How High Is the Ceiling on Willful FBAR Penalties?

On September 4, 2026, the Fourth Circuit affirmed a $2,915,663 willful FBAR penalty against an Eighth Amendment challenge, holding that a penalty amounting to roughly 30 percent of the statutory maximum — about 14 to 16 percent of each account balance per year — is not constitutionally excessive. United States v. Rund, No. 24-1958 (4th Cir. Sept. 4, 2026).

The Excessive Fines Clause is a real ceiling on FBAR penalties. It is also, according to the Fourth Circuit, a very long way up. But the more useful lesson in Rund isn’t about the ceiling at all — it’s about the two arguments the taxpayer had available and never developed.

What Rund Actually Did

Richard Rund held more than a dozen foreign accounts across HSBC in Hong Kong, the Bank of East Asia, UBS in Switzerland (through a Mauritius entity), and China Construction Bank. The IRS identified 48 reporting deficiencies spanning 2003 through 2008 and 2013 through 2014 — eight nonconsecutive years.

But he had filed FBARs for earlier years, which is how the court determined he understood the requirement: “Rund knew about the FBAR requirement before he violated it for the first year at issue, 2003, because he had filed FBARs for earlier years.”

Then it gets worse. Rund entered the IRS Offshore Voluntary Disclosure Program in 2010 and stayed in it until the IRS removed him in 2016. While in the program, he opened two new accounts at China Construction Bank in 2013. He didn’t report those either.

The Fourth Circuit’s willfulness holding follows United States v. Horowitz, 978 F.3d 80 (4th Cir. 2020), under which recklessness suffices — a standard we’ve discussed in connection with willfulness established through recklessness or willful blindness. Rund offered ADHD, a decade of business litigation, cancer treatment, and depression. The court disposed of all of it in one line: “Rund’s ADHD and compounding conditions do not undermine the Government’s evidence of objective recklessness.” He filed timely, complete FBARs for 2009 through 2012, within the same window and under the same conditions.

Is a Willful FBAR Penalty an Excessive Fine?

The Fourth Circuit went out of its way not to say. The court assumed the answer and ruled anyway:

We need not resolve whether the Excessive Fines Clause limits the Government’s ability to collect civil FBAR penalties because, even assuming it does, the penalty assessed here is not unconstitutionally excessive.

Footnote 3 acknowledges the reason for the caution: “Our sister circuits disagree about whether civil FBAR penalties are fines subject to the Eighth Amendment.” The First Circuit held they are not in United States v. Toth, 33 F.4th 1, 16 (1st Cir. 2022), and the Supreme Court denied certiorari over a dissent from Justice Gorsuch, 143 S. Ct. 552 (2023). The Eleventh Circuit went the other way in United States v. Schwarzbaum, 127 F.4th 259 (11th Cir. 2025), which we covered when the Eleventh Circuit held that willful FBAR penalties are subject to the Excessive Fines Clause. That split is now more than three years old, and the Fourth Circuit just declined an opportunity to take a side.

Whether the Clause applies has never, in any event, been the practical problem. Applying it is. A district court in Idaho ran the proportionality analysis and reached opposite results for a husband and wife on identical facts, which is how gross-disproportionality review actually works in FBAR cases — individualized, culpability-driven, and hard to predict. Under Rund, a penalty at 30 percent of the statutory maximum of $9,842,840 clears the bar comfortably in the Fourth Circuit.

The Argument Rund Didn’t Make

The Eleventh Circuit in Schwarzbaum requires the excessive-fines analysis to run account by account, in each year, rather than against the aggregate. That methodology is currently a one-circuit rule, and the Fourth Circuit had an open invitation to adopt it or reject it. It did neither, and footnote 5 explains exactly why:

We leave that question for another day because the parties here have focused exclusively on the total penalty imposed, and Rund’s constitutional challenge to his total civil FBAR penalty fails on its own terms.

Rund briefed the total. So the court decided the total.

The IRS misallocated $311,236 of the assessment to three 2013 HSBC accounts for which there was no violation. Rund’s counsel flagged the error but never developed an argument around it. The Fourth Circuit held the point forfeited, and observed in a footnote that fixing the allocation would have pushed the effective rate up, to something more like 15.6 percent.

Pointer: If you are defending an FBAR assessment outside the Eleventh Circuit, plead and brief the excessive-fines defense at the individual account-year level, preserve the aggregate argument in the alternative, and audit the penalty computation for allocation errors that you are prepared to argue rather than merely mention. Our FBAR penalty defense practice handles these computations regularly, and the IRS worksheets are wrong more often than you’d expect.

Why Telling Your Preparer Is Important

One sentence in Rund sticks out, and it’s about the CPA:

But there is no evidence that Rund told his tax professionals in the relevant years about the foreign accounts that he now claims he did not think he needed to report.

Reliance on a preparer is a defense that lives or dies on the contemporaneous record. Not on later testimony that the accountant “knew about it.” Dated engagement letters, tax organizer responses, the Schedule B foreign-account question, Form 8938 workpapers — those are the documents that make the defense. Our comparison of how Form 8938 and FinCEN Form 114 differ is a good starting point for the file, since the two obligations run independently and a client who satisfied one often assumes he satisfied both.

And the OVDP point deserves its own warning. Rund’s participation didn’t help him — it raised the standard, because the court treated the program as a period when he should have been more attentive, not less. The same logic applies to the current Voluntary Disclosure Practice that replaced OVDP and to the Streamlined Filing Compliance Procedures. Entering a disclosure program with incomplete disclosure is how a non-willful case becomes a willful one.

What the Supreme Court Is About to Decide

The Fourth Circuit wrote this opinion with one eye on the Supreme Court. Footnote 7 flags Jouppi v. Alaska, No. 25-246, where the Court granted certiorari on July 20, 2026 to decide whether an excessive-fines analysis looks at the gravity of the underlying offense in the abstract or the gravity of the particular defendant’s conduct. Argument is set for December 1, 2026.

Jouppi is not a tax case. It’s a bush pilot whose $95,000 Cessna was forfeited over a misdemeanor bootlegging conviction carrying a $10,000 maximum fine. But the standard it settles will govern every willful FBAR case in the country.

The Fourth Circuit hedged. It conducted an individualized analysis of Rund’s own conduct and then added that it would reach the same result looking at the offense in the abstract. Belt and suspenders.

Pointer:  Anyone with a willful FBAR case pending should preserve the Eighth Amendment defense now and calendar the December argument. A case currently briefed on an abstract-gravity theory may need supplementation.

Questions

Does the Eighth Amendment ever actually reduce an FBAR penalty?

It can (and should). The Eleventh Circuit in Schwarzbaum struck $300,000 attributable to one account while upholding more than $12 million, and a district court has reduced a penalty as to a spouse who didn’t know about the accounts. Those are narrow wins on individualized facts. But to date, no court has invalidated a full willful assessment on excessive-fines grounds.

My penalty is 50 percent of my highest balance. Is that automatically unconstitutional?

No. Fifty percent is the statutory ceiling under 31 U.S.C. § 5321(a)(5)(C), and the Eleventh Circuit has upheld penalties computed at that rate. The constitutional question turns on culpability, the harm to the government’s interest, and how the total compares to the maximum Congress authorized—not the percentage alone.

I have unreported foreign accounts. Is it too late to come forward?

No, but the calculus changes the moment the IRS opens an examination or a criminal referral issues. The Voluntary Disclosure Practice and the Streamlined Filing Compliance Procedures serve different taxpayers and carry different penalty structures, and choosing wrong can be expensive. Get a willfulness assessment before you pick a lane.

Does Bittner help me here?

Bittner v. United States, 598 U.S. 85 (2023), held that the non-willful penalty applies per report rather than per account. It does nothing for a willful assessment, which the statute computes against account balances. Our discussion of the decision striking down the largest non-willful FBAR penalty explains the distinction.

What records should I be keeping right now?

Everything that shows what you told your advisors and when. Engagement letters, organizers with the foreign-account questions answered, emails identifying institutions and balances, and the workpapers behind Schedule B and Form 8938. The FBAR FAQs cover the underlying filing and recordkeeping obligations, and our summary of international information reporting penalties outlines the broader penalty regime.

Where the Ceiling Sits

The constitutional ceiling on willful FBAR penalties is real, and after Rund it sits somewhere above 30 percent of the statutory maximum in the Fourth Circuit. Taxpayers who plan to reach for it should also spend their effort in other areas where the case can be won — on the willfulness record, on the account-by-account computation, and on the contemporaneous evidence of what the client told his advisors. The Supreme Court hears argument in Jouppi on December 1, and the standard may shift.

Freeman Law’s international tax attorneys represent taxpayers in FBAR examinations, penalty litigation, and voluntary disclosures, and our international tax FAQs address the reporting obligations behind these disputes.

This article is for general information only and is not legal advice. Reading it or contacting Freeman Law does not create an attorney-client relationship. The law is fact-specific and subject to change, and outcomes depend on the particular circumstances of each matter. Consult qualified counsel about your situation.