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Privilege against self-incrimination may not reach offshore bank accounts

Table of Contents

    Date: 09/12/12

    Topic: Foreign Accounts

    Recently, both the Ninth and Seventh Circuits have issued decisions that undermined the Fifth Amendment privilege against self-incrimination. This “required records” exception, it turns out allows prosecutors to compel someone to produce offshore account data even if it is self-incriminating. Moreover, in the event the account holder does not have the records, he or she must go to the bank and request the records for the government.

    In In re Grand Jury Investigation M.H., appellant M.H. was the target of a grand jury investigation seeking to determine whether he used a secret Swiss bank account to evade paying federal taxes. The district court concluded that under the required records doctrine the Fifth Amendment did not apply. The Ninth Circuit court affirmed that decision asserting that M.H. may not invoke the Fifth Amendment to resist compliance with the subpoena’s command. The Ninth Circuit had been the only federal appellate court to hold that a person may not resort to the Fifth Amendment to resist subpoena for the person’s offshore bank records, however, the Seventh Circuit quickly followed.

    In In Re Special February 2011-1 Grand Jury Subpoena, on appeal from district court, the Seventh Circuit decision begins, “[we are] asked to determine whether compulsory production of foreign bank account records required to be maintained under the Bank Secrecy Act would violate appellee T.W.’s Fifth Amendment privilege against self-incrimination.” Since the court found the required records doctrine applicable, they held that T.W. must produce the subpoenaed records that admittedly did not comport with forms previously filed with the IRS.

    Under the required records exception, Fifth Amendment rights are not violated if:

    • The government’s inquiry is essentially regulatory,
    • The information is a preserved record of a kind customarily retained, and
    • The records have taken on public aspects making them analogous to a public document.

    The message sent by these decisions is clear, prosecution of tax evaders’ trumps even constitutional rights given the correct circumstances. Decisions like these make the IRS voluntary disclosure program an all the more attractive option.


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