The U.S. Department of Justice has filed a civil lawsuit against former Trump campaign chairman Paul Manafort, alleging that he failed to disclose multiple foreign bank accounts on his tax returns and FBAR filings. The case highlights the broader risk faced by any U.S. person—citizen, green‑card holder, or tax resident—who holds financial assets abroad.
Reporting obligations under FATCA and FBAR
- Foreign Account Tax Compliance Act (FATCA) requires foreign financial institutions to report accounts held by U.S. persons to the Internal Revenue Service (IRS).
- FinCEN Form 114 (FBAR) must be filed by any U.S. person who, at any time during a calendar year, has a total aggregate value of $10,000 or more in foreign financial accounts. This includes:
- Bank accounts, brokerage accounts, mutual funds, and certain insurance or annuity contracts.
- Accounts where the individual has signature authority or is the “beneficial owner.”
- Both personal and business accounts, even if the account is in a spouse’s name.
Failure to file an FBAR can trigger civil penalties of up to $10,000 per non‑filing for non‑willful violations, and the greater of $100,000 or 50 % of the account balance for willful violations. Criminal penalties are also possible.
Recent enforcement examples
| Case | Penalty / Judgment | Reason |
|---|---|---|
| Woman with undisclosed Swiss account | $3.1 million | Failure to report foreign account; court rejected a statutory penalty cap. |
| Florida taxpayer (default judgment) | $4.1 million | Unreported foreign accounts; interest and penalties added. |
| Arizona taxpayer (recalculation) | $2.2 million | Miscalculated liability after failing to report accounts. |
| Married couple (willful failure) | $650 k total | Unreported foreign accounts; willful‑failure penalties applied. |
| Paul Manafort (civil suit) | $2.9 million sought | Alleged non‑reporting of accounts in Cyprus, the United Kingdom, St. Vincent & the Grenadines, and others for 2013‑2014. |
These cases demonstrate that the IRS and Treasury can pursue penalties years after the tax year in question.
Practical steps for compliance
- Identify all foreign financial accounts – Include checking, savings, investment, and crypto accounts held abroad, as well as any foreign‑held precious‑metal holdings that are custodial rather than physically stored by the owner.
- Determine aggregate value – Convert each account’s balance to U.S. dollars using the year‑end exchange rate (or the highest rate during the year if higher). If the total reaches $10,000 at any point, an FBAR is required.
- File FBAR (FinCEN Form 114) – Due April 15, with an automatic extension to October 15. The filing is electronic through the BSA E‑File system.
- Report on Form 8938 (FATCA) – Required on the annual tax return (Form 1040) for many foreign assets, with lower thresholds for married filing jointly ($100,000 on the last day of the tax year, $150,000 at any time during the year).
- Maintain documentation – Keep statements, account opening documents, and proof of foreign currency conversions for at least six years.
- Seek professional advice – Engage a tax attorney or CPA experienced with international tax compliance to verify that all required forms are filed correctly.
Risks of non‑compliance
- Financial penalties ranging from thousands to millions of dollars, as illustrated by recent court judgments.
- Criminal prosecution for willful violations, potentially leading to imprisonment.
- Increased audit scrutiny – The Treasury has signaled a focus on high‑net‑worth individuals who are more likely to hold offshore assets.
- Future expansion of reporting scope – The IRS is moving to include crypto holdings and certain precious‑metal accounts in its reporting regime.
Options for U.S. persons who wish to avoid ongoing reporting
- Renounce U.S. citizenship or long‑term residency – Once no longer a U.S. person, the FATCA/FBAR filing obligations cease, though exit taxes may apply.
- Structure ownership through foreign entities – Properly established entities can sometimes limit direct ownership, but the “beneficial owner” rules often still trigger reporting.
- Limit foreign account balances – Keeping total foreign holdings below the $10,000 threshold eliminates the FBAR filing requirement, though Form 8938 may still apply.
Bottom line
The Manafort lawsuit serves as a high‑profile reminder that U.S. tax law mandates full disclosure of foreign financial assets. The thresholds are low, the penalties are severe, and enforcement can occur many years after the alleged omission. U.S. persons with overseas accounts should inventory their holdings, calculate aggregate values, and file the required FBAR and FATCA forms promptly to avoid costly penalties.
