Supreme Court Limits Liability for Failure to Accurately Report Foreign Bank Accounts


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By: Nancy Reimer

In a 5-4 decision, the Supreme Court limited an individual’s liability under 31 U.S.C. § 5314 for failure to accurately report foreign bank accounts to the government. Bittner v. United States, No. 21-1195, 598 U.S. __ (slip op.) (2023). The Bank Secrecy Act requires United States citizens with foreign bank accounts to file a Report of Foreign Bank and Financial Account (“FBAR”) if the balance exceeds $10,000. 31 U.S.C. § 5314. The Act imposes penalties for failing to file an accurate FBAR, with a maximum penalty of $10,000 for a non-willful violation, and a maximum penalty of $100,000, or 50% of the account, whichever is greater, for a willful violation. 31 U.S.C. § 5321. The Supreme Court recently decided whether these penalties apply to each report filed by the individual, or each account held by the individual. Since only one report is required per year, the maximum penalty for a non-willful violation under the per-report approach would be $10,000 per year. Under the per-account report, the penalty is essentially limitless.

In the Fifth Circuit, Alexandru Bittner is a Romanian citizen who immigrated to the United States in 1982. He returned to Romania in 1990 after the fall of communism. Bittner maintained dual citizenship in the United States and Romania. In 2011, Bittner learned that under the Bank Secrecy Act, he was required to file an FBAR with information regarding each of his overseas bank accounts. He hired an accountant to aid in filing the reports from 2007 to 2011. Since the reports were late, the government imposed a penalty on Bittner. Bittner had 61 foreign accounts in 2007, 51 accounts in 2008, 53 accounts in 2009 and 2010, and 54 accounts in 2011. The government agreed that none of Bittner’s violations were willful and attempted to impose the maximum penalty for non-willful violations. The government imposed a penalty of $10,000 per account, or $2.27 million. Bittner argued that he should be assessed a $50,000 penalty, because his violation accrued on a per-report, not per-account basis. The Fifth Circuit disagreed with Bittner and upheld the $2.27 million penalty.

In the Ninth Circuit, Jane Boyd is an American citizen who held 13 accounts in the United Kingdom. Her United Kingdom accounts exceeded $10,000 beginning in 2009. She neglected to file an FBAR and corrected the error in 2012. The government agreed that Boyd’s violation was non-willful and tried to impose a $130,000 penalty for Boyd’s 13 foreign accounts. The Ninth Circuit held that “only one non-willful penalty when an untimely, but accurate, FBAR is filed, no matter the number of accounts” is authorized under the Bank Secrecy Act. United States v. Boyd, 991 F.3d 1077, 1078 (9th Cir. 2021). Under this approach, Boyd was imposed a penalty of $10,000.

The Supreme Court heard the issue following the split between the Fifth Circuit and the Ninth Circuit. Based on a plain reading of the statute, the Supreme Court decided that penalties for non-willful failure to accurately file an FBAR carries a maximum penalty of $10,000 per report. The statute does not use the word “account” at any place in Section 5314. Because the statute is a penal statute, the Supreme Court stated it must be strictly construed so as to not impose a penalty against an individual that is not clearly stated. This decision greatly reduces both personal and professional liability with regards to non-willful errors when filing an FBAR. In practice, the penalty for a non-willful violation of the statute is now capped at $10,000 per year for each taxpayer required to file an FBAR, and the damages in a professional liability action stemming from failure to properly file an FBAR are reduced to the taxpayer’s potential loss of $10,000 per year.

For more information on this topic, please reach out to Nancy Reimer or your local FMG attorney.