Money Laundering and the U.S. Anti-Money Laundering Whistleblower Program

The U.S.’s new anti-money laundering whistleblower rewards program was enacted in 2021. This program is designed to reward whistleblowers for reporting insider information about some person or entity violating the U.S. anti-money laundering laws. The idea of this program is that it should allow whistleblowers to report wrongdoing and not be punished for doing so. The hope is that because of these protections and potential financial incentives, more people will come forward and report money laundering crimes, which will lead to a higher rate of prosecutions and convictions related to crimes involving money laundering and other types of financial frauds.

The way this program works is relatively simple. If you have any inside information about someone or some entity breaking U.S. anti-money laundering laws, you can report this information to the U.S. government. If your information is found to be true and leads to a successful enforcement action where the government collects money, then you may be rewarded a percentage of the money that was recovered from the violators.

This program provides an incentive for people to come forward and report any wrongdoing they may know about related to money laundering. The hope is that this will help crackdown on financial fraud occurring not just in the U.S. but around the world. Money laundering is a harmful crime because it helps finance terrorist activities and other illicit activities. The anti-money laundering whistleblower rewards program is just one way that the U.S. government is trying to combat this problem.

Money Laundering and How the Anti-Money Laundering Whistleblower Program Works

Money laundering is carried out by individuals trying to mask the origins of large sums of money. It is generally done to conceal money generated from criminal activities. To aid the government in prosecuting and holding those who launder money accountable, a whistleblower program was first created in 1984 so that people who had information on money laundering activities could report them. After its inception, the program was barely used due to several limitations which limited its appeal. Among them was a cap that limited awards granted to whistleblowers for their information. Additionally, no provisions were included providing protections to whistleblowers if they suffered retaliation for blowing the whistle on these types of activities from their employers. Given these drawbacks, most people were not willing to come forward, especially given the negative consequences they could be exposed to and the limited financial incentive involved.

On January 1st of 2021, Congress passed the National Defense Authorization Act for Fiscal Year 2021 (NDAA). Among the many provisions contained in this law, it included the most substantial and sweeping legislative reforms to Unite States anti-money laundering (AML) and counter-terrorism financing laws since the United States Patriot Act of 2001. Specifically, this law sought to greatly improve the whistleblower program that existed for money laundering activities which, until that moment was ineffective.

To improve the AML whistleblower program, the NDAA eliminated the cap of $150,000 that existed for awards given to whistleblowers. Under the new legislation, whistleblowers that report suspected AML violations can receive up to 30 percent of all monetary sanctions recovered in enforcement actions resulting from their tips. No minimum percentage was established, as exists for other whistleblower programs. Employers are now also prohibited from retaliating or discriminating against employees who report suspected AML violations. This new provision allows affected whistleblowers to sue their employers for compensatory damages, reinstatement, and other relief including double back-pay with interest, litigation costs, and attorneys’ fees. This greatly enhances the appeal of the program since, without these protections against retaliation, many individuals would hesitate to come forward and blow the whistle on their employers. Between these two changes, the appeal of the program has greatly increased. From a practical point of view, many of the individuals who possess the necessary information to bring one of these cases forward work in the financial sector. Given the salaries these employees earn, without adequate financial compensation and protection from retaliation, before the reform they were not many of them willing to blow the whistle.

To be eligible to receive an award under this program, the following criteria must be met:

• An individual must voluntarily report the information to his or her employer, the Treasury Department, or the Department of Justice;
• The information must be original;
• The information must lead to a successful enforcement action; and
• The resulting enforcement action must lead to the government recovering at least $1 million.

Unlike other whistleblower programs, such as the one at the Securities and Exchange Commission, this program does not exclude compliance personnel, internal or external auditors, or legal counsel from being eligible to receive an award.

The Financial Crimes Enforcement Network (FinCEN), a bureau within the United States Department of the Treasury, is the government office tasked with managing this whistleblower program. When submitting their information to FinCEN, whistleblowers can do so and identify themselves in the process or they can do so anonymously. To submit information anonymously, the whistleblower must be represented by legal counsel. If the information leads to a successful enforcement action and the whistleblower becomes eligible to receive an award, they must then disclose their identity to the Secretary of the Treasury if they wish to receive it.

Although the NDAA granted rulemaking authority to the Secretary of the Treasury, rules have yet to be adopted for the program. Until this happens, details surrounding the program and how it will work, such as how any information should be submitted, remain undecided. It is expected that within the following months, rules and regulations will be adopted further fleshing out how this program will work. Once this happens, it will only be a matter of time before many whistleblowers come forward with valuable information on money laundering activities. Despite the lack of rules and regulations, information can already be submitted under this program.

Money laundering is not only a crime in of itself, but it is usually a crime committed after other crimes have been committed and illicit profits have been made. In its fight against these activities, the government usually lacks the required evidence to effectively enforce its laws. The difficulty involved in enforcing anti-money laundering laws is exponentially increased when dealing with sophisticated criminals in an age when many transactions occur digitally. Emboldened by the protections provided by the NDAA, whistleblowers will greatly aid the government in its fight against money laundering activities and the criminal activities that lay beneath.