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Pleading the Fifth Does Not Protect Your Offshore Bank Records

On August 27, the Seventh Circuit ruled that a taxpayer may not invoke the Fifth Amendment privilege against self-incrimination to resist compliance with a subpoena of offshore bank account records. The taxpayer, known as "T.W.", is being investigated by a grand jury because the federal government suspects he is using offshore bank accounts to hide money and income on which he should be paying U.S. income tax. In response to a grand jury subpoena seeking records kept pursuant to the Bank Secrecy Act, T.W. pleaded the Fifth, claiming that producing the bank records would be a testimonial act that may incriminate him. The U.S. District Court for the Northern District Illinois agreed with T.W., so the government appealed and prevailed.

The Seventh Circuit's decision in this case agrees with the Ninth Circuit's decision is an almost identical case that was decided in late June 2012. Both circuits held that the subpoenaed bank records fell within the Required Records Doctrine - an exception to the Fifth Amendment privilege that applies if three requirements are met : the purpose of the government's inquiry must by essentially regulatory, the information is to be obtained by requiring the preservation of records of a kind which the regulated party has customarily kept, and the records themselves must have assumed public aspects which render them at least analogous to public document. The Ninth Circuit further held that, if a taxpayer does not have the records in their possession, the government can require them to go to the bank, get the records, and turn them over to the government.

Though these decisions are not precedential for taxpayers who reside in the Fifth Circuit, they are demonstrative of the federal government's aggressive efforts to bring tax dollars back home and criminally prosecute taxpayers who refuse to comply.

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