Appeals Court Upholds $2.9 Million FBAR Penalty, Rejecting Excessive-Fines Challenge in Rund

A federal appeals court on September 4, 2026 upheld a $2,915,633 civil penalty against a U.S. businessman who failed to report foreign bank accounts, ruling that his conduct was willful because it was reckless and that the fine did not violate the Eighth Amendment. The published decision in United States v. Rund from the Fourth Circuit adds weight to a standard that treats inattention, not only intent, as grounds for the steepest FBAR penalties.

What happened

Richard Rund held accounts at HSBC in Hong Kong, at the Bank of East Asia through a company in which he had a 95% beneficial interest, and at UBS in Switzerland through a Mauritius shell company, among others, according to an analysis by Current Federal Tax Developments. The government identified 48 reporting failures across 2003 to 2008 and 2013 to 2014, including accounts left off filings after he joined the IRS offshore voluntary disclosure program. The penalty was set at 50% of the highest aggregate balance, reached in 2014, and allocated across years and accounts, which worked out to roughly 14% to 16% of unreported balances each year.

Rund pointed to ADHD, cancer treatment, depression and business litigation. The panel, in an opinion by Judge Rushing joined by Judge Harris and Senior Judge Floyd, affirmed the district court in the Eastern District of Virginia.

The legal standard

The court applied the objective recklessness test from its 2020 decision in Horowitz: a filer acts willfully if he clearly ought to have known of the reporting duty, faced a grave risk that accurate reports were not being filed, and could have found out easily. A lack of motive to evade tax was treated as irrelevant to that test. The court noted that Rund had filed compliant FBARs from 2009 through 2012 while dealing with the same health and business stresses, and that he had not told his tax preparers about his foreign accounts before 2009, which undercut any claim of relying on professionals.

On the Excessive Fines Clause, the court noted a split between the First Circuit, which has held civil FBAR penalties fall outside that clause, and the Eleventh Circuit, which has held that penalties serving punitive purposes are covered. Assuming the clause applies, the panel found the fine proportional, observing that “repeated or prolonged offenses can justify higher fines than a solitary violation.” Congress authorized up to $9,842,840 for Rund's violations, and the assessed amount was about 30% of that.

Who is affected

Under IRS rules, a U.S. person with a financial interest in, or signature authority over, foreign financial accounts whose combined value exceeded $10,000 at any time during the year must file an FBAR electronically with FinCEN. The report is due April 15, with an automatic extension to October 15. That net catches dual citizens, immigrants who kept accounts at home, executives with signature authority over overseas corporate accounts, and families holding foreign brokerage or pension accounts.

The math of a willful penalty

Example with round numbers: an unreported foreign account holds a maximum of $1,000,000 in a single year. The willful penalty ceiling described in the case is the greater of $100,000 or 50% of the balance for each account and year, or $500,000 for that one year. Across five unreported years, the theoretical ceiling exceeds the account itself. That is why the government's choice of how much to assess, and a court's proportionality review, carry real weight. Civil maximums are adjusted for inflation, and the IRS publishes current figures separately.

Steps households often discuss with counsel

• Evaluating the IRS's options for filing delinquent FBARs, with a tax attorney assessing which path fits the facts.
• Confirming that every foreign account, including those held through companies or covered only by signature authority, is disclosed to the return preparer.
• Keeping records of account details and maximum values, which must be retained for five years.

What to watch

The disagreement among circuits over whether the Excessive Fines Clause reaches civil FBAR penalties remains unresolved. Until it is settled, the recklessness standard applied in Rund leaves little room for defenses based on health, stress or the absence of intent to evade tax.

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