Justices to consider Bank Secrecy Act penalties for failure to report foreign bank accounts

Justices to consider Bank Secrecy Act penalties for failure to report foreign bank accounts
Written by admin


The argument Wednesday in Bittner v. United States presents a routine interpretative problem. Specifically, for a citizen who owns numerous foreign bank accounts, whether the failure to file an FBAR (the federal form that describes the foreign bank accounts of a United States citizen) is a single violation of the Bank Secrecy Act (failure to file a single form) or numerous Bank Secrecy Act violations (failure to report numerous accounts). Because each violation bears a maximum penalty of $10,000, the difference for petitioner Alexandru Bittner is between a fine of $50,000 (for five years of delinquent reporting) or $2.72 million (for the 272 omissions from those five reports).

The relevant statute (31 U.S.C. § 5314) requires citizens to “keep records” and “file reports” whenever “the … person … maintains a relation … with any foreign financial agency,” and specifies that the relevant reports should “contain … information [that] the Secretary [of the Treasury] prescribes.” The relevant regulations require an annual Report of Foreign Bank and Financial Accounts (the FBAR mentioned above) by any person having “foreign financial accounts exceeding $10,000 maintained during the previous calendar year.”

Bittner focuses on the language of the statutory obligation – to “file reports” – contending that the failure to file a single report can only be one violation of the statutory command that a taxpayer “file reports.” He also points out that the regulatory command implementing the statute is tied (in the passage quoted above) not to the number of accounts, but instead to the aggregate balance in all the accounts.

The government, by contrast, emphasizes the language of Section 5321, the provision that authorizes the imposition of a penalty, and contends that it consistently describes a “violation” as something that is “account-specific.” So, for example, an exemption that prohibits a penalty when the citizen has “reasonable cause” for the violation depends on the “balance in the account” (singular) that was not reported. In the same way, later paragraphs that specify the maximum penalty for each violation tie the maximum to the “balance in the account at the time of the violation” (again, singular).

Bittner responds forcefully, pointing to the Dictionary Actwhich specifies that “[i]n determining the meaning of any Act of Congress,” singular words “include and apply to” plural things and “words importing the plural include the singular.” Thus, for Bittner, all the references to the balance in “the [undisclosed] account” are read just as easily as referring to the balance in all of “the [undisclosed] account[s].”

The parties spend a great deal of their pages trying to control the narrative. Bittner’s counsel portrays him as an innocent Romanian who came here to flee communism, became a citizen, and then returned to Romania upon the fall of communism. He particularly emphasizes that as the case comes to the Supreme Court it involves penalties for non-willful failure to report. From that vantage, giving the treasury secretary the discretion to impose a fine of almost three million dollars for a wholly innocent misunderstanding about American law is a stark overreach. The government, by contrast, portrays Bittner as a wealthy mogul, pointing to more than 70 million dollars of income produced from his various overseas ventures. The amount of under-reporting of foreign accounts is massive, it explains; this is just the kind of information the government needs to respond to the massive problem of money laundering that plagues our financial regulators.

For my part, I find the statutory arguments largely in equipoise, as neither the statute nor the regulations seem crafted to answer the particular question before the court. It may be, then, that some of the justices will rely on their impression of the equities of the situation in assessing how to resolve the problem before them. On Wednesday we shall see.

About the author


Leave a Comment