Non -compliance of foreign accounts leads to a penalty of $ 2 million

In an increasing era of control over offshore accounts, the US government has aggressively pursued people who fail to reveal their foreign financial participations. The recent case Al US v. Leeds, (D. Idaho 2025) It serves as a memory of the consequences of non -compliance with the report of the requirements regarding foreign banking and financial accounts (FBAR).

US v. Leeds: A Precution Story

Richard Leeds, an American citizen, has maintained undisclosed Swiss bank accounts for over three decades, using bank practices to hide assets from American authorities. When IRS investigated, he found that Leeds failed to submit FBAR for 2006 to 2012, which led to an assessment of the penalty exceeding $ 2 million.

Following Leeds’ passing in 2021, the government sought to recover these sanctions from his estate and his surviving husband, Patricia Leeds. The District Court decided that the punishments survived Richard’s death and were enforceable against his estate. However, the court found that the application of punishments to Patricia, who had no knowledge or control over the accounts, violated the clause of excessive fines of the eighth amendment. As a result, the government was allowed to recover the sanctions evaluated from the estate, not from Patricia Individual.

Understanding FBAR reporting requirements

FBAR is a critical compliance requirement in accordance with the Law on bank secret (31 USC section 5314), designed to prevent tax evasion and financial offenses. American people – including citizens, residents, corporations, partnerships, LLC, trusts and estates – must submit a FBRB (Fincen 114) if:

1. Have a financial account in a foreign country;
2. The aggregate value of these accounts exceeded $ 10,000 at any time of the calendar year;
3. They have a financial interest in foreign accounts or signature authority.

FBAR must be submitted electronically through the network of application of financial offenses (FINCEN) until April 15 of the following year. Failure to comply with significant civil and criminal sanctions.

Penalties for non -compliance

Sanctions for FBAR violations vary depending on the level of guilt:

• Non-voices violations: A maximum penalty of $ 10,000 on violation, although recent judicial decisions clarify that it is applied on the FBRB, not on the account.
• Desired violations: The highest of $ 100,000 or 50% of the account balance at the time of violation, with sanctions adjusted annually for inflation. For the penalties evaluated in 2024, the maximum punishment indexed to inflation is $ 161,166 or 50% of the account balance.

Leeds lessons: Compliance is essential

USA v. Leeds The case highlights the persistent application of the IRS of the FBAR violations and the severe financial consequences for non -compliance. While Richard Leeds was hiding a deliberate concealment, the Court’s decision emphasizes the importance of individual guilt when evaluating sanctions.

For natural persons and companies with foreign financial accounts, it is essential to strictly accession of the FBAR reporting rules. Proactive compliance, including complete disclosure of tax trainers and legal adviser, can prevent expensive sanctions and legal battles. The case serves as an increased warning – offshore activities are not worth the risk.