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No Fifth Amendment Protection for Foreign Account Records, Government Prevails in the Third Circuit

By Michael A. Villa, Jr. on July 20, 2015

On July 17th, a panel for the U.S. Court of Appeals for the Third Circuit held there is no Fifth Amendment protection for foreign bank account records.  U.S. v. Chabot, No. 14-4465 (3d Cir. July 17, 2015).  The central issue was whether the IRS can enforce a summons for foreign bank account records that 31 C.F.R. § 1010.420 requires foreign accountholders to keep.  The taxpayers contested the summons asserting a Fifth Amendment Privilege and argued that complying with the summons effectively forced them to incriminate themselves, as the requested information was all the IRS needed to charge them with willful failure to report overseas accounts. 

The Third Circuit disagreed with the Chabots’ privilege argument and applied the required records exception to foreign bank account records that 31 C.F.R. § 1010.420 required them to keep.  The Third Circuit’s decision follows a line of rulings in the Second, Fourth, Fifth, Seventh, Ninth and Eleventh Circuits.  See In re Grand Jury Subpoena Dated Feb. 2, 2012, 741 F.3d 339 (2d Cir. 2013); U.S. v. Under Seal, 737 F.3d 330 (4th Cir. 2013); In re Grand Jury Proceedings, 707 F.3d 1262 (11th Cir. 2013); In re Grand Jury Subpoena, 696 F.3d 428 (5th Cir. 2012); In re Special Feb. 2011-1 Grand Jury Subpoena Dated Sept. 12, 2011, 691 F.3d 903 (7th Cir. 2012); In re Grand Jury Investigation M.H., 648 F.3d 1067 (9th Cir. 2011). 

A link to the decision can be found at http://www2.ca3.uscourts.gov/opinarch/144465p.pdf and 31 C.F.R. § 1010.420 can be located at https://www.law.cornell.edu/cfr/text/31/1010.420.