1. The standard
The PMTA and some of the loose language in the cases shift the standard, improperly, I believe.
The standard in the statute is willfully. 31 USC § 5321(a)(5)(C) in exactly the same wording as the criminal penalty in 31 USC § 5322(a). The only difference is that one penalty is criminal and the other is civil. The Supreme Court held in Ratzlaf v. United States, 510 U.S. 135, 136-37 (1994) that willfulness in § 5322(a), the criminal statute is voluntary intentional violation of a known legal duty, the same as the Cheek definition of willfulness in the Title 26 criminal penalties. Cheek v. United States, 498 U.S. 192 (1991).
Consistent with Ratzlaf and Cheek, IRM 126.96.36.199.5.1 (11-06-2015), Willful FBAR Violations - Defining Willfulness, here, says:
The test for willfulness is whether there was a voluntary, intentional violation of a known legal duty.The PMTA, however, suggests that this is not the standard, citing Bedrosian as rejecting the argument "that in order for the government to sustain a civil willful FBAR penalty, it must meet the standard used in the criminal context and show “that the actions amounted to a voluntary, intentional violation of a known legal duty. See Cheek v. United States, 498 U.S. 192, 201 (1991).”
Perhaps my complaint is semantics, but I think the standard is (or should be) the Cheek standard stated in the IRM. The issue is not whether the standard is articulated differently in criminal and civil FBAR contexts, but whether more relaxed proof is permitted in the civil context to meet the standard.
Example, the criminal tax standard (willfully) and civil fraud standard (fraud). Although, unlike the FBAR context, the statutory standard is different, as interpreted they are the same. The difference is in the burden of proof with respect to the conduct -- beyond a reasonable doubt in the criminal tax case and clear and convincing in the civil tax fraud case.
Certainly, at least under current law, in a criminal context both in tax and FBAR, in appropriate cases, courts will permit the fact finder to consider proof of willful blindness in determining willfulness under the intent to violate a known legal duty standard. As I have stated often on this blog, that consideration does not change the criminal standard of intent to violate a known legal duty but simply permits the fact finder to consider willful blindness along with other evidence in making the determination of whether the defendant intended to violate a known legal duty. It is not a substitute permitting the jury to find intentional violation of known legal duty where it cannot do so beyond a reasonable doubt although it does find beyond a reasonable doubt that the defendant willfully blinded himself as to the known legal duty.
Of course, where the fact finder does find facts supporting willful blindness that can be powerful evidence, with the other evidence, that the defendant knew the legal duty and intended to violate it, thus permitting the fact finder to find willfulness beyond a reasonable doubt. How exactly can someone willfully blind themselves to a fact that they do not know at some level?
As the IRM specifically states, the civil FBAR penalty standard is the same as the Cheek standard. Any suggestion that it is something less is not supported by the statutory text and context.
As with the civil fraud penalty, the proper adjustment in the civil case is in the burden of proof required for the fact finder to find willfulness -- either preponderance or clear and convincing.
I am in the process of publishing my annual Federal Tax Procedure Editions (Student and Practitioner) and a related article on IRS Guidance (including Chevron). An important subject in both is statutory interpretation, including Chevron. The issue of whether the statutory word "willfully" in the FBAR civil penalty provision means something different that the same term in the related FBAR criminal provision is a matter of statutory interpretation. Since textualism in statutory interpretation is somewhat in vogue now, it might be interesting to ask what would a textualist do with this question. Generally, a textualist considers the statutory word (here willfully in the FBAR civil penalty provion) but also its relationship to the enacted scheme. The same word in related provisions should be interpreted the same unless there is some statutory textual reason not to interpret them the same. So, here, working from the known and authoritative meaning of willfully in the criminal FBAR provision, it seems to me that a textualist would apply the same interpretation unless there is some affirmative textual reason to apply a different interpretation. And, of course, a textualist would not consider legislative history, but if anyone considering the legislative history will not find anything to indicate that Congress intended the willfully in the civil penalty provision to mean something different from willfully in the criminal penalty provision. So, in either event, the textualist would apply the same definition of the term.
I don't think that the competing broad approach to statutory interpretation -- purposivism -- would produce a different result. Purposivists still have to anchor interpretation in some perception of congressional meaning. So far as I can tell, there is nothing to indicate a different meaning for the word willfully in the FBAR civil penalty and criminal statutes. The only difference Congress clearly intended is that one is a civil penalty and the other a criminal penalty. The different burdens of proof traditionally handle that difference.
2. Burden of proof.
The PMTA states the burden of proof the Government must meet as the preponderance of the evidence rather than clear and convincing. I have written on this often and will not repeat that here. The PMTA is a crisp summary of the current state of the law as I understand it.
1. For those not familiar with PMTAs, here is the IRS description:
Program Manager Technical Advice is: These documents are legal advice, signed by attorneys in the National Office of the Office of Chief Counsel and issued to Internal Revenue Service personnel who are national program executives and managers. They are issued to assist Service personnel in administering their programs by providing authoritative legal opinions on certain matters, such as industry-wide issues.2. The IRS FOIA reading room to access these and other IRS guidance documents is here.