Analysis of the Meaning of “Willful” in the FBAR Context

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Author(s): Rufus Rhoad­es and Alex­ey Man­a­suev Date: Sep­tem­ber 2013

Intro­duc­tion.

In this Emerg­ing Issues Analy­sis, we review the mean­ing of “will­ful” in the FBAR context.1 Treasury’s enforce­ment of the For­eign Bank Account Report­ing (FBAR) rules has grown aggres­sive­ly over the last few years. It is chas­ing both known and sus­pect­ed tax­pay­ers who Trea­sury believes hold funds in undis­closed off-shore accounts. Many times, the pur­suit of those tax­pay­ers gen­er­ates legal action to col­lect a penal­ty or exact jail time. All of those cas­es turn on the statute, the key word of which is “will­ful­ly.”

Crim­i­nal Penal­ties.

31 USC § 5322(a): A per­son will­ful­ly vio­lat­ing this sub­chap­ter or a reg­u­la­tion pre­scribed or order issued under this sub­chap­ter (except sec­tion 5315 or 5324 of this title or a reg­u­la­tion pre­scribed under sec­tion 5315 or 5324), 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.

Civ­il Penalties31 USC § 5321(a)(5)© 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) Amount. — The amount deter­mined under this sub­para­graph is
        • (i) in the case of a vio­la­tion involv­ing a trans­ac­tion, the amount of the trans­ac­tion, or
        • (ii) in the case of a vio­la­tion involv­ing a fail­ure to report the exis­tence of an account or any iden­ti­fy­ing infor­ma­tion required to be pro­vid­ed with respect to an account, the bal­ance in the account at the time of the vio­la­tion. …

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