A new defense bill proposes the creation of a whistleblower program to encourage reporting of anti-money laundering violations. The proposed regulations, which are part of the National Defense Authorization Act, have garnered legislators’ approval and could be signed into law before Donald Trump leaves the White House.
The new legislation would offer anti-money laundering (AML) whistleblowers a similar level of protection as the SEC's whistleblower program. Informants would be able to report violations anonymously and would enjoy anti-retaliation protections. Without this legal shield, people with information about money laundering activities are very reluctant to come forward. Many of them fear their employers might fire them in retaliation. And once out of a job, they often find themselves labeled as 'problematic' and unable to find work in the same industry.
Since its inception, the SEC whistleblower program has paid more than $720 million to securities industry insiders who came forward with tips leading to enforcement actions. Since the SEC and CFTC whistleblower programs have limited jurisdiction over AML violations, their success has not served to deter money launderers.
"The implementation of this new program will be a total game-changer for whistleblowers," whistleblower attorney Brian Mahany explains. "Up until now, insiders could only rely on the Bank Secrecy Act, which caps awards at $150,000 and offers few anti-retaliation protections. While the SEC and CFTC have their own whistleblower programs, they have rarely investigated anti-money laundering cases. I trust the new legislation will encourage many individuals with information about AML violations to come forward." Mahany is one of the top whistleblower attorneys in the U.S. He has fought some of the country’s biggest financial institutions and secured multibillion-dollar fraud settlements.
Companies and individuals involved in money laundering are adept at covering their tracks. Without an informer on the inside, it is almost impossible to detect this type of misconduct, which has been linked to terrorism and people trafficking. By blocking the financing of criminal groups, stopping money laundering can save lives. On the other hand, the implementation of whistleblower protections could save the Justice Department significant resources by enabling tipsters to aid prosecutors in complex AML investigations.
Anti-Money Laundering Whistleblowers Could Receive 30 Percent of Recoveries
Under the proposed legislation, successful informers would receive a cash award whenever monetary sanctions exceed $1 million. It would be up to the Treasury Department to determine what percentage of recoveries they will get. The new rules establish a maximum award (30 percent) but not a minimum. In contrast, SEC whistleblowers receive awards in the 10-30 percent range.
According to Mahany, if the new rules are implemented, "a minimum award percentage should be established." The recognized whistleblower attorney argues that "whistleblowers put their livelihood and sometimes their lives at risk when they inform the government about money laundering."
"This is an age-old discussion. Are whistleblowers motivated by greed? Is it bad to offer multimillion-dollar rewards?" Mahany asks. "In my experience, the majority of whistleblowers need the award money to survive after dedicating years of their lives to bringing wrongdoers to justice. These are often people with seven-figure salaries, and it is not unusual for the financial industry to blacklist them after they've blown the whistle. Awards are also a way to protect them."
The AML whistleblower legislation is not only designed to incentivize U.S. tipsters. If it is enacted, foreign nationals with information about covered violations would also be eligible for awards. Compliance officers and internal auditors would also be able to report misconduct under the proposed legislation.