Whistleblowing has long been a key element of a proactive and effectively designed anti-money laundering (AML) program. On Dec. 29, President Biden signed into law the Anti-Money Laundering Whistleblower Improvement Act, which further incentivizes employees and organizations to report suspected money laundering activity to their organization, the Department of Justice, or Department of Treasury. Under the new Act, qualified whistleblowers will be entitled to an award of “not less than 10%” and up to 30% of the fine imposed and collected. Previously, there was no statutory minimum guarantee for AML whistleblowers, meaning that awards were purely discretionary.

The Act also allows whistleblowers from any country to be able to report money laundering violations anonymously and confidentially to the U.S. Department of Justice or Treasury.

This law is likely to significantly increase the number of violations reported and the number of possible fines and enforcement actions levied against organizations not complying with the AML laws.

Background

Congress agreed to include the Anti-Money Laundering Whistleblower Improvement Act as part of the Consolidated Appropriations Act of 2023 (a.k.a. Omnibus Act).

Prior to new bill, persons with relevant information were not guaranteed to receive an award and, thus, not likely to file a whistleblower report, according to the Wall Street Journal. Furthermore, lawyers were declining cases brought by potential whistleblowers due to the uncertainty of the financial reward, as well as delays with the process. The new legislation incentivizes lawyers to accept whistleblower cases; the Department of Treasury will have a fund to pay whistleblowers for information that leads to enforcement and collections of fines.

In considering awards to whistleblowers, the Treasury may consider certain factors including but not limited to (per current law, 31 U.S.C. Section 5323(c)(1)):

• The significance of the information provided by the AML whistleblower
• The degree of assistance provided by the whistleblower or their legal representative in a covered judicial or administrative action
• The programmatic interest of the Department of Treasury in deterring violations
• Other relevant factors that the SEC employs to determine SEC Whistleblower awards

Key Features of the AML Whistleblower Improvement Act

The following are important features related to the Anti-Money Laundering Improvement Act:

• Qualified whistleblowers will be entitled to an award of “not less than 10%” and up to 30% of the fine imposed.
• The Act incorporates the Dodd-Frank Act’s confidentiality and reward provisions, according to Reuters. Whistleblowers can report sanction violations anonymously and confidentially.
• The Act also protects whistleblowers from retaliation.
• Fines paid by the offenders are used to pay whistleblowers.
• Whistleblowers must voluntarily provide information about violations.
• The Act applies to residents in any country.

What this means for employees and organizations

The legislative changes provide much more incentive for employees to file whistleblower complaints, which is likely to significantly increase the number of violations that will be reported. Organizations have an increased risk of having fines levied against them if they do not have an effective AML program. The cost of non-compliance can be staggering: Financial institutions were levied over $2.7 billion in fines for AML violations in the first half of 2021.

What organizations can do

To identify suspicious conduct within the organization, it is critical to have an internal whistleblower and complaint process. Such “employee speaking up” programs are designed to help encourage employees to ask questions, raise concerns, disclose potential conflicts of interest about which they are aware, and report suspicious activity. Regardless of how organizations decide to brand their whistleblowing or speaking up programs internally, an effective whistleblower and complaint policy and program should include the following:

• An affirmative duty imposed on employees to come forward with legal, policy, or ethics-related questions or concerns, without fear of retaliation
• Mechanisms to apply confidentiality and anonymity, to the extent allowed by law, to matters brought forward
• Multiple channels for reporting: Encourage employees to first speak with their manager but also the manager’s manager, the law department, human resources, or the ethics and compliance department
• A case management system to maintain reports
• Periodic messaging to make sure employees are aware of reporting channels (break room posters, intranet postings, quarterly emails, etc.)

It is also critical to develop and maintain a solid AML program that incorporates the following key elements:

• Written policies and procedures and supervisory controls
• A risk assessment
• A designated BSA (Bank Secrecy Act) compliance officer
• Ongoing employee training
• Independent review of the BSA/AML program

Contact our team for more information or for help getting started.

Contact

Marianne Turnbull, CIA, CAMS, Managing Director, Risk Advisory

973.364.7711

Alex Slusser, Senior Manager, Risk Advisory

304.677.0585

Talar Sahagian, Consultant, Risk Advisory

973.618.6220