United States v. Under Seal, No. 13-4267

Decided: December 13, 2013

The Fourth Circuit affirmed the district court and held that the required records doctrine superseded the Fifth Amendment privilege against self-incrimination and required production of certain foreign bank records.

John and Jane Doe (collectively “Appellants”) were targeted under a grand jury investigation to determine whether they used secret Swiss bank accounts to conceal assets and income from the IRS. Evidence presented to the grand jury indicated that, in 2008, John Doe opened an account at a Swiss investment bank in the name of a corporation, the name of which was redacted. The Swiss firm Beck Verwaltungen AG (“Beck”) managed the account, valued in excess of $2.3 million. In January 2009, Doe closed the account and transferred $1.5 million to Beck’s account at a different Swiss private bank. In May 2012, Appellants were served grand jury subpoenas. The subpoena requested that Appellants produce certain foreign bank account records that they were required to keep pursuant to Treasury Department regulations governing offshore banking. Appellants, however, citing the Fifth Amendment, moved to quash the subpoenas. The district court denied Appellants’ motion, finding that the required records doctrine overrode Appellants’ Fifth Amendment privilege against self-incrimination. Appellants refused to comply with the district court’s order to produce the requested records. The district court, therefore, held Appellants in civil contempt. Appellants filed this appeal and the district court stayed execution of the contempt order until this matter was adjudicated.

On appeal, the Fourth Circuit first noted that the Supreme Court has held that the privilege against self-incrimination does not bar the government from imposing recordkeeping and inspection requirements as part of a valid regulatory scheme. It then summarized the requirements of the required records doctrine as follows: (1) the purposes of the United States’ inquiry must be essentially regulatory; (2) information is to be obtained by requiring the preservation of records of a kind which the regulated party has customarily kept; and (3) the records themselves must have assumed public aspects which render them at least analogous to public document. Noting that it was joining in the consensus of the courts of appeals to have considered the issue, the court then concluded that the records required to be maintained under the Bank Secrecy Act (“BSA”) fall within the required records doctrine. In so holding, the court addressed, in turn, Appellants’ argument that the BSA record keeping provisions failed to meet each requirement under the required records doctrine, primarily focusing on the first requirement—that the records be “essentially regulatory.” Appellants argued that the BSA’s recordkeeping provision is criminal, rather than regulatory, in nature. The court, however, rejected this contention and found that the BSA’s recordkeeping requirements do not apply exclusively to those engaged in criminal activity. Rather, the requirements serve many purposes, a number of which are unrelated to criminal law enforcement. Therefore, it held that the requirements were in fact “essentially regulatory.”

Full Opinion

-W. Ryan Nichols

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