Democrats Abroad appreciates the opportunity to comment on the request submitted by the Department of the Treasury (the “Agency”) for renewal of authorization for information collection on FinCEN Form 114, the Report of Foreign Bank and Financial Accounts (“FBAR”).

We, like other public commentators, have commented that the FBAR Information Collection is:

• Unnecessary given the Secretary’s authority to adjust reporting under 31 U.S. Code § 5314(b); 
• Does not serve any practical utility given the lack of indicia of suspicious activity associated with maintaining financial accounts where one resides; 
• Poses an undue burden given the disparate impact on Americans abroad, who have an inherent need to maintain multiple such accounts, in comparison to U.S. residents, whose ownership of or financial interest in a foreign account would be unusual and rarely a necessity. 
• Inherently stigmatizing because accounts essential for daily life are reported to Treasury’s Financial Crimes Enforcement Network, giving filers a feeling of implied guilt.

While Supporting Statement A submitted by the Agency accurately summarizes the comments it received from the public, we do not agree with its conclusion that the Director of the Office of Management and Budget (“OMB”) should approve the extension without change of a currently approved collection. The analysis conducted by the Agency lacks specific responses to the summarized comments received and indicates no intention to reduce paperwork burdens. Prior filings indicate that it has been aware of serious problems with this information collection since at least 2019, opting to request extension without change in the two subsequent OMB processes without addressing problems previously raised. In particular, the disparate impact of this information collection on Americans abroad, and the failure of the Agency to explain how it has used the collected information, are sufficient grounds for the OMB Director to disapprove the renewal of authorization pursuant to 44 USC §3507(h)(2) and instruct the Agency to undertake a rulemaking to establish a more proportionate, better targeted, more transparent, and more effective collection of information. 

Public Comments per Paperwork Reduction Act Requirements

In seeking renewed authorization for information collection, 44 USC §3506(c)(2)(A) obliges federal agencies to seek comment on and evaluate the necessity, practical utility, and burden associated with the collection, and, according to 44 USC §3508, “before approving a proposed collection of information, the [OMB] Director shall determine whether the collection of information by the agency is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility…. To the extent, if any, that the Director determines that the collection of information by an agency is unnecessary for any reason, the agency may not engage in the collection of information.” 

The public comments that were collected in the current request, like public comments collected in 2021 and 2019, do not support the necessity and practical utility of the information collection, or that the burden on the impacted public (primarily Americans residing outside the United States) is reasonable. 

In its Supporting Statement A, the Agency summarizes the “consistent themes” of the collected comments as follows: 

• FBAR information collection is unnecessary for U.S. persons living abroad due to the low reporting threshold, the clear need for Americans abroad to maintain local accounts in their country of residence, and the redundancy of the information reported with FATCA data also collected by the Treasury.
• FBAR information collection is burdensome for U.S. persons living abroad, due to the effort required to determine maximum annual balances, the cost of hiring professional assistance to support the filing, and the excessive penalty for filing errors.
• Modifications to FBAR regulations are recommended, including adjusting the reporting threshold for inflation, eliminating duplicative reporting, expanding reporting exceptions, updating the instructions to reflect the Supreme Court’s ruling in Bittner vs. United States, etc.
• Exemptions should be provided for U.S. persons living abroad.
• Estimates of the time to complete the FBAR are inaccurate because they do not take into account the number of accounts typically maintained by an ordinary person living abroad or the time required to determine the maximum value of each account.

Public opinion is crystal clear in stating that this Information Collection is in urgent need of a complete overhaul to reduce the public paperwork burden. Appendix A, re-stating our prior comment to the Agency, provides ample suggestions for how this may be achieved. 

Recurring Feedback from Government Watchdogs

In addition to the strong criticism from the public concerning FBAR, the National Taxpayer Advocate – the IRS’s internal watchdog – has vocally criticized this information collection many times. 

Recommendations have included consolidation of redundant information collection , exercising restraint when assessing penalties , and to reduce the complexity, ambiguity, and redundancy of international information reporting that Treasury expects from overseas taxpayers of ordinary income and wealth.

The Government Accountability Office has also commented on overlap and redundancy in information reporting.

Unambiguous signals are coming from within the government that this Information Collection is in need of revision and that there is substantial ability for the Agency to reduce the public paperwork burden. 

Lack of Agency Response to Feedback

These concerns have been expressed to Treasury and the Financial Crimes Enforcement Network (“FinCEN”) via multiple OMB renewal comment periods, a request for information mandated by the Anti-Money Laundering Act of 2020 (the “AML Act”), and by the government watchdogs cited above. 

The Agency has dutifully ticked procedural boxes outlined in the Paperwork Reduction Act, but has not proposed or initiated changes in response to the comments received, nor has it substantively responded to public comments. In the current and previous requests to OMB, the Agency has simply affirmed that comments and suggestions will be considered. This is only a minor improvement from the Agency’s failures in 2010 and 2016 to “include a description of how the agency has responded to any public comments on the ICR, including comments on maximizing the practical utility of the collection and minimizing the burden” that led OMB to withhold approval in the past.  

In addition, Section 6216 of the AML Act requires the Secretary of the Treasury to solicit public comment on ways to streamline and modernize risk-based guidelines and regulations issued pursuant to the Bank Secrecy Act.  While the Secretary has initiated a process of consulting with stakeholders, she has failed to meet the January 1, 2022 deadline for submitting a report to Congress. 

We note further that, while the Agency has published its findings on the utility of a number of BSA reports such as SAR and CTR, to the best of our knowledge, no similar analysis has been provided for FBAR. At the moment, the only public insight into FBAR’s utility is through a number of highly publicized court cases involving mind-bogglingly large penalties against individuals who failed to file a FBAR. Few, if any, public statistics or other artifacts demonstrate utility for enforcement or prosecution efforts.  We believe that compliance efforts are not well-served when it appears that the most useful FBAR for the Treasury is an unfiled FBAR for which a penalty can be assessed.

Given the Agency’s failure to timely meet its obligations under the AML Act, the lack of transparency from the Agency on the necessity and practical utility of FBAR for law enforcement purposes, and taking into account the clear feedback from both the public and government watchdogs, OMB should exercise its authority under 44 USC §3507(h)(2) to disapprove the renewal of authorization and instruct the Agency to undertake a new rulemaking to establish a more proportionate, better targeted, more transparent, and more effective collection of information. 

Paperwork Reduction Opportunities

As cited in comments in response to both the 2024 and 2021 requests, the Secretary of the Treasury has broad statutory authority under 31 U.S. Code § 5314(b) to adjust who must participate in FBAR information collection and for which accounts. The Secretary may prescribe:

• to which countries FBAR should apply;
• a “reasonable classification of persons subject to or exempt from a requirement under this section or a regulation under this section;”
• “the magnitude of transactions subject to a requirement or a regulation;”
• “the kind of transaction subject to or exempt from a requirement or a regulation;” and
• “other matters the Secretary considers necessary.”

The Agency should use these authorities to modify the regulations in 31 CFR §1010.306 and §1010.350.

Specific recommendations for changes under these statutory authorities were included in the public comment submitted by Democrats Abroad on October 9, 2023 and are summarized in Appendix A. Similar recommendations urging the Agency to exercise its statutory  authority in order to maximize the utility and minimize the burdens of FBAR were made by the Association of Americans Resident Overseas in the 2021 public comment period and by the American Bar Association’s Tax Section in 2024.

We additionally include, as Appendix B, feedback on various sections of the Agency’s Supporting Statement A, which call into question the appropriateness of the Agency’s recommendation in favor of approval without change.

Conclusion

While the Bank Secrecy Act serves an important purpose to establish tools for monitoring and combating crime, the Agency’s information collection requirements conflate the 9 million United States citizens residing abroad with criminals simply because they need to maintain moderate balances in “foreign” bank accounts, which are actually local to them.

The current information collection is unnecessary, lacking in utility, burdensome, and stigmatizing. Though the Agency is aware of both public and government criticism of this information reporting, it has taken no action despite the Secretary possessing broad authority to adjust reporting under 31 U.S. Code § 5314(b) to be more effective, less burdensome, and better targeted.  

To continue the current FBAR information collection in its current form, without changes and despite clear feedback, especially in light of the ever-increasing high stakes penalties involved, appears irrational and should be subjected to scrutiny. 

We urge the Director of the Office of Management and Budget to exercise her authority under 44 U.S. Code § 3507(h)(2) to disapprove this request for extension, and to instruct the Agency to undertake a rulemaking to make substantive changes in the information collection requirements. 

Sincerely,