This article examines the decision in United States of America v. Tuncay Saydam, Case No. 22-cv-07371-DMR, issued by the United States District Court for the Northern District of California. The case centers on the application of the Excessive Fines Clause of the Eighth Amendment to willful civil penalties imposed for failure to file Reports of Foreign Bank and Financial Accounts (FBARs).

Case Facts

The Bank Secrecy Act requires any individual with more than $10,000 in a foreign bank account during a calendar year to file an FBAR with the IRS (31 C.F.R. §§ 1010.350(a), 1010.306(c)). For non-willful failures, the statute authorizes a civil penalty of up to $10,000 for each violation (31 U.S.C. § 5321(a)(5)(B)). If an individual willfully fails to file, the statute authorizes a civil penalty of up to the greater of either $100,000 or 50% of the account value at the time of the violation (31 U.S.C. § 5321(a)(5)(C)-(D)).

Tuncay Saydam, a dual citizen of Turkey and the United States, was assessed a penalty of $437,564 by the U.S. Internal Revenue Service (IRS) on March 1, 2021, for willfully failing to report foreign bank accounts for the years 2013 through 2017. The Government initiated a lawsuit to reduce this assessment to judgment. Following a jury trial, the jury returned a verdict finding Saydam guilty of willful violation of the reporting statute for all five years.

The penalties were calculated by using the highest maximum aggregate account balance across the period ($875,127 in 2014), dividing that amount in half ($437,564), and splitting the resulting figure proportionally among the five years. The maximum aggregate account balances and corresponding penalties assessed were: $847,826 ($129,346) for 2013; $875,127 ($133,511) for 2014; $719,472 ($109,764) for 2015; $213,456 ($32,565) for 2016; and $212,229 ($32,378) for 2017. With interest, the total penalty due was $544,933.

In a separate Tax Court proceeding (Saydam v. Comm’r, No. 12312-23), the parties stipulated to deficiencies in income tax and penalties under 26 U.S.C. § 6662(b)(7) (undisclosed foreign financial asset understatement penalties) and 26 U.S.C. § 6663 (tax fraud penalties) for those years. The Government’s final stipulated tax loss for the years 2013 through 2017, not including penalties, totaled $29,006.

Taxpayer’s Request for Relief

Following the jury verdict of willfulness, Saydam moved to reduce the assessed penalty under the Excessive Fines Clause of the Eighth Amendment, which states that "excessive fines [shall not be] imposed" (U.S. Const. amend. VIII).

The Government opposed the motion, arguing that Saydam had waived or forfeited his Eighth Amendment challenge, that the clause did not apply to FBAR penalties, and that even if it did, the penalty was not excessive.

Preliminary Legal Analysis: Waiver and Forfeiture

The court first addressed the Government’s procedural arguments.

Analysis of Waiver

Waiver is the "intentional relinquishment or abandonment of a known right" (citing United States v. Olano, 507 U.S. 725, 733 (1993)). The court found that Saydam did not waive his constitutional right. Although Saydam agreed in the joint pretrial statement that the assessed penalties were "correctly calculated," he also stipulated that the "final amount of any judgment should be determined post-trial through stipulation and/or briefing, following the determination of Saydam’s willfulness at trial". The court determined that Saydam’s agreement to the statutory calculation did not imply agreement that the penalty was not disproportionate under the Eighth Amendment, noting that the court must indulge "every reasonable presumption against waiver" (citing Pollard, 850 F.3d at 1043).

Analysis of Forfeiture

Forfeiture is the "failure to make the timely assertion of a right" (Olano, 507 U.S. at 733). The court rejected the Government’s argument that the challenge was forfeited because the parties had expressly agreed to reserve arguments regarding the final judgment amount for post-trial submissions, and the court had explicitly ordered post-trial submissions to determine that amount.

Legal Analysis: Applicability of the Excessive Fines Clause

To apply the Excessive Fines Clause to the penalty under 31 U.S.C. § 5321(a)(5), Saydam had to demonstrate that the statutory provision was a fine—meaning it imposed punishment—and that the fine was excessive (citing Wright v. Riveland, 219 F.3d 905, 915 (9th Cir. 2000) and Austin v. United States, 509 U.S. 602, 622 (1993)). A sanction constitutes punishment if it "cannot fairly be said solely to serve a remedial purpose, but rather can only be explained as also serving either retributive or deterrent purposes" (citing Austin, 509 U.S. at 610).

The court acknowledged a circuit split on whether FBAR penalties constitute fines. The First Circuit concluded that civil penalties under § 5321(a)(5)(C)-(D) are not fines, citing their similarity to administrative tax penalties and their remedial function of recouping lost tax revenue and investigation costs (United States v. Toth, 33 F.4th 1 (1st Cir. 2022)). In contrast, the Eleventh Circuit found that the FBAR penalty serves, "at least in part—punishment" (United States v. Schwarzbaum, 127 F.4th 259, 271 (11th Cir. 2025)).

The court sided with the reasoning of the Eleventh Circuit.

Structure and Purpose of the FBAR Penalty

The court focused on the structure and legislative history of the penalty scheme:

Culpability: The FBAR penalty scheme differentiates between a $10,000 maximum penalty for non-willful violations and the much steeper penalty (50% of account balance or $100,000, whichever is greater) for willful violations. Statutory provisions that focus on the defendant’s culpability "look more like punishment" (citing Schwarzbaum, 127 F.4th at 272 (quoting Austin, 509 U.S. at 619)).
Deterrence over Remediation: The legislative history shows that the Bank Secrecy Act aimed to deter a wide range of illicit activities, including organized crime and fraud, with tax evasion being only one of many concerns. Congress intentionally increased the penalties in 1986 and 2004 to improve the reporting of foreign financial accounts, lending support to a deterrent purpose.
Distinction from Civil Tax Penalties: Crucially, the FBAR penalty is not comparable to civil tax penalties, which are typically remedial because they are "directly tied to the amount of taxes underpaid by the taxpayer" (citing Helvering v. Mitchell, 303 U.S. 391, 401 (1938)). The FBAR reporting requirement applies regardless of whether the foreign accounts generated income or whether taxes were actually owed. Furthermore, the FBAR penalty is part of the Bank Secrecy Act under Title 31, rather than the Internal Revenue Code under Title 26.
Reporting Violation Precedent: The court compared the FBAR violation to the currency reporting violation at issue in United States v. Bajakajian, 524 U.S. 321 (1998), where the Supreme Court held that the forfeiture of unreported currency was punishment because the resulting "loss of information" would not be remedied by the government confiscating the funds. Likewise, FBAR penalties address a loss of information and are not the sole remedy for lost tax revenue.

The court concluded that the civil FBAR penalty "cannot fairly be said solely to serve a remedial purpose" and, therefore, is a fine under the Eighth Amendment.

Application of Law: Is the Fine Excessive?

To determine if the fine is excessive, the court analyzed whether the $437,564 penalty was "grossly disproportional to the gravity of the defendant’s offense" (citing Bajakajian, 524 U.S. at 336–37). The court applied the four factors established in the Ninth Circuit (citing Pimentel v. City of Los Angeles (Pimentel I), 974 F.3d 917, 921 (9th Cir. 2020)).

Nature and Extent of the Underlying Offense

The court considers the violator’s culpability. The jury found Saydam acted willfully, which in FBAR cases includes knowing, willfully blind, or reckless behavior. The court determined that reckless behavior constitutes "more than a minimal level of culpability" (citing Pimentel I, 974 F.3d at 923).

Relation to Other Illegal Activities

Saydam argued that the record contained no evidence of related illegal activities, such as money laundering or illegal trade. The Government did not dispute this.

Alternative Penalties

The court considered alternative penalties authorized by the legislature to measure the gravity of the offense (citing United States v. $100,348.00 in U.S. Currency (Currency Case One), 354 F.3d 1110, 1122 (9th Cir. 2004)).

Criminal FBAR Penalty: The maximum statutory criminal FBAR penalty is $250,000 and five years in prison per violation (31 U.S.C. § 5322(a)). For five years of willful non-reporting, Saydam faced a maximum statutory penalty of $1.25 million and 25 years in prison, demonstrating that Congress viewed the offense as non-trivial.
Sentencing Guidelines: The court gave greater weight to the U.S. Sentencing Guidelines (U.S. Sent’g Comm’n 2024), which account for specific culpability (citing Currency Case One, 354 F.3d at 1122). Based on the stipulated tax loss of $29,006, Saydam’s offense level would result in a maximum prison sentence of four years and a maximum fine of $139,000.

The assessed penalty of $437,564 is 3.1 times greater than the Sentencing Guidelines maximum fine of $139,000. The court noted that this disproportionality is not a per se violation of the Eighth Amendment, citing United States v. $132,245.00 in U.S. Currency (Currency Case Two), 764 F.3d 1055, 1060 (9th Cir. 2014), where a 2.6x fine was upheld. Unlike the penalty in Bajakajian, where the Guidelines fine was minimal ($5,000), Saydam’s potential Guidelines fine and four-year sentence confirm a "significantly higher level of culpability".

Extent of the Harm Caused by the Offense

The monetary harm resulting from the violation is the simplest way to assess this factor (citing Pimentel I, 974 F.3d at 923). The court found that the Government suffered a specific tax loss of $29,006 due to Saydam’s taxable income in his foreign accounts. This direct monetary loss, along with the significant resources expended by the Government in the IRS audit, distinguishes the case from those involving solely informational losses. Saydam failed to meet his burden to prove that this tax loss was speculative, given that the Tax Court assessed the deficiency.

The court also considered the financial hardship to the defendant, assuming arguendo that deprivation of livelihood is a relevant factor. However, Saydam failed to provide sufficient evidence of his present or future financial circumstances to support this claim.

Conclusion and Court Holding

Considering all four factors, the court determined that Saydam’s $437,564 fine is not excessive.

The court concluded that because Saydam was found to have acted at least recklessly, he possessed more than minimal culpability. Despite the absence of other criminal activities, the penalty was not grossly disproportional when compared to the Sentencing Guidelines maximum fine and potential four-year sentence. Furthermore, the penalty was significantly lower than the maximum statutory amount that could have been assessed. The $437,564 penalty constituted 31% of the total statutory maximum calculated using the aggregate balances for each year ($1,434,055).

The court held that the fine was not grossly out of proportion to the willful non-reporting activity the Government intended to deter. Saydam’s motion to reduce the penalty was DENIED.

Prepared with assistance from NotebookLM.