No Fifth Amendment Privilege As To Foreign Bank Accounts

Recently, the United States Court of Appeals for the Third Circuit confronted the question of whether the Fifth Amendment privilege against self-incrimination applies when the Government subpoenas foreign bank records under 31 C.F.R. § 1010.420. In United States v. Chabot, -F.3d-, 2015 WL 4385279 (3d Cir. 2015), the Third Circuit joined the Second, Fourth, Fifth, Seventh, Ninth, and Eleventh Circuits in concluding that it does not.

In April 2010, the IRS was informed that Eli and Renee Chabot had an undisclosed bank account in France. The IRS subpoenaed the Chabots to produce documents about their foreign bank account that were required to be kept under § 1010.420. The Chabots refused to produce the documents, arguing that their production of these documents may subject them to criminal prosecution and is therefore protected by the Fifth Amendment. Moreover, the Chabots claimed that the “required records” exception to the Fifth Amendment did not apply because it would abrogate the Fifth Amendment protection in every “failure to report” crime. The Chabots also argued that the three-pronged test for applying the required records exception, Grosso v. United States, 390 U.S. 62, 67–68 (1986), was not met.

In agreeing with the District Court, the Third Circuit ruled that the “required records” exception applies. The Court rejected the argument that the exception would abrogate Fifth Amendment protection for all failure to report crimes because § 1010.420’s records requirement serves legitimate non-criminal purposes—for example, tax collection, monetary policy-making, and intelligence gathering. The Court then considered the three prongs of the “required records” exception and concluded that each prong was satisfied. First, the records were kept for an “essentially regulatory purpose.” Next, the records are the type of records that reasonable accountholders would “customarily keep.” Finally, because the Government circulates the data from these records to several governmental agencies, the records have a “public aspect.” Since the Fifth Amendment privilege against self-incrimination did not apply, the Court ordered that the IRS’s subpoena be enforced.

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