The bizarre nature of signature authority
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.
Who really holds signing authority?
The above only holds true if you are communicating directly with the bank, for example by using the bank’s web portal, but the reality is that many organizations have long ago moved to payment factories which aggregate many banking platforms into one. This separation (detachment?) can obfuscate the “bank singing authority” and replace it with the signing authority set up in the payment factory. According to the IRS, the rule says, “signature authority over” an account. It is clear that the intent of the law is to list the persons who effectively hold signing authority of an account.
Modern payment factories can have extremely complex approval workflows but the regulations are quite clear; if you have the authority to move money out of an account, you need to report. The rule does not care whether or not you actually “did” anything. If you had the ability to approve a payment, whether or not you personally release it, or whether it was released at all, you must report.
Companies need to be aware that this list will include all the signatories listed at the bank, as well as those listed in the Payment Factory and a good Payment Factory will allow you to consolidate all the signatures for reporting purposes, whether or not the individual is a Payment Factory user or their signature resides only at the bank and is never used.
Another grey-ish area is the situation where two signatures are required to approve a payment. In this case, no single individual has the “signature authority over” an account but this is a case where arguing the semantics is mute. The spirit of the ruling is clear, both individuals should report.
We see no requirement for “releasers” or initiators to report. Their role in the process does not involve decisions on whom to pay which is the intent of FBAR in the first place.
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