Opinion ID: 2818141
Heading Depth: 4
Heading Rank: 1

Heading: Essentially Regulatory Purpose

Text: The Chabots contend that § 1010.420 is a recordkeeping scheme with an essentially criminal purpose. The first prong of the required records exception asks whether a recordkeeping scheme targets an inherently criminal activity and/or an inherently suspicious class of persons. See Doe, 741 F.3d at 347–48; M.H., 648 F.3d at 1075–76. Therefore, we begin our inquiry by determining what and whom § 1010.420 targets. Section 1010.420 regulates foreign bank account ownership, an activity in which people participate for a myriad of legitimate and legal reasons. As the Chabots’ counsel recognized at oral argument, someone might own an overseas account to ensure convenient access to money when living, working, or even vacationing abroad. Oral Argument at 13:19, 13:48, United States v. Chabot, (No. 14-4465), available at http://www2.ca3.uscourts.gov/oralargument/ audio/14-4465USAv.Chabot,etal.mp3. 4 See In re Grand Jury Subpoena Dated Feb. 2, 2012, 741 F.3d 339 (2d Cir. 2013); United States v. Under Seal, 737 F.3d 330 (4th Cir. 2013); In re Grand Jury Proceedings, 707 F.3d 1262 (11th Cir. 2013); In re Grand Jury Subpoena, 696 F.3d 428 (5th Cir. 2012); In re Special Feb. 2011-1 Grand Jury Subpoena Dated Sept. 12, 2011, 691 F.3d 903 (7th Cir. 2012); In re Grand Jury Investigation M.H., 648 F.3d 1067 (9th Cir. 2011). 12 In a similar vein, the class of persons who own foreign bank accounts is comprised of law-abiding citizens as well as miscreants. Doe, 741 F.3d at 350–51. On this point, we agree with the Fifth Circuit’s conclusion that “the [Bank Secrecy Act]’s record-keeping requirements do not apply exclusively to those engaged in criminal activity.” In re Grand Jury Subpoena, 696 F.3d at 435. Where a recordkeeping scheme exclusively targets those who engage in illegal activities, its purpose is essentially criminal. For example, the Supreme Court held that the statutes at issue in Grosso and Marchetti v. United States were essentially criminal because the regulations at issue exclusively targeted individuals who were engaged in an inherently illegal activity, namely gambling. Grosso, 390 U.S. at 68; Marchetti, 390 U.S. 39, 46–48 (1968). See also Leary v. United States, 395 U.S. 6, 18 (1969) (holding that petitioner’s Fifth Amendment privilege was violated when “compliance with the transfer tax provisions [of the Marihuana Tax Act] would have required petitioner unmistakably to identify himself as a member of this ‘selective’ and ‘suspect’ group [of individuals who failed to comply with the Act’s order form requirement]”); Haynes v. United States, 390 U.S. 85, 96, 100 (1968) (concluding that the registration requirement of the National Firearms Act violated petitioner’s Fifth Amendment privilege where the requirement mainly targeted individuals who possessed a firearm but had failed to comply with the Act’s other requirements, therefore targeting an inherently suspicious class of persons). Conversely, because § 1010.420 does not apply exclusively, or even largely, to criminals, it does not operate simply as a dragnet for criminals by forcing them to maintain self-incriminating records. Instead, § 1010.420 is an essentially regulatory scheme. See also In re Grand Jury Proceedings, 707 F.3d at 1272 (concluding that § 1010.420 has an essentially regulatory purpose because it targets 13 neither “inherently illegal activity” nor an “inherently suspect” group of individuals). The Chabots contend that the Financial Crimes Enforcement Network’s administration of § 1010.420 evidences the regulation’s essentially criminal purpose. The Chabots attempt to bolster their argument by highlighting the fact that the records that § 1010.420 requires accountholders to keep are also useful for potential criminal proceedings against these individuals. As the government asserted at oral argument, “bank records can be very important for . . . a lot of things [that] you might want to investigate about a person.” Oral Argument at 27:29. Just because some of these things have criminal aspects does not mean that § 1010.420’s purpose is essentially criminal. See, e.g., Under Seal, 737 F.3d at 334–36 (explaining that, despite how useful records maintained under § 1010.420 are to criminal prosecutions, this utility does not negate § 1010.420’s other noncriminal purposes). As the government acknowledged at oral argument, one of Congress’s goals in passing the Bank Secrecy Act of 1970 was to reach accountholders who were avoiding U.S. criminal laws. Oral Argument at 27:19. Section 1010.420 was promulgated pursuant to this Act and therefore shares this goal. An equally important objective of both the Act and § 1010.420, however, is to monitor and facilitate compliance with currency regulation and tax laws. Id. at 27:20; see also Under Seal, 737 F.3d at 335 (noting that the Bank Secrecy Act was enacted for “concomitant tax, regulatory, and counterterrorism purposes in addition to its [the Act’s] law enforcement goals”). Accordingly, like our sister circuits that have addressed these arguments, we find the Chabots’ 14 arguments that § 1010.420 is an essentially criminal scheme to be unpersuasive.5