Facts

Citizens are required under civil penalty to file a Report of Foreign Bank and Financial Account (FBAR) to the IRS Commissioner for "any activity having a financial interest in, or signature or other authority over a bank, securities, or other financial account in a foreign county." In March 1, 2017, the United States commenced an action against Fariba Ely Cohen to collect an unpaid federal penalty assessment and interest on an alleged FBAR violation of failing to report a foreign bank account for the tax year 2008. Cohen was found liable by the District Court of the Central District to the U.S. for FBAR penalties of $1,549,849, plus late payment penalties and interest. As of February 3, 2022, the balance due was $2,300,952.54.

PLAINTIFF'S CONTENTIONS: Plaintiff contended that when Congress revised Tax Code Section 5321 to increase the maximum civil penalty for willful FBAR violations it increased the maximum potential penalty and superseded the previous law. Thus, the IRS is not bound by the $100,000 limit articulated in the original 1970 Currency and Foreign Transactions Reporting Act regulation.

DEFENDANT'S CONTENTIONS: Defendant contended that the IRS does not have the authority to assess an FBAR penalty in excess of $100,000 and while the Secretary is allowed to access larger FBAR penalties, he is not required to do so.

Result

$930,000 settlement, 60% of the assessed $1,549,849 FBAR penalty.