New whistleblower provisions for reporting AML violations

United States Publication January 4, 2021

On January 1, 2021, the National Defense Authorization Act for Fiscal Year 2021, was enacted, after the Senate joined the House in overriding President Trump’s veto of the bill. The Act, which authorized appropriations for military activities of the Department of Defense, included the Anti-Money Laundering Act of 2020 (AMLA), which contained multiple provisions designed to improve policies and procedures aimed at policing money laundering and terrorism financing.

One such provision is Section 6314, “Updating whistleblower incentives and protection,” which updated a prior AML whistleblower program already in place and encouraged whistleblowers to report violations of the Bank Secrecy Act (BSA) and anti-money laundering laws. The AMLA also established an “Anti-Money Laundering and Counter-Terrorism Financing Fund” to pay whistleblower rewards.

Pursuant to the AMLA, any individual, or 2 or more individuals acting jointly, who provides original information relating to a violation of anti-money laundering laws to (1) an employer; or (2) the Secretary of the Treasury; or (3) the Attorney General resulting in a successful enforcement action under the Bank Secrecy Act resulting in monetary sanctions over US$1 million may be eligible for an award of not more than 30 percent of the monetary sanction imposed in the action or related actions. This provision updated the prior AML whistleblower program in existence, which had capped whistleblower awards at US$150,000.

The AMLA defines “whistleblower” as any individual who reports a violation, including those who report violations “as part of the[ir] job duties.” Interestingly, that language does not exclude compliance officers, auditors, or counsel, who often learn of violations during the normal course of business, from benefitting from the whistleblower provisions. This is in contrast to Dodd-Frank, which passed in 2010 in the wake of the 2008 financial crisis and created the Securities and Exchange Commission (SEC) Whistleblower Program and the largely similar Commodity Futures Trading Commission (CFTC) Whistleblower Program.

Under Dodd-Frank, key compliance and ethics personnel, including internal auditors, officers, and directors, though eligible for awards, face restrictions and limitations on their eligibility. However, not all individuals may benefit from the whistleblower provisions of the AMLA. By its terms, the AMLA excludes  certain individuals who learn of the original information while acting within the scope of their employment at: (1) a regulatory or banking agency; (2) the Department of Treasury, or; (3) a law enforcement agency. The AMLA also excludes from whistleblower status those who have been convicted of AML law violations.

Further, unlike Dodd-Frank, the AMLA does not have a set minimum award for successful whistleblowers. The amount of the whistleblower award under AMLA is in the discretion of the Secretary of the Treasury. In determining the amount of an award, however, the Secretary is required to consider the following:

  1. The significance of the information provided by the whistleblower to the success of the action,
  2. The degree of assistance provided by the whistleblower and its legal representative,
  3. The interest of the Department of Treasury in deterring violations by making awards to whistleblowers who provide information leading to successful enforcement, and
  4. Any other relevant factors.

The AMLA also prohibits an employer from retaliating or discriminating against a whistleblower. Retaliation includes discharging, demoting, suspending, threatening, blacklisting and harassing an employee. These anti-retaliation protections extend to a whistleblower who reports internally to his or her employer or to the government. Conversely, under Dodd-Frank, a whistleblower is required to report to the SEC or the CFTC, rather than internally, before the whistleblower is protected from the anti-retaliation provisions of Dodd-Frank.

Under the AMLA, to file an anti-retaliation complaint, an aggrieved whistleblower must file a complaint with the Secretary of Labor if he or she believes that he or she has been discharged or otherwise discriminated against for whistleblowing activity. The whistleblower must show that the whistleblowing activity was a contributing factor in the unfavorable personnel action, otherwise the Secretary of Labor can dismiss the complaint. If the whistleblower complaint satisfies this burden, then the burden shifts to the employer to provide clear and convincing evidence that the employer would have taken the unfavorable personnel action absent the whistleblowing conduct.

If the Secretary of Labor does not issue a final decision within 180 days, then a whistleblower may bring an action against the employer in the appropriate federal district court and may seek a jury trial. A prevailing whistleblower may be reinstated and can receive 2 times the amount of back pay otherwise owed, with interest, compensatory damages, including litigation costs and reasonable attorneys’ fees.

The whistleblower provisions of the AMLA could have an enormous impact in combatting money laundering. However, the specific bounds of the law are still unknown as implementing regulations by the Treasury Secretary have not yet been prescribed. There is no question that Dodd-Frank’s whistleblower program has provided tremendous value to the SEC’s enforcement efforts, with the SEC recovering over US$2 billion due to whistleblower disclosures and paying US$387 million to whistleblowers from FY 2011 to FY 2019. With some key differences in the whistleblower program under the AMLA, however, the success of the AMLA whistleblower program remains to be seen. 

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