Fourth Circuit: Objective Recklessness Establishes Willful FBAR Liability, and Aggregate Willful FBAR Penalties Are Not “Grossly Disproportional” When Far Below the Statutory Maximum

1. Introduction

United States v. Richard Rund (4th Cir. Sept. 4, 2026) is a published decision affirming summary judgment for the Government in an action to reduce to judgment civil penalties assessed under the Bank Secrecy Act for willful failures to file accurate and timely FBARs (Reports of Foreign Bank and Financial Accounts).

The IRS assessed $2,915,663 in willful FBAR penalties against Richard M. Rund, a U.S. citizen and businessman, based on unreported interests in and authority over more than a dozen foreign accounts across multiple years (primarily 2003–2008, 2013–2014). Rund resisted enforcement on two main grounds:

  • Liability: the record did not establish “willfulness” (arguing material disputes, including health-related explanations).
  • Constitutionality: the penalties violated the Excessive Fines Clause of the Eighth Amendment.

The Fourth Circuit affirmed on both issues, holding that willfulness was established as a matter of law under its existing recklessness standard, and that (even assuming the Eighth Amendment applies to civil willful FBAR penalties) the $2.9 million assessment was not “grossly disproportional.”

2. Summary of the Opinion

The court made three core moves:

  1. Willfulness: Applying United States v. Horowitz, the court held Rund’s FBAR violations were willful as a matter of law because the undisputed record showed at least objective recklessness—Rund knew of FBAR obligations from prior filings, signed tax returns denying foreign accounts, used structures “for US tax reasons,” and had ready access to tax professionals yet lacked evidence he disclosed the relevant accounts or sought advice in the years at issue.
  2. Excessive Fines Clause: The court declined to decide whether civil FBAR penalties are categorically subject to the Excessive Fines Clause (noting a circuit split), because Rund’s challenge failed even if the Clause applied.
  3. Proportionality: Under United States v. Bajakajian and Fourth Circuit proportionality factors, the aggregate penalty—about 30% of the statutory maximum, and effectively about 14%–16% per account-year (given the IRS’s pro rata allocation approach)—was not grossly disproportional given repeated violations across many accounts and years, and the relationship between nonreporting and potential tax loss/investigative harm.

3. Analysis

A. Precedents Cited

1) FBAR purpose and statutory context

  • Bittner v. United States: Cited for the function of FBARs—helping trace illicit funds and identify unreported taxable income. This framed why nonreporting is treated as a serious regulatory breach, supporting the court’s harm and proportionality analysis.

2) Summary judgment standards

  • Amazon.com, Inc. v. WDC Holdings LLC and Anderson v. Liberty Lobby, Inc.: Supplied the de novo review posture and the “genuine dispute of material fact” test, which the court used to reject Rund’s largely conclusory assertions about mental health and disclosure practices as insufficient without record evidence.
  • Grayson O Co. v. Agadir Int'l LLC: Used to dispose of any undeveloped argument about reducing the judgment due to the IRS allocation error; Rund identified the error but did not develop an appellate argument.
  • United States v. Rund: The district court decision was cited for factual synthesis and the observation that participation in the Offshore Voluntary Disclosure Program should have heightened Rund’s awareness and care.

3) Willfulness standard for civil FBAR penalties

  • United States v. Horowitz: The controlling Fourth Circuit rule that “willful” includes both knowing and reckless violations for civil FBAR penalties. Rund is, in significant part, an application—and reinforcement—of Horowitz’s “objective recklessness” framework to a more complex, multi-entity, multi-year record.
  • Farmer v. Brennan and Safeco Ins. Co. of Am. v. Burr: Provided the general definition of civil recklessness (objective “high risk” disregard), which Horowitz imported and Rund then applied.
  • Bedrosian v. United States: Quoted (via Horowitz) for the three-part formulation: the defendant clearly ought to have known of a grave risk of inaccurate filing and could have found out very easily.

4) Excessive Fines Clause and proportionality

  • United States v. Bajakajian: The “touchstone” proportionality test—whether the fine is grossly disproportional to the offense. The court distinguished Bajakajian’s “single failure to report” from Rund’s repeated nonreporting and tax-related concealment context.
  • United States v. Jalaram, Inc., United States v. Ahmad, United States v. Blackman, and United States ex rel. Bunk v. Gosselin World Wide Moving, N.V.: Cited for Fourth Circuit factor-based proportionality analysis and deference to legislatively authorized penalty ranges.
  • Korangy v. FDA: Supported the proposition that penalties scaling with the number of violations tend to be proportionate when multiple discrete offenses occurred.

5) Circuit split on whether the Eighth Amendment applies to civil FBAR penalties

  • United States v. Toth (1st Cir.): Cited for the view that civil FBAR penalties are not “fines” under the Eighth Amendment because they are remedial and not tied to a criminal sanction.
  • United States v. Schwarzbaum (11th Cir.): Cited for the contrary view that civil FBAR penalties are at least partly punitive and thus subject to the Excessive Fines Clause; also cited for the logic that tying penalties to account size reflects proportional deterrence and risk.
  • Toth v. United States: Noted via a quoted dissent from denial of certiorari (Justice Gorsuch), underscoring ongoing controversy about the punitive/remedial characterization.

6) Unresolved methodological questions flagged by the court

  • Jouppi v. Alaska: Noted to highlight a pending Supreme Court question about whether “gravity” is assessed abstractly or with defendant-specific facts. The Fourth Circuit emphasized it performed an individualized analysis in Rund.
  • United States v. Schwarzbaum: Also cited for the Eleventh Circuit’s view that excessiveness should be assessed account-by-account and year-by-year. The Fourth Circuit expressly left that question open because the parties litigated only the aggregate penalty.

B. Legal Reasoning

1) Willfulness: why summary judgment was appropriate

The court treated willfulness as the only disputed liability element and held that no reasonable jury could find Rund’s violations non-willful under the controlling recklessness standard.

Key drivers of “objective recklessness” across the record:

  • Prior knowledge and repeated omissions: Rund had filed FBARs for earlier years, so—unlike defendants who plausibly lacked awareness—he had direct notice of the requirement before the first charged year.
  • Tax return “foreign account” questions: For multiple years he signed returns (under penalty of perjury) answering “no” to foreign-account questions that referenced FBAR instructions—an evidentiary “red flag” emphasized in United States v. Horowitz.
  • Ease of confirmation: The “very easily” prong mattered: Rund used tax professionals, but the record lacked evidence that he disclosed the relevant accounts to preparers in the pertinent years or sought advice about FBAR reporting for them.
  • Tax-motivated structuring: The court repeatedly highlighted that certain entities/accounts were arranged “for US tax reasons” or to achieve a “more favourable tax rate,” making the failure to seek professional guidance about reporting obligations particularly reckless.

Account-category applications:

  • HSBC personal accounts: Having reported an HSBC account in some years, Rund “clearly ought to have known” that omitting the same account later created a grave risk of noncompliance. Participation in the Offshore Voluntary Disclosure Program further heightened the expectation of careful disclosure.
  • Bank of East Asia business accounts (FOB Instruments Ltd./York Luen): Despite formal ownership layering (beneficial owner/nominee), Rund exercised control and sought U.S. tax advantages. The absence of evidence that he informed preparers during 2003–2008, or that he received contrary advice, foreclosed a triable issue.
  • UBS Switzerland (Far East Ventures Ltd.): The “for US tax reasons” naming of an entity holder, paired with admitted control and beneficial ownership, made nonreporting a paradigmatic “red flag” case under Horowitz logic.
  • China Construction Bank accounts (2013–2014): After acknowledging earlier York Luen-related violations, omitting York Luen’s later accounts was at least reckless. A claimed real-estate reinvestment/tax-deferral belief did not create a factual dispute absent evidence it reasonably affected FBAR obligations or was supported by professional advice.

The court also rejected Rund’s health-related explanation (ADHD and other “compounding conditions”) as insufficient on this record: it was not tethered to specific reporting failures in a way that could negate objective recklessness, and Rund continued filing returns and working with professionals, underscoring his ability to “find out for certain very easily.”

2) Excessive Fines: assumption of applicability, then rejection on proportionality

The Fourth Circuit avoided taking sides in the First vs. Eleventh Circuit dispute over whether civil willful FBAR penalties are “fines” under the Eighth Amendment. Instead, it assumed (without deciding) the Clause applies and asked whether the penalty was “grossly disproportional.”

How the court applied the Bajakajian/ Ahmad proportionality framework:

  • Nature and extent: Rund committed over 40 reporting deficiencies, across more than a dozen accounts, over eight nonconsecutive years. The court treated multiplicity and duration as legitimately increasing gravity, relying on Fourth Circuit precedent that repeated/prolonged wrongdoing supports higher sanctions.
  • Connection to other wrongdoing / tax loss: While not tied to classic money-laundering/drug-trafficking facts, the record supported that FBAR nonreporting facilitated significant underreporting of foreign income (with tax loss being litigated elsewhere). Unlike United States v. Bajakajian, where the government had no claim to the transported funds, the court emphasized correlation between unreported balances and potential tax harm.
  • Harm and governmental costs: Beyond informational harm, the government identified lost revenue and investigation costs—harms Congress sought to address through mandatory reporting.
  • Statutory authorization / legislative deference: The court found it important that the assessed penalty was approximately 30% of the statutory maximum the Government represented was available, and far below the “50% of account balance” ceiling for willful violations.
  • Mitigation and calibration: The court treated the IRS’s below-maximum approach as adequately accounting for Rund’s asserted mitigating facts (health conditions, partial belated compliance, and recklessness rather than knowledge).

Notably, the court also declined to adopt the Eleventh Circuit’s account-by-account method in this case, expressly because the parties argued only the total penalty and Rund challenged only the aggregate amount.

C. Impact

Rund’s practical significance lies less in announcing a new doctrinal test and more in clarifying how the Fourth Circuit will apply existing standards to common FBAR fact patterns.

  • Willfulness via recklessness remains summary-judgment friendly: Where a taxpayer had prior FBAR awareness, signed returns denying foreign accounts, used professionals, and cannot point to evidence of disclosure/advice in the relevant years, the court is prepared to find willfulness as a matter of law under United States v. Horowitz.
  • Eighth Amendment challenges face a steep proportionality hill: Even if the Excessive Fines Clause applies, penalties substantially below the statutory maximum—especially for repeated violations—are unlikely to be deemed “grossly disproportional” under United States v. Bajakajian.
  • Open questions preserved: The Fourth Circuit left unresolved (i) whether civil FBAR penalties are “fines” under the Eighth Amendment, and (ii) whether excessiveness must be assessed per account-year (as in United States v. Schwarzbaum) or can be assessed in aggregate when litigated that way.

4. Complex Concepts Simplified

  • FBAR: An annual report to the IRS disclosing qualifying foreign financial accounts when aggregate values exceed the regulatory threshold.
  • Willful (civil FBAR context): In the Fourth Circuit, “willful” includes not only intentional violations but also reckless ones—serious disregard of an obvious risk of noncompliance.
  • Objective recklessness: The question is not whether the defendant subjectively meant to break the law, but whether a reasonable person in the defendant’s position should have recognized a grave risk of noncompliance and could have confirmed compliance easily.
  • Summary judgment: A case can be decided without trial when the material facts are not genuinely disputed and the law entitles one side to win on that record.
  • Excessive Fines Clause / “gross disproportionality”: The Eighth Amendment forbids fines that are wildly out of proportion to the offense. Courts consider repeated conduct, harm, culpability, and how the penalty compares to what Congress authorized.
  • Beneficial owner / nominee structure: A person can effectively own or control assets even if formal paperwork lists someone else; such arrangements can trigger reporting duties and may heighten “red flags” in willfulness analysis.
  • Offshore Voluntary Disclosure Program: An IRS program allowing belated disclosure under certain terms; participation can undermine claims of ignorance about reporting duties.

5. Conclusion

United States v. Richard Rund reinforces two themes in Fourth Circuit FBAR enforcement. First, under United States v. Horowitz, a pattern of obvious “red flags” (prior FBAR knowledge, inaccurate tax-return answers, tax-motivated entity/account structuring, and lack of evidence of disclosure to professionals) can establish willfulness by objective recklessness as a matter of law. Second, even assuming civil willful FBAR penalties are subject to the Eighth Amendment, the court’s proportionality analysis—grounded in United States v. Bajakajian and Fourth Circuit factors—signals strong deference to Congress’s penalty design, particularly where violations are repeated and the assessment is materially below statutory maxima.