Prologue
In 2024 the Eleventh Circuit (contrary to the First Circuit in Toth) ruled that FBAR penalties are subject to the “Excessive Fines Clause”. I wrote about the Schwarzbaum decision here. The decision was a small win for Mr. Schwarzbaum but a large win for U.S. citizens and those “U.S. residents” subject to the FBAR rules.
Isac Schwarzbaum’s contribution to the understanding of Mr. FBAR continues …
Isac Schwarzbaum should be awarded the "Presidential Medal Of Freedom" for his contributions to the development of the law of @InFBARWeTrust. His latest contribution began on November 4, 2024. The Government seeks clarification that civil and criminal #FBAR penalties are… pic.twitter.com/wv2P1BYwSX
— John Richardson – Counsellor for US persons abroad (@ExpatriationLaw) November 12, 2024
Two kinds of “willful” FBAR penalties:
Generally both “civil” and “criminal” FBAR penalties can be asserted. Conviction of a “criminal FBAR penalty” may result in incarceration.
Willful FBAR Penalty 1 – The Civil Willful Penalty – 31 U.S.C. 5321(a)(5)(c)
31 U.S. Code § 5321 – Civil penalties
(C) Willful violations.—In the case of any person willfully violating, or willfully causing any violation of, any provision of section 5314—
(i) the maximum penalty under subparagraph (B)(i) shall be increased to the greater of—
(I) $100,000, or
(II) 50 percent of the amount determined under subparagraph (D), and
(ii) subparagraph (B)(ii) shall not apply.
Willful FBAR Penalty 2 – The Criminal Willful Penalty – 31 U.S.C. 5322
31 U.S. Code § 5322 – Criminal penalties
(a) A person willfully violating this subchapter or a regulation prescribed or order issued under this subchapter (except section 5315, 5324, or 5336 of this title or a regulation prescribed under section 5315, 5324, or 5336), or willfully violating a regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91–508, shall be fined not more than $250,000, or imprisoned for not more than five years, or both.
JR Commentary: Notice that both the civil and criminal penalty sections are triggered by “willfully violating”. The issue is whether the words “willfully violating” have the same meaning in the civil and criminal context. The Government (rightfully) argues they have different/separate meanings in each context. (The meaning of “willfully violating” has one meaning in the civil context and a different meaning in the criminal context.) The Government appeal of the Eleventh Circuit decision in Schwarzbaum includes this issue.