Judge to consider Bank Secrecy Act penalties for failure to report foreign bank accounts | Techy Kings

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CASE PREVIEW

Wednesday’s argument in Bittner v. United States of America presents a routine interpretation problem. In particular, for citizens with multiple foreign bank accounts, either failure to file an FBAR (the federal form that describes a US citizen’s foreign bank account) is a violation of the Bank Secrecy Act (failure to file the form) or multiple violations of the Bank Secrecy Act (failure to report multiple accounts). Since each violation carries a maximum penalty of $10,000, the difference for petitioner Alexandru Bittner is between a fine of $50,000 (for five years of reporting arrears) or $2.72 million (for 272 omissions from those five reports).

The relevant statute (31 USC ยง 5314) requires citizens to “keep records” and “file reports” when “… the person … maintains relations … with any foreign financial agency,” and states that the report related should “contain … information [that] Secretary [of the Treasury] set.โ€ The relevant regulations require an annual Report of Foreign Banks and Financial Accounts (the aforementioned FBAR) by any person who has “foreign financial accounts in excess of $10,000 maintained during the preceding calendar year.”

Bittner focused on the language of the statutory duty – to “file a report” – arguing that failure to file a report can only be a violation of the statutory order that the taxpayer “file a report.” He also pointed out that the regulatory order implementing the statute is bound (in the passage quoted above) not to the number of accounts, but rather to the aggregate balance in all accounts.

The government, instead, emphasizes the language of Section 5321, the provision authorizing the imposition of penalties, and argues that it consistently describes “violations” as something that is “account specific.” So, for example, the exception that prohibits penalties when the citizen has “reasonable cause” for the violation depends on the “balance in the account” (single) that is not reported. Similarly, the later paragraph specifying the maximum penalty for each violation binds the maximum to “the balance in the account at the time of the violation” (again, singular).

Bittner responded strongly, pointing to the Dictionary Act, which states that โ€œ[i]n determine the meaning of any Act of Congress,” the singular word “includes and applies to” the plural and “words importing the plural include the singular.” Thus, for Bittner, all references to the balance in “the [undisclosed] account” reads simply as referring to the balance in all ” [undisclosed] account[s].โ€

The parties spend many of their pages trying to control the narrative. Bittner’s attorney described him as an innocent Romanian who came here to escape communism, became a citizen, and then returned to Romania after the fall of communism. He particularly emphasized that when the case reached the Supreme Court, it involved penalties for inadvertent failure to report. From that point of view, giving the treasury secretary discretion to impose a fine of nearly three million dollars for a completely innocent misunderstanding of American law is an overreach. The government, on the other hand, portrays Bittner as a wealthy mogul, pointing to more than 70 million dollars in income generated from his various overseas ventures. The amount of underreporting of foreign accounts is huge, it explains; this is just the kind of information the government needs to respond to the massive money laundering problem plaguing our financial regulators.

For my part, I find the statutory arguments to be largely the same, since neither the statute nor the rules seem designed to answer the particular question before the court. Therefore, it is possible that some judges will rely on their notion of the equity of the situation in assessing how to resolve the problem before them. On Wednesday we will see.

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