United States v. Reyes

Summary

The United States Court of Appeals for the Second Circuit affirmed summary judgment imposing civil penalties on Juan and Catherine Reyes for willfully failing to file FBARs concerning a jointly held foreign bank account. The court held that “willful” under 31 U.S.C. § 5321(a)(5)(C) encompasses reckless conduct and that the undisputed evidence established recklessness. The court also held that a six percent late-payment penalty under 31 U.S.C. § 3717(e)(2) and applicable Treasury regulations was mandatory.

Holdings

1. In the civil FBAR-penalty context, "willfully" encompasses both intentional and reckless conduct; a person who recklessly fails to report a foreign account may be subject to enhanced penalties.
2. The undisputed evidence established that the Reyeses acted recklessly in failing to file FBARs for 2010, 2011, and 2012, and no genuine dispute of material fact precluded summary judgment.
3. The district court correctly imposed the six-percent late-payment penalty because Treasury regulations set the applicable rate at six percent per year within the authority granted by 31 U.S.C. § 3717(e)(2).

Questions Presented

1. Whether the term "willfully" in 31 U.S.C. § 5321(a)(5)(C) encompasses reckless conduct for purposes of enhanced civil FBAR penalties.
2. Whether the undisputed evidence established that the Reyeses acted recklessly, permitting summary judgment for the United States.
3. Whether the district court had discretion to impose less than the six-percent late-payment penalty established by Treasury regulations under 31 U.S.C. § 3717(e)(2).

Disposition

affirmed