United States v. Flume, 390 F. Supp. 3d 847

Flume, a U.S. citizen living and doing business in Mexico, opened a UBS Swiss account in the name of his Belize corporation (Wilshire) in 2005 and was the account's sole signatory; average balances exceeded $700,000 in 2007–2008.
Flume did not timely file FBARs for 2007 and 2008 and only filed delinquent FBARs in 2010 after UBS began cooperating with U.S. authorities; IRS assessed willful FBAR penalties totaling $456,509.
The Government sued to collect civil FBAR penalties; only willfulness was disputed at bench trial following denial of summary judgment on that issue.
At trial, IRS agent Raphaelle Johnson, Flume, and two tax preparers (Purcell and Luna) testified; preparers credibly testified they had annually reminded clients about foreign-account reporting and that Flume never disclosed the UBS account to them.
The court found Flume not credible, emphasized his financial sophistication, the timing of his late disclosures (after UBS’s cooperation), underreporting of account balances on delinquent FBARs, and his failure to review returns—concluding his omissions were knowing or reckless.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Flume willfully failed to file FBARs for 2007–2008	Government: Flume acted knowingly or recklessly in not filing; evidence of concealment, sophistication, and delayed disclosure after UBS exposure shows willfulness	Flume: omission was inadvertent; he learned of FBAR requirement only in 2010 and relied on preparers	Court: Held willful—Flume not credible; conduct was knowing or highly reckless
Whether reliance on tax preparers negates willfulness	Government: failure to disclose the account to preparers indicates intent to conceal; reliance was reckless given his complexity	Flume: entrusted tax preparers and therefore lacked knowledge	Court: Preparers’ testimony credited; Flume’s nondisclosure to them supports finding of willfulness
Whether late filing and underreporting mitigate penalties	Government: late, partial disclosure after UBS cooperated indicates consciousness of guilt	Flume: late filings were remedial and based on limited records/memory	Court: Underreporting and timing reinforce willfulness; Flume had facile access to records, so recklessness/knowing failure shown
Proper assessment amount for willful penalties	Government: statutory maximums apply (up to 50% of account balance or $100,000)	Flume: challenges willfulness to avoid large penalties	Court: Upheld IRS assessment of $356,509 for 2007 (50% of balance) and $100,000 for 2008 (statutory maximum when balance was zero)

United States v. Under Seal, 737 F.3d 330 (4th Cir. 2013) (discussing Bank Secrecy Act regulation of offshore accounts)
Cal. Bankers Ass'n v. Shultz, 416 U.S. 21 (U.S. 1974) (legislative history and scope of Bank Secrecy Act)
Bedrosian v. United States, 912 F.3d 144 (3d Cir. 2018) (willfulness requires knowing or reckless failure to file FBAR)
Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47 (U.S. 2007) (standard for reckless conduct and objective unreasonableness)
United States v. Kelley-Hunter, 281 F. Supp. 3d 121 (D.D.C. 2017) (elements for government recovery of civil FBAR penalties)
United States v. McBride, 908 F. Supp. 2d 1186 (D. Utah 2012) (FBAR willfulness and constructive knowledge issues)
United States v. Vespe, 868 F.2d 1328 (3d Cir. 1989) (recklessness standard for IRS filing requirements)