Abstract
The Bank Secrecy Act, enacted in 1970, was intended in part to prevent American taxpayers from hiding funds in secret bank accounts overseas. At the time of the Act's enactment, a former U.S. Attorney for the Southern District of New York named secret foreign accounts as the single largest loophole in American tax law. This problem persists today. Over the last two decades, several of the largest banks in Switzerland have paid billions in fines after admitting to helping American clients hide billions in taxable assets.
Obtaining a bank account in a foreign jurisdiction like Switzerland is a luxury that is often only available to wealthy Americans. To address this issue, the Bank Secrecy Act requires U.S. citizens who hold more than $10,000 in a foreign bank account to file a Report of Foreign Bank and Financial Accounts, or FBAR, with the Internal Revenue Service. Willful violations of FBAR filing requirements carry penalties that can reach into the millions of dollars. While steep, these penalties serve the important purpose of reimbursing the government for a portion of the massive sums of money that are unlawfully concealed in foreign bank accounts to evade taxes.
The First and Eleventh Circuits are split on the issue of whether these civil FBAR penalties are subject to the Eighth Amendment's Excessive Fines Clause. The scope of that clause turns on the question of whether a given penalty constitutes a "fine" in the first place. The Supreme Court has held that a penalty only qualifies as a fine when it serves as punishment for an offense. In United States v. Toth, the First Circuit ruled that FBAR penalties are remedial penalties, not punitive fines, that serve to reimburse the government for evasion and enforcement costs. The Eleventh Circuit declined to follow this ruling when it decided Schwarzbaum v. United States, instead holding that FBAR penalties are punitive and therefore subject to the Excessive Fines Clause.
This Note argues that FBAR penalties are remedial. The Eleventh Circuit's decision is at odds with Supreme Court precedent, and future courts to rule on the issue should decline to adopt its interpretation. Civil FBAR penalties are not tied to any criminal conviction, are analogous to historically remedial customs and tax penalties, and they are designed primarily to reimburse the government for lost revenue and investigation costs. They are therefore nonpunitive and should remain outside the scope of the Excessive Fines Clause.
Volume
110
Issue
4
Page
1849
Year
2026
Recommended Citation
Jack Swain,
Fine and Punishment: Remedial Versus Punitive Penalties Under the Eighth Amendment,
110
Minn. L. Rev.
1849
(2026).
Available at:
https://scholarship.law.umn.edu/minnlrev/vol110/iss4/5
Rights
http://rightsstatements.org/vocab/InC-EDU/1.0/
Publication Abbreviation
Minn. L. Rev.
