Call it the James Bond effect, a distrust of the U.S. government, or an attempt to dodge taxes. Whatever the reason, it seems that a whole lot of people, including some clearance holders, want a foreign bank account.
This isn’t anything new, nor, to be fair, is it always indicative of anti-government sentiment or shadiness. In fact, the much more benign reason I often hear for wanting a foreign account is convenience when traveling for extended periods to visit relatives living abroad.
That may be perfectly reasonable, but the truth is – no matter what the motivation for having one – foreign bank accounts can create problems for clearance holders. Before going down that road, I recommend considering a couple different variables, including what the Internal Revenue Service has to say about the matter.
Security clearance or not, anyone having a foreign bank account is required by federal law to disclose the existence of that bank account annually to the IRS. That may sound cut-and-dry, but, like everything else in the tax code, nothing about this is simple. The annual reporting obligations constitute such a headache for many taxpayers that they outweigh the value of having the foreign bank account in the first place. Taxpayers who get caught not reporting a foreign bank account can face hefty civil and criminal penalties.
For clearance holders specifically, next comes the issue of how your federal agency’s security office will react. Unfortunately, there isn’t always a clear answer on this. Factors like the country in question, the reason for having the account, the amount of money in the account, and the amount of money in the account relative to the individual’s assets in the United States will all be considered. The more hostile the country to U.S. interests and the more money is in the account, the more likely there is to be a problem.
But just because the country in question is “friendly” or the clearance holder is financially secure in the United States isn’t necessarily a guarantee that the foreign account won’t still raise concerns. Part of the issue is whether the foreign account raises foreign preference or foreign influence considerations – the latter in the context of a foreign government threatening to confiscate the funds unless the clearance-holder does their bidding. The other part of the issue is whether the foreign account provides a means of receiving payment from foreign actors – a concern which isn’t always mitigated by the identity of the country.
The bottom line is that there is nothing inherently illegal about having a foreign bank account, provided it is reported to the IRS in accordance with the law and not being used for unlawful purposes. But for clearance holders, having a foreign bank account is generally an avoidable basis for security problems, or at least a substantial risk of them. If the paperwork hassle wasn’t already enough of a turn-off, the career implications are worthy of strong consideration before taking any action.
This article is intended as general information only and should not be construed as legal advice. Although the information is believed to be accurate as of the publication date, no guarantee or warranty is offered or implied. Laws and government policies are subject to change, and the information provided herein may not provide a complete or current analysis of the topic or other pertinent considerations. Consult an attorney regarding your specific situation.