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The FBAR Food Chain: Who Has Signature Authority?

  • By Andrew Deichler
  • Published: 9/17/2015
talkRESTON, VA. -- Treasurers are intensely focused on Foreign Bank Account Reporting (FBAR), and one area that is particularly of concern is exactly which individuals have signature authority, meaning that they need to file an FBAR after making a payment. Rod Lundquist, IRS, and Russ Stephenson, senior program manager policy division, FinCEN, attempted to provide more clarity on this issue to AFP’s Treasury Advisory Group on Tuesday.

A treasurer for a major retailer explained that at most organizations, there is one employee who puts a request for a wire transfer. Once this task is complete, a second employee goes in and actually authorizes the release of the funds.

The confusion is around whether both of these individuals are required to file an FBAR. “If the person only has the ability to start the transaction, do they need to file?” she asked. “Typically these are lower level employees, and they’re nervous about this. The way we interpret it is, if the person can just go in and input, then they wouldn’t have to comply.”

Another treasurer added that the only power these employees have is to start the transfer process; they can’t complete a transfer. “They’re coded in the system so that they can’t actually release the funds,” she said. “The second group—they are the ones who ‘push the button’ and release the wire out of a foreign account.”

Added the retail treasurer: “If no one actually releases it, the order just sits there forever.”

Stephenson responded that the staff members who initiate the payments are not required to file an FBAR. However, the ones who actually send the funds are obligated to file. Because these individuals are directly responsible for sending money, they are considered to have signature authority.

“All the other people are support staff,” he said. “They’re not subject to FBAR. The ‘releaser’ has the authority to release funds. They could do that on their own.”

The retail treasurer argued that the “releaser” is also just support staff. “They’re just doing their job,” she said. “They’re just going in and releasing the payment that has already been approved by somebody else.”

A third treasurer added that the “releaser” would not technically be able to release the funds on their own because both individuals need to work in conjunction for the wire transfer to be successful. “One without the other cannot complete a transfer,” he said. “That’s why it’s a little fuzzy.”

Another treasurer explained to Stephenson and Lundquist that most of the individuals involved in the payment approval process are not authorized signatories. “The person who approves the payment is usually not an authorized signatory on the bank account,” he said. “They hand off the payment to the accounts payable department, and you typically have an AP clerk who can initiate and an AP clerk who can release. They should not have to file FBAR because they are doing their job.”

The treasurer noted that authorized signatories are the ones who actually communicate with the bank. “The bank recognizes these people can make changes to the bank account,” he said. “Those are the people that we would consider to be the ones who should file an FBAR.”

Lundquist responded that the individuals who can move funds out of the account—i.e. that AP clerk who releases the payment—do have signatory authority. “If you’re able to release funds, the bank recognizes your password, signature, etc., then you have signature authority,” he said. “The regulations define it as having the ability to dispose of funds from the account. I know these situations are a little convoluted because you have so many people involved. But what it boils down to is, the person who can move those assets out of the account has to file the FBAR.”

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