Court rejects Eighth Amendment challenge to FBAR penalty on Turkish bank accounts

United States v. Tuncay Saydam, No. 4:22-cv-07371 (United States District Court for the Northern District of California, Nov. 18, 2025).

A federal court held that a $437,564 FBAR penalty for willful non-reporting of foreign accounts is a “fine” under the Eighth Amendment but is not excessive in light of the taxpayer’s culpability, tax loss, and the statutory and guideline frameworks.

Holding

The court held that civil FBAR penalties under 31 U.S.C. §5321(a)(5) function as “fines” for Eighth Amendment purposes because they have a deterrent and punitive purpose, not a purely remedial one.

Applying the proportionality test from Bajakajian and Ninth Circuit precedent, the court concluded that the $437,564 FBAR penalty imposed on Tuncay Saydam was not grossly disproportionate to his willful failure to file FBARs and the resulting $29,006 tax loss.

The motion to reduce the penalty under the Excessive Fines Clause was denied.

Why It Matters

• Confirms that, at least in this district, FBAR penalties are subject to the Excessive Fines Clause but can still survive proportionality review.

• Provides a detailed blueprint for how courts may analyze FBAR penalties under Bajakajian and the Pimentel factors, including comparisons to the Sentencing Guidelines.

• Signals that willful FBAR penalties well below statutory maximums are likely to be upheld even for individual taxpayers with no related criminal conduct.

• Shows how parallel Tax Court outcomes on unreported income and §6662 penalties inform Eighth Amendment analysis by quantifying the tax loss.

Timeline

• March 1, 2021: IRS assesses a willful FBAR penalty of $437,564 for 2013-2017.

• April 29, 2021: Saydam purchases a residence in San Francisco after the FBAR assessment.

• November 22, 2022: Government files suit to reduce the FBAR assessment to judgment.

• October 3, 2024: Jury finds willful FBAR violations for 2013-2017.

• November 12, 2024: Saydam files a motion to reduce the penalty under the Eighth Amendment.

• June 27, 2025: Tax Court enters decision in Saydam v. Commissioner, finding $29,006 total income tax loss and §6662(b)(7) penalties.

• November 18, 2025: District court issues order denying Eighth Amendment reduction and upholding the FBAR penalty.

Key Facts

• Taxpayer: Tuncay Saydam, dual citizen of Turkey and the United States.

• Accounts: Multiple Turkish bank accounts with annual aggregate balances above $10,000 for 2013-2017, peaking at $875,127 in 2014.

• Penalty structure used by IRS:

  • 2013: $847,826 max balance, $129,346 penalty

  • 2014: $875,127 max balance, $133,511 penalty

  • 2015: $719,472 max balance, $109,764 penalty

  • 2016: $213,456 max balance, $32,565 penalty

  • 2017: $212,229 max balance, $32,378 penalty

  • Total FBAR penalty: $437,564 (allocated using half of the highest aggregate balance and spreading it proportionally across five years).

• Interest: Total amount with interest stated as $544,933.

• Tax Court decision: Deficiencies and §6662(b)(7) penalties found for 2013-2017, with total tax loss of $29,006 after credits and advance payments.

• Trial posture: Jury decided only willfulness; penalty amounts were reserved for post-trial briefing under a pretrial stipulation.

• Stipulations: Saydam agreed that the penalties were correctly calculated under the statute, while expressly reserving a constitutional challenge to the penalty amount.

Statutory or Regulatory Framework

• The Bank Secrecy Act and regulations require U.S. persons with more than $10,000 in foreign accounts to file an annual FBAR. 31 U.S.C. §5314; 31 C.F.R. §§1010.350, 1010.306.

• Civil FBAR penalties for non-willful violations are up to $10,000 per violation. §5321(a)(5)(B).

• For willful violations, civil FBAR penalties are up to the greater of $100,000 or 50 percent of the account balance at the time of violation. §5321(a)(5)(C)-(D).

• Criminal FBAR penalties under §5322(a) can reach $250,000 and five years in prison per violation.

• The Eighth Amendment’s Excessive Fines Clause applies when a sanction is punitive and is violated only if the fine is “grossly disproportional” to the offense, under United States v. Bajakajian and Ninth Circuit cases like Pimentel.

Arguments

Taxpayer argued:

• The FBAR penalty, at more than 15 times the $29,006 tax loss, was excessive under the Eighth Amendment.

• His conduct involved only non-reporting, with no money laundering, illegal trade, or other criminal activity.

• The penalty would impose severe financial hardship, including a potential forced sale of his home.

• FBAR penalties should be treated differently from those aimed at serious criminals and reduced for individuals like him.

IRS argued:

• Saydam waived or forfeited his Eighth Amendment challenge by stipulating to the penalty amounts and failing to raise the issue earlier.

• Civil FBAR penalties are remedial, not punitive, and thus fall outside the Excessive Fines Clause.

• Even if the clause applies, the penalty is not excessive, given Saydam’s willfulness, the tax loss, the broader policy concerns behind foreign account reporting, and the fact that the penalty is well below statutory maximums.

• Sentencing enhancements for obstruction and for sophisticated means could result in criminal penalties higher than Saydam’s civil FBAR penalty.

Court’s Reasoning

• No waiver or forfeiture:

  • The pretrial stipulation preserved post-trial briefing on the “final amount of any judgment,” so stipulating that the penalties were correctly calculated did not waive a constitutional challenge to excessiveness.

  • The parties and the court intentionally reserved penalty arguments for post-trial submissions, so waiting until after the verdict did not forfeit the claim.

• FBAR penalties are “fines”:

  • The two-tier penalty system, with higher caps for willful violations tied to account balances, reflects a deterrent and punitive function, not a purely remedial one.

  • Legislative history shows concern with a broad set of harms from secret foreign accounts, including tax evasion and other financial abuses, which supports a deterrent purpose.

  • The penalties apply even when no tax is owed and are not strictly tied to measured revenue loss, unlike traditional civil tax penalties.

  • The court followed the Eleventh Circuit’s approach in Schwarzbaum and declined to follow the First Circuit’s reasoning in Toth.

• Application of proportionality factors:

  • Nature of the offense: The jury found willful conduct, with recklessness sufficient to show more than minimal culpability.

  • Relation to other illegal activity: There was no evidence of other crimes, but FBAR violations still implicate significant policy concerns about undisclosed foreign assets.

  • Alternative penalties:

    • Statutory maximum criminal penalties could reach $1.25 million and 25 years of prison, showing that Congress treats this conduct as serious.

    • Under the Sentencing Guidelines, comparable conduct would yield a maximum fine of about $139,000 and up to four years in prison, before speculative enhancements.

    • The FBAR penalty of $437,564 is about 3.1 times the guideline maximum fine, within the ranges previously upheld by the Ninth Circuit.

  • Harm caused: The Tax Court decision fixed actual tax loss at $29,006, which is real monetary harm to the government, beyond mere loss of information.

• Hardship not established:

  • The court assumed, without deciding, that deprivation of livelihood can matter under the Eighth Amendment, but held that Saydam offered no concrete evidence of his financial situation or future earning capacity.

  • The general possibility of enforced collection, including the sale of a residence, did not constitute a deprivation of livelihood.

• Relative size of the penalty:

  • Statutory maximum based on half of the total aggregate balances for 2013-2017 would be about $1.43 million. The assessed penalty is roughly 31 percent of that figure.

  • Using a disaggregated account-by-account approach and $100,000 caps, total possible penalties could reach about $2.52 million; the assessed penalty is about 17 percent of that amount.

  • For each year, the penalty does not exceed that year’s highest aggregate account balance.

Forward-Looking Implications

• Courts in the Ninth Circuit may treat civil FBAR penalties as Eighth Amendment “fines” yet still uphold substantial penalties for willful non-reporting when they are below statutory maximums and supported by tax loss.

• Parallel Tax Court proceedings resolving income tax deficiencies and §6662 penalties can be necessary inputs to proportionality analysis by quantifying the government’s harm.

• Taxpayers challenging FBAR penalties on Excessive Fines grounds will need detailed evidence of their financial condition to argue deprivation of livelihood.

• The decision reinforces that willful FBAR penalties tied to high foreign balances can significantly exceed guideline-level fines without being deemed unconstitutional.

Result

The court denied Saydam’s motion to reduce the FBAR penalty under the Eighth Amendment and directed the parties to submit a proposed judgment reflecting the full $437,564 penalty plus interest.

The Takeaway

FBAR penalties for willful non-reporting are now squarely treated as Eighth Amendment “fines” in this court, but that classification does not make them easy to reduce. Where there is a jury finding of willfulness, measurable tax loss, and a penalty well below what the statute allows, courts are likely to uphold the assessment against an Excessive Fines challenge.

List of Citations

• United States v. Bajakajian, 524 U.S. 321 (1998)
  Used for the “gross disproportionality” test and comparison between reporting violations and the size of sanctions.

• Austin v. United States, 509 U.S. 602 (1993)
  Cited for the principle that civil sanctions can be “fines” if they serve punitive or deterrent purposes.

• United States v. Pimentel (Pimentel I & II), 974 F.3d 917 (9th Cir. 2020); 115 F.4th 1062 (9th Cir. 2024)
  Applied for the four-factor proportionality framework and the level of deference owed to legislative penalty choices.

• United States v. Schwarzbaum, 127 F.4th 259 (11th Cir. 2025)
  Relied on for holding that FBAR penalties are fines and for discussion of legislative history and FBAR structure.

• United States v. Toth, 33 F.4th 1 (1st Cir. 2022)
  Discussed as a contrary authority concluding FBAR penalties are not fines, the court declined to follow it.

• United States v. Mackby, 261 F.3d 821 (9th Cir. 2001)
  Cited for the treatment of civil monetary penalties as fines, where no actual damages must be shown.