Duties of UK based executors to file tax paperwork in the USA

BERKO V UNITED STATES 2024 – Treatment of FBAR filing obligations in England and Wales

When administering an estate with assets in the UK and the US, executors must consider the wide array of duties imposed on them as well as the deceased’s lifetime obligations, under the applicable laws in the UK and the US. A failure to do so can have consequences for the executors, and they may in some circumstances even risk criminal liability in the US for non-compliance with some of their, or the deceased’s, obligations. 

An example of an obligation that executors must take into account includes a US person’s lifetime obligations to file Foreign Bank Account Reports (‘FBAR’) to the IRS. 

A US person, including a citizen, resident, company or trust, is (subject to requirements) obliged to file a FBAR to show their financial interests outside the US. Where a person wilfully fails to file FBARs during their lifetime, the executors could after this person’s death face criminal liability in the US in certain circumstances. 

A UK based executor will often be unfamiliar with US legal culture and filing obligations, therefore we will take a closer look at how the duty to file FBARs is treated under UK law. The recent decision of the High Court of England and Wales in Asante Kwaku Berko v United States 2024 is relevant. In Berko, the court decided to allow an appeal against the requested extradition of a dual US-Ghanaian citizen (the ‘Appellant’) to the US for his failure to file FBARs. 

Background

The case has an interesting though uncomplicated set of facts. The Appellant was employed as an executive director in the Investment Banking Division of Goldman Sachs International, based in London. His extradition was sought for the prosecution of several offences. The court categorised the charges into two groups. One group of charges on indictment included the wilful failure to file FBARs for the calendar years 2015, 2016 and 2017. The other group of charges related to the charge of conspiracy to violate the US Foreign Corrupt Practices Act following the Appellant’s involvement in the making of corrupt payments to public officials in Ghana in connection with an investment deal.

The Appellant appealed against the Magistrates’ Court’s decision at first instance which allowed his extradition to the US on grounds of his wilful failure to file FBARs. The High Court allowed the appeal, as no obligation to file a FBAR existed in English law. The High Court clarified that ‘obligations under US law are not to be translated’, and that for the extradition to be warranted ‘the relevant obligation must exist in English law’. The court reasoned that the extradition will otherwise ‘expose the requested person to the risk of conviction for conduct that is not a crime in this jurisdiction’. The extradition to the US was, however, allowed on grounds of the appellant’s involvement in the bribery scheme.

Good News for UK Executors?

At first glance this decision seems like a relief for UK executors (based in the UK) who are administering a US estate administration as they may not be exposed to criminal liability for the deceased’s wilful failure to file FBARs in England and Wales. Notwithstanding this, they may depending on the circumstances still face criminal penalties in the US, and executors do need to seek professional advice before deciding how to respond in each case. This is of particular importance where executors are administering a multi-jurisdictional estate, where the courts in each jurisdiction may take a different view on the matter. 

In Berko, the court did not however consider the duties of executors when dealing with a deceased’s wilful failure to file FBARs during their lifetime. We will, therefore, need to wait and see how this would be treated by the courts in the future. Berko does provide a steer into the direction that the courts of England and Wales may take when faced with questions on an executor’s position where the deceased wilfully failed to comply with their filing obligations.

The Bigger Picture

Berko is yet another illustration of private international law in motion and how the treatment of legal obligations can differ between jurisdictions. Whether you are administering an estate as an executor, or planning the succession of your estate, Berko is also a good reminder that a cross-border estate should not be treated as consisting of isolated components that can be kept separately. This is due to the myriad of obligations imposed on individuals in different jurisdictions, which inevitably lead to conflicts of laws.

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If you have been appointed the executor of an estate with connections to the US, and would like to discuss your duties please contact us.