files a consolidated FBAR listing the accounts of the subsidiary.”

In conclusion, when an individual has signature authority over a foreign financial account, they may have to report their signature authority on the annual FBAR statement — unless they meet one of the exceptions, exclusions or limitations for reporting.

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