Case Information
*1 Before HULL, WILSON and HILL, Circuit Judges.
HULL, Circuit Judge:
This аppeal concerns a grand jury investigation and the issuance of
subpoenas duces tecum to a target (the “Target”) and his wife, which required the
production of records concerning their foreign financial accounts. The Target and
his wife refused to comply with the subpoenas by producing their records,
asserting their Fifth Amendment privilege against self-incrimination. The
government moved to compel, pointing out that the Supreme Court has recognized
an exception (the “Required Records Exception”) to the self-incrimination
privilege when certain records are kept pursuant to a valid regulatory scheme. See
Shapiro v. United States,
After review and oral argument, we join the three of our sister circuits that have considered the same issue here about foreign financial account records and conclude that the subpoenaed records fall within the Required Records Exception. We thus affirm the district court’s grant of the government’s motion to compel.
I. BACKGROUND
The relevant facts are both brief and undisputed. The present appeal arises out of a grand jury investigation in the Northern District of Georgia, jointly conducted by the Internal Revenue Service (“IRS”), the U.S. Department of Justice Tax Division, and the U.S. Attorney’s Office (collectively, the “government”). The government suspected that the Target, along with his wife, maintained foreign bank accounts both together and individually. For the years under investigation, the Target and his wife filed joint tax returns. Among other things, the government’s investigation focused on the Target and his wife’s failures to: (1) disclose on their tax returns their ownership of or income derived from their foreign accounts; and (2) file, with the U.S. Department of the Treasury, Forms TD F 90-22.1, Reports of Foreign Bank and Financial Accounts (“FBAR”) for these alleged accounts. [1]
During the course of its investigation, on June 29, 2011, the grand jury, at the request of the U.S. Attorney, issued subpoenas duces tecum to both the Target and his wife. These subpоenas required the Target and his wife to produce any foreign financial account records that they were required to keep pursuant to the federal regulations governing offshore banking. Specifically, the subpoenas requested:
[f]or the tax years 2006 to the present: any and all records required to be maintained pursuant to 31 C.F.R. § 103.32 relating to foreign financial accounts that you had/have a financial interest in, or signature authority over, including records reflecting the name in which each such account is maintained, the name and address of the foreign bank or other person with whom such account is maintained, the type of such account, and the maximum value of each such account during each specified year.[ [2] ]
The Target and his wife informed the government that they would not produce the subpoenaed records. Thereafter, on September 20, 2011, the government filed a motion seeking to compel their compliance with the subpoenas. In its motion, filed in the district court, the government argued that the Bank Secrecy Act (“BSA”), 31 U.S.C. § 5311 et seq., and its implementing regulations, required the Target and his wife to keep the foreign financial account records sought by the subpoenas. Because the subpoenas were directed at only those records kept “within the requirements of [the] regulations,” the Required Records Exception to the Fifth Amendment privilege against self-incrimination applied, such that the Target and his wife could not resist complying with the subpoenas on Fifth Amendment grounds. The government requested that the district court grant the motion to compel and enter an order directing the Target and his wife “to show cause why they should not be held in contempt for failing to comply with the subpoenas.”
The Target and his wife filed a response to the government’s motion to compel, arguing that the Required Records Exception did not apply to them based on the particular facts and circumstances of their case.
On November 7, 2011, the district court granted the government’s motion to compel. In pertinent part, the district court found that the documents requested in the subpoenas fell within the Required Records Exception because: (1) federal law required the Target and his wife to maintain and make available for inspeсtion records regarding their foreign financial accounts; (2) that recordkeeping requirement, imposed by federal statute and implemented by federal regulations, was part of a civil regulatory scheme that was “‘essentially regulatory’ and not criminal in nature”; (3) the records were of the sort that “bank customers would customarily keep”; and (4) the records had “public aspects” because they contained information that federal law required the Target and his wife to maintain and make available for inspection by the IRS, as well as report to the Treasury Department. The district court ordered the Target and his wife to produce the subpoenaed foreign financial account records “or be subject to contempt.”
The Tаrget and his wife did not comply with the district court’s order. On March 5, 2012, the government moved the district court to hold the Target and his wife in contempt, pursuant to 28 U.S.C. § 1826. The district court issued an order holding the Target and his wife in contempt for their failure to comply with the district court’s earlier November 7 order. The district court, however, stayed the enforcement of its contempt order pending the outcome of any appeal. The Target and his wife timely appealed.
II. DISCUSSION
On appeal, the Target [3] argues that he properly invoked his Fifth Amendment privilege against self-incrimination, and that the district court erred in concluding that the Required Records Exception applied to the subpoenaed records. The Target also argues that because his act of producing the subpoеnaed records could potentially be incriminating, his Fifth Amendment privilege against self- incrimination should apply to his act of production, as well as applying to the records themselves. [4]
Before discussing these privilege issues, we review the Bank Secrecy Act and its related regulations.
A. The Bank Secrecy Act
The Currency and Foreign Transactions Reporting Act of 1970, Pub. L. 91-508, 84 Stat. 1118 (1970), is generally referred to as the Bank Secrecy Act (“BSA”). The BSA’s purpose is “to require certain reports or records where they have a high degree of usefulness in criminal, tax, or regulatory investigations or proceedings. . . .” 31 U.S.C. § 5311. Section 241 of the BSA, codified at 31 U.S.C. § 5314, provides that the “Secretary of the Treasury shall require a resident or citizen of the United States or a person in, and doing business in, the United States, to keep records, file reports, or keep records and file reports, when the resident, citizen, or person makes a transaction or maintains a relation for any person with a foreign financial agency.” Id. § 5314(a). In short, the Secretary of
the Treasury must require U.S. citizens and residents, as well as any person doing business in the United States, to “keep records and file reports” regarding their foreign financial transactions and relationships. See id.
Pursuant to this Section 241 instruction, the Secretary of the Treasury has implemented regulations that require U.S. citizens, residents, and business entities to report their foreign financial accounts to the IRS. See 31 C.F.R. § 1010.350. Specifically, the reporting regulation requires that:
Each United States person having a financial intеrest in, or signature or other authority over, a bank, securities, or other financial account in a foreign country shall report such relationship to the Commissioner of Internal Revenue for each year in which such relationship exists and shall provide such information as shall be specified in a reporting form prescribed under 31 U.S.C. 5314 to be filed by such persons. The form prescribed under section 5314 is the Report of Foreign Bank and Financial Accounts (TD-F 90-22.1), or any successor form.
31 C.F.R. § 1010.350(a) (emphasis added).
A separate regulation mandates that those persons who are required to report foreign financial interests under § 1010.350 retain certain foreign financial records for at least five years, making them “available for inspection as authorized by law.” Id. § 1010.420. These foreign finаncial records must contain (1) “the name in which each such account is maintained”; (2) “the number or other designation of such account”; (3) “the name and address of the foreign bank or other person with whom such account is maintained”; (4) “the type of such account”; and (5) “the maximum value of each such account during the reporting period.” Id. [5] The records named in the subpoenas here mirror the records that § 1010.420 requires persons maintaining foreign financial interests to keep and maintain for government inspection. The information contained in those subpoenaed records is also identical to information that persons subject to § 1010.420 annually report to the U.S. Department of the Treasury through FBAR, Form TD F 90-22.1. Thus, the records at issue contain information that the Target—if he has a foreign financial account and meets other qualifications specified in the BSA—must keep, report to the Treasury Department, and maintain for inspection.
The question here is whether records that federal law requires a person to keep and make available for inspection by the federal government can be subpoenaed by the government in a grand jury investigation when the holder of the records asserts his Fifth Amendment privilege against self-incrimination. We now turn to a discussion of the Fifth Amendment and the Required Records Exception to that Amendment’s privilege against self-incrimination.
B. The Fifth Amendment’s Privilege against Self-Incrimination
The Fifth Amendment to the United States Constitution states that “[n]o
person . . . shall be compellеd in any criminal case to be a witness against
himself. . . .” This provision applies “when the accused is compelled to make a
[t]estimonial [c]ommunication that is incriminating.” Fisher v. United States, 425
U.S. 391, 408,
Courts have interpreted broadly what constitutes a “testimonial
communication.” In Fisher, the Supreme Court stated that “[t]he act of producing
evidence in response to a subpoena . . . has communicative aspects of its own,
wholly aside from the contents of the papers produced.”
C. The Required Records Exception
Although the Fifth Amendment protects an individual against
self-incrimination by barring the government from “compelling [him] to give
‘testimony’ that incriminates him,” its protective shield is not absolute. Fisher, 425
U.S. at 409,
Of relevance to the present case, the Supreme Court has made clear that
when the government is authorized to regulate аn activity, an individual’s Fifth
Amendment privilege does not prevent the government from imposing
recordkeeping, inspection, and reporting requirements as part of a valid regulatory
scheme. See Shapiro v. United States,
The rationale underlying the Required Records Exception is “twofold.” In
re Two Grand Jury Subpoenae Duces Teсum,
Building on Shapiro, the Supreme Court later articulated three “premises” or
elements of the Required Records Exception in a pair of cases that dealt with
whether the Exception applied to the payment of an excise tax on illegal gambling
wagers. See Grosso v. United States,
In the nearly 45 years that have elapsed since the Supreme Court laid out the
Required Records Exception’s three “premises” in Grosso and Marchetti, many of
our sister circuits have recognized and applied these “premises” as though they
were elements of the Required Records Exception. See, e.g., In rе Grand Jury
Subpoena,
Importantly here, in several of these cases—In re M.H. (9th Cir.), Grand
Jury Subpoena Dated Sept. 12, 2011 (7th Cir.), and In re Grand Jury Subpoena (5th
Cir.)—our sister circuits upheld the application of the Required Records Exception
to individuals who were served with subpoenas that sought the production of
financial records required to be kept pursuant to the BSA and its implementing
regulations. In re Grand Jury Subpoena,
Subpoena Dated Sept. 12, 2011,
D. Analysis—Application of the Required Records Exception With this analytical framework in place, we now turn to our application of the Required Records Excеption to the particular records at issue here. For the reasons set forth below, we conclude that the government has met its burden of proving that the foreign financial account documents sought from the Target, which the BSA and its implementing regulations require him to maintain, satisfy the “premises” of the Required Records Exception. [7] Because the Exception applies, both the documents themselves and the act of producing them fall outside the purview of the Fifth Amendment.
1. “Essentially Regulatory”
The Target argues that the text of the BSA and its legislative history indicate
Congress intended for the recordkeeping and reporting requirements imposed on
foreign financial accountholders to aid law enforcement, and therefore, that the
purpose of the Act is сriminal in nature rather than “essentially regulatory.”
Grosso,
The Target also acknowledges, however, that the BSA has multiple
purposes. That a statute relates both to criminal law and to civil regulatory matters
does not strip the statute of its status as “essentially regulatory.” See Cal. Bankers
Ass’n v. Shultz,
In re Grand Jury Subpoena,
In Dichne, the Second Circuit held that a similar recordkeeping and
reporting requirement of the BSA was not subject to the Fifth Amendment’s
privilege against self-incrimination.
The BSA and its implementing regulations at issue here apply to a wide
range of individuals. “There is nothing inherently illegal about having or being a
beneficiary of an offshore foreign banking account,” and “[n]othing about having a
foreign bank account on its own suggests a person is engaged in illegal activity.”
In re M.H.,
For these reasons, we conclude that the requested foreign financial account records satisfy the first “premise” of the Required Records Exception, as the government’s interest is “essentially regulatory” in nature.
2. “Customarily Kept”
The second “premise” of the Required Records Exception examines whether
the records sought are of the type typically kept in connection with the regulated
activity. Grosso,
The Ninth Circuit has held that the foreign financial account information
required to be kept under 31 C.F.R. § 1010.420 is “basic account information that
bank customers would customarily keep, in part because they must report it to the
IRS every year as part of the IRS’s regulation of offshore banking, and in part
because they need the information to access their foreign bank accounts.” In re
M.H.,
We agree. Simply put, the Target’s argument that these records are not “customarily kept” is a non-starter. In addition to needing these foreign financial account records to comply with tax and Treasury Department reporting obligations, “the records sought are also of the same type that a reasonable account holder would keep in order to access his account.” Grand Jury Subpoena, 696 F.3d at 435. We conclude that the subpoenaed foreign financial account records here are оf a kind “customarily kept” in connection with the regulated activity of offshore banking, thereby satisfying the second “premise” of the Required Records Exception.
3. “Public Aspects”
The third “premise” of the Required Records Exception requires that the
requested records “have assumed ‘public aspects’ which render them at least
analogous to public documents.” Grosso,
Generally, “[w]here personal information is compelled in furtherance of a
valid regulatory scheme, as is the case here, that information assumes a public
aspect.” In re M.H.,
The fact that 31 C.F.R. § 1010.420 requires foreign accountholders to keep
foreign financial account records, but to file only the TD F 90-22.1 FBAR form
concerning those records with the Treasury Department, does not extinguish the
public aspects of the records here. The Supreme Court has recognized that there is
no material distinction between records required to be kept by law and those
regularly or “easily accessed” by the government. See Marchetti,
Thus, this Court finds that the Target’s records sought here have “public
aspects,” satisfying the third and final “premise” of the Required Records
Exception. See Grand Jury Subpоena Dated Sept. 12, 2011,
E. The Act-of-Production Privilege
We now address the Target’s contention that the Required Records Exception is not applicable to a case such as this where the act of producing the records would be compelled, testimonial, and self-incriminating. We reject the Target’s attempt to draw a distinction, for Fifth Amendment privilege purposes, between his act of producing the records and the records themselves. As the Seventh Circuit has persuasively stated,
[o]ne of the rationales, if not the main rationale, behind the Required Records Doctrine is that the government or a regulatory agency should have the means, over an assertion of the Fifth Amendment Privilege, to inspect the records it requires an individual to keep as a condition of voluntarily participating in that regulated activity. That goal would be easily frustrated if the Required Records Doctrine were inapplicable whenever the act of production privilege was invoked. The voluntary choice to engage in an activity that imposes record-keeping requirements under a valid civil regulatory scheme carries consequences, perhaps the most significant of which, is the possibility that those records might have to be turned over upon demand, notwithstanding any Fifth Amendment privilege. That is true whether the privilege arises by virtue of the cоntents of the documents or [by the] act of producing them.
Grand Jury Subpoena dated Sept. 12, 2011,
Although the Supreme Court decided its “act-of-production” privilege cases
after it decided Shapiro, Grosso, and Marchetti, it has since applied the rationale
behind the Required Records Exception to negate a witness’s act-of-production
privilege. See Bouknight,
Indeed, in McCoy & Sussman, our predecessor Court determined that the act-of-production privilege discussed in Fisher was “not directed at the production
of ‘required records,’” and that “[t]he proper designation by the government of
certain records to be kept by an individual necessarily implies an obligation to
produce them.”
We likewise reject the Target’s assertion that the resolution of this question
is controlled by our decision in United States v. Argomaniz,
customshouse brokers to maintain records of their business and allow access to them.” Id. McCoy refused to permit the inspection. Id. As part of a grand jury investigation, McCoy was later served with a subpoena duces tecum requiring the production of certain records. Id. McCoy contended that “even if the subpoena were limited to ‘required records,’ he would be privileged from producing the records because the mere act of producing them would be, in effect, testimonial.” Id. at 170. This Court rejected that contention as to “required records.” Id. at 170–71.
III. CONCLUSION
For the reasons stated above, and after oral argument and our review of the record in the present case, we affirm the district cоurt’s order granting the government’s motion to compel the Target and his wife to comply with the subpoenas duces tecum for their foreign financial account records. [10] AFFIRMED.
Notes
[1] “Each United States person” must file an FBAR form if that person has a financial interest in, or signature authority over, any financial account or other financial interest maintained in a foreign country. See 31 U.S.C. § 5314; 31 C.F.R. §§ 1010.350, 1010.420.
[2] On March 31, 2011, 31 C.F.R. § 103.32 became 31 C.F.R. § 1010.420. Compare 31 C.F.R. § 103.32 (2010) with id. § 1010.420 (2011); see also Transfer and Reorganization of Bank Secrecy Act Regulations, 75 Fed. Reg. 65806-01 (Oct. 26, 2010).
[3] Although both the Target and his wife received identical subpoenas and both are appealing the district court’s contempt order, we refer to the Target as a singular entity in our discussion, for ease of reference.
[4] “We review the district court’s findings of relevant facts for clear error, . . . and review
the district court’s application of the Fifth Amendment privilege de novo.” In re Grand Jury
Subpoena Duces Tecum Dated Mar. 25, 2011,
[5] We note that the Target has raised no challenge to the constitutionality or legality of
either the Bank Secrecy Act or its implementing regulations. And it is plainly within Congress’s
power to regulate foreign financial transactions undertaken by U.S. citizens and residents by
mandating that such financial activity be reported yearly to the federal government. See U.S. C ONST . art. I, § 8, cl. 3 (vesting Congress with the authority “[t]o regulate Commerce with
foreign Nations”); Cal. Bankers Ass’n v. Shultz,
[6] In Bonner v. City of Prichard,
[7] Our predecessor Court, the Fifth Circuit, applied the first and third “premises”—the
“essentially regulatory” and “public aspects” elements—but did not explicitly mention the
“customarily kept” element. See McCoy & Sussman,
[8] We also reject the Target’s argument that the Required Records Exception is only
triggered where there is some level of licensure or heightened government regulation at issue.
We agree with the government’s position that it is up to Congress to determinate the appropriate
level of regulation that should accompany its mandate that certain records be kept. We note that
the Fifth Circuit recently arrived at the same conclusion, holding that “[i]f the witness’s
argument were correct, thеn Congress would be prohibited from imposing the least regulatory
burden necessary; it would instead be required to supplement a reporting or recordkeeping
scheme with additional and unnecessary ‘substantive restrictions’ for the sole purpose of
upholding its record keeping and reporting requirements,” and thus, “adopting a rule that the
legitimacy of a recordkeeping requirement depends on Congress first enacting substantive
restrictions would lead to absurd results.” In re Grand Jury Subpoena,
[9] McCoy was the sole proprietor and operator of a customshouse brokerage office.
McCoy & Sussman,
[10] In this appeal, the government has never sought any oral testimony from the Target or his wife, and thus this case involves only records and the act of producing those records.