113 F.4th 1158
9th Cir.2024Background
- Timberly Hughes, a U.S. citizen, owned and operated two companies in New Zealand, giving her signature authority over associated foreign bank accounts.
- Under the Bank Secrecy Act, U.S. citizens are required to file annual FBARs (Reports of Foreign Bank and Financial Accounts) for foreign accounts.
- Hughes failed to file FBARs for 2010–2013; the U.S. government sought civil penalties, totaling $678,899, for allegedly willful violations in 2012 and 2013.
- The district court held that "willfulness" for civil FBAR penalties can include recklessness, in line with other circuits and the Supreme Court's reasoning in Safeco Ins. v. Burr.
- The court found Hughes's violations in 2012 and 2013 to be willful but not those in 2010 or 2011, based on evidence of her awareness of the filing requirement in the later years.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standard for “willfulness” under FBAR | Requires subjective intent to violate FBAR | "Willfulness" can be shown via recklessness | Civil "willfulness" includes recklessness |
| Application of Recklessness vs. Negligence | Recklessness standard is too broad, conflates | Recklessness is higher than negligence | Recklessness is more than negligence; |
| negligence with willfulness | negligence alone is not sufficient | ||
| Use of Safeco standard in FBAR penalties | Safeco does not apply to punitive statutes like | Safeco covers civil liability contexts | Safeco applies to civil FBAR penalty standard |
| FBAR; should be limited to compensatory statutes |
Key Cases Cited
- Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47 (2007) (willfulness in civil penalty statutes includes reckless violations)
- Bedrosian v. United States, 912 F.3d 144 (3d Cir. 2018) (civil FBAR penalties include reckless disregard)
- United States v. Horowitz, 978 F.3d 80 (4th Cir. 2020) (recklessness meets FBAR willfulness standard)
- United States v. Rum, 995 F.3d 882 (11th Cir. 2021) (willfulness for FBAR includes recklessness)
- United States v. Kelly, 92 F.4th 598 (6th Cir. 2024) (affirming recklessness as standard for willful FBAR civil penalties)