Justices mull money-laundering implications of failure to report foreign bank accounts
on Nov 3, 2022 at 7:08 pm
After several interruptions from protesters supporting abortion rights, the court settled into a relatively pedestrian argument Wednesday in Bittner v. United States. The case is slight, involving provisions of the Bank Secrecy Act that obligate citizens to file a form each year (an FBAR) that identifies their foreign bank accounts. The specific question is whether the penalty for violating that obligation depends on the number of times you fail to file or the number of accounts you fail to disclose. In this case, for example, Alexandru Bittner missed five annual filings, but the total number of missed disclosures was 272. The question for the justices then, is whether Bittner’s penalty (at $10,000 for each violation) should be $50,000 or $2.72 million.
The first thing you’d think about the argument (once you got past the protesters) is that somebody challenging government overreach will have a really hard time finding five votes if Justices Elena Kagan and Sonia Sotomayor are unpersuaded. And that was the situation here, as both of them seemed wholly unreceptive to the arguments of Daniel Geyser (representing Bittner).
Kagan, for example, forcefully criticized the logic of Geyser’s position because it “forces the government to treat equally somebody who has a $10,000 account and somebody who, like your client, has extreme wealth and many, many accounts and where he is depriving the government of much more information than … the small ‘I have a checking account for $12,000’ person does.” Even more troubling for Geyser, she found the statutory language quite clear in specifying the unit of violation as the account, rather than the filing:
Congress did [point to accounts rather than filings], starting with [Section] 5321, which speaks over and over again with respect to individual accounts. When you have the reasonable cause provision, and it speaks of specific accounts, and the willful provision, and it speaks of specific accounts, and it’s all in the structure of a statute which is speaking of a single violation, … it would be very odd not to think that Congress meant for the basic provision, without reasonable cause, without willfulness, also to be speaking of individual accounts.
In case those pointed comments left any doubt about the clarity of her position, she hammered home the point near the end of his argument, when she explained:
There is a real difference between a person with not much wealth, not knowing that he should be filing something about his checking account, and a person who has hundreds or millions of dollars in many, many accounts, is constantly making transactions, is constantly opening and closing them, maybe doing it to evade taxes, maybe doing it to finance terrorism. And, you know, in that case, the equities go against you, and that suggests, well, just look at the statute, and the statute, as I said, is very account-specific.
When Kagan thinks that the statute is “very” specifically against you, and that “the equities go against you,” you’ll have a hard time getting her vote.
Joining in the sentiment of that last comment of Kagan’s, Sotomayor displayed a similar reaction: The “problem I’m having,” she said, is that “the whole structure” of the statute seems to obligate you to “tell the government about” any foreign banking relationship. As she put it, “Tthat’s what the word ‘report’ means. Whether you do it on one form or 10 forms is irrelevant to me.”
That’s not to say that the case is an easy layup for the government. Several justices seemed hesitant to accept various parts of the government’s position, as presented by Matthew Guarneri. Justices Samuel Alito and Brett Kavanaugh, for example, were troubled by the narrow reading the government ascribed to a “reasonable cause” provision that limits penalties under the statute. For his part, Alito challenged the idea that ignorance of the law is not a reasonable cause for failing to file. When Guarneri stuck to that position, Kavanaugh turned to an assertion in the briefs “that a significant percentage of people who have these accounts have no idea they’re supposed to do a reporting.” For Kavanaugh,
That’s a little bit problematic. … Now you then said the reasonable cause provision can take care of that. And I think you said, if someone truly did not know about their legal obligation, and had exercised prudent care … in trying to be aware of their legal obligations, … that’s a powerful case. That should be a definitive case, shouldn’t it?
Guarneri, though, stuck to the government’s position that the reasonable cause provision should be interpreted quite narrowly.
In the same vein, Justice Neil Gorsuch was not happy about the broad discretion of the government to stockpile large penalties out of a large number of minor violations. He was particularly interested in the implications of a provision that allows a filer with more than 25 accounts to omit all account details: “So long as I tick the box and say I have 25, it would seem pretty hard to accumulate non-willful violations, whereas if it’s under 25 and you have the wrong address of the bank, 12 times, that’s a $120,000 fine. Is there some incongruity there that people with more bank accounts are actually less susceptible to penalty than those with fewer?”
This is not an argument displaying deep engagement or firmly dug-in positions. So the justices well might resolve their disparate reactions and coalesce around a consensus solution. As likely as not, though, we’ll have to wait until the spring to find out.