US Supreme Court Upholds Single Penalty for Non-Willful Violations of Bank Secrecy Act

March 9, 2023

On Feb. 28, 2023, the U.S. Supreme Court decided Bittner v. United States, holding that non-willful violations of the Bank Secrecy Act (BSA) should be handled per annual report, not per bank account, a ruling that saved the taxpayer in this case millions in fines.

What is the BSA?

The BSA is a federal law requiring U.S. citizens to report their foreign holdings. This law, originally created to combat fraud and money laundering, requires that U.S. citizens report their foreign accounts to the U.S. government each year. In order to ensure compliance with the law, Congress provided that even an unintentional failure to comply can result in a penalty of up to $10,000.

The Case of Bittner v. United States

The petitioner in the case, Alexandru Bittner (Bittner), was an immigrant from Romania who immigrated to the United States at a young age and eventually became a naturalized citizen. Bittner returned to Romania following the fall of communism and remained in Romania, growing a successful business, until his return to the U.S. in 2011. It was only then, in 2011, that he learned of his requirements to report his foreign accounts under the BSA.

Upon learning of his reporting requirements, Bittner properly filed all the missing reports for tax years  2007 through 2011. The reports detailed 272 foreign accounts in which Bittner owned or had a signatory interest. Due to his failure to timely file the report, the government hit Bittner with a $2.72 million fine.

Per-Account or Per-Report Bases

Litigation over the fine quickly ensued, with Bittner arguing a $50,000 penalty, at most, was appropriate given the law. However, the US government argued that BSA allows for a penalty on per-account bases instead of a per-report bases. Notwithstanding the government’s position, the Supreme Court agreed with the taxpayer.

Non-Willful or Willful Conduct

The Supreme Court held that under the relevant statutory provisions, non-willful violations could only hold a max of $10,000 per report. The Court’s assessment centered not on the statutory provision regulating non-willful conduct but instead focused on the language for willful conduct. In these sections, Congress clearly stated that penalties for willful violations could be measured on a per-account basis. However, under the sections relevant to non-willful conduct, Congress was silent and did not include such language.

Compounding Penalties

The Court also considered the drafting history of the BSA, which was amended to allow penalties for non-willful violations, but still failed to use the similar per-account penalty language found in the willful violation sections. The language for non-willful penalties is binary; either one properly reports to the extent required, or they inadvertently do not. The language provides no framework for one mistake versus five mistakes or one day late versus one year late. Grounded in this notion, the Court found that had Congress intended to allow compounding penalties per mistake, they would have included such language.

What Does the Ruling Mean for Taxpayers?

The Supreme Court seldom hears tax issues, but the result is positive for Americans with foreign holdings. Regardless of the number of accounts moving forward, non-willful violators of the BSA can only be penalized per report.

For support with tax matters including the BSA, please contact a member of KJK’s Tax Practice Group, including our Tax Practice Co-Chair Demetrius Robinson (614.427.5749; DJR@kjk.com) or Emily Stoerkel at (614.427.5755; ELS@kjk.com).