Loyola University Chicago School of Law, JD 2024
Whistleblowing – a powerful weapon in the arsenal of defense against fraud – is a highly effective tool utilized by the government to enforce regulatory compliance. Nevertheless, many employees remain hesitant to initiate criminal proceedings. In 2021, in an effort to dispel such concerns and to empower potential whistleblowers to take action, Congress enacted the Anti-Money Laundering Act (AMLA).
Whistleblowing – a decade of results
According to the Securities and Exchange Commission (SEC), since 2012, 102 individuals have been awarded approximately $557 million as they assisted the Commission in exposing and prosecuting securities law violators. However, significant obstacles remain in place that discourage employees from coming forward. Jeb White, the CEO of Taxpayers Against Fraud, believes that (1) many employees fear their voices won’t be heard and (2) anonymous interviewees have made it clear that the prospect of employment termination has undoubtedly stifled their inclination to initiate criminal proceedings. Hopeful that the AMLA can serve as a powerful incentivization tool to combat these kinds of barriers, Philip Berkowitz of the ABA describes it as an Act that will effectively “(1) [narrow] the government’s discretion to pay an award, (2) [increase] the potential amount of whistleblower awards, and (3) [implement] protections specific to money-laundering whistleblowers, in a manner largely modeled after Dodd-Frank.”
By increasing potential monetary awards, under the AMLA, prevailing employees are entitled to reinstatement, double back pay with interest, and additional compensatory damages such as attorney’s fees. Also, the rights protected by the AMLA cannot be legally waived in any contract. In prevailing cases, when the financial sanctions against a company exceed $1 million, the whistleblower is guaranteed an award which may be as high as 30 percent of the sanctions. This is because the new statute provides that the Secretary of the Treasury “shall” provide a compensatory award to employees so long as they provided original information which resulted in the eventual enforcement of some money-laundering-related law. Prior to the enactment of the AMLA, awards for whistleblowers were entirely discretionary and were capped at $150,000.
Bolstering protections previously housed under the Dodd-Frank Act (DFA)
At its core, the AMLA’s whistleblower protections are modeled after the DFA, which was enacted in 2010. Initially, Congress implemented the DFA as a financial reform law that encourages employees to report securities violations by offering financial rewards. Clearly, Congress enacted the AMLA with the same goal in mind, yet several clear distinctions exemplify Congress’ innovative approach to strengthening whistleblower protections in the modern era. In contrast to the DFA, which only protects whistleblowers who submit complaints to the SEC or the Commodity Futures Trading Commission (CFTC), the AMLA protects internal whistleblowers who complain internally to their employer and employees who complain to the Attorney General or the Secretary of the Treasury.
Moreover, the AMLA broadens the definition of whistleblower, deeming, as such, anyone who reports a violation, but also specifically including those who report violations as part of their job duties. Under the DFA, insiders who worked in compliance roles as well as regulatory and law enforcement officials were not considered to fit within the purview of ‘whistleblowers,’ and were thus prohibited from receiving any awards. Notably, the AMLA does not contain a carve-out provision, meaning that compliance employees who learn of potential violations during the ordinary course of their duties, such as auditors or counsel, are protected by the AMLA’s broader reach.
Initial implementation – funding issues remained, yet optimism endured
As of January 2021, the AMLA required the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) to modernize its regulations to address evolving risks to the security of the U.S. financial system. In early 2022, FinCEN accordingly established a new Office of the Whistleblower. Its Acting Director, Himamauli Das, remarked that since then, FinCEN has already received whistleblower tips, and has drafted rules to implement the Act’s whistleblower provision. However, as of April 2022, FinCEN still faced a major hurdle – lack of Congressional funding for the program. Despite some concern, Das noted around that time that FinCEN’s work with Congress on that issue had been “constructive” and [he] expressed optimism for “continued progress over the course of the year.” It was up to Congress to decide whether it would increase spending.
Congress to the rescue
In July 2022, in response to President Biden’s request to increase the funding of FinCEN, the U.S. House of Representatives passed a bill increasing FinCEN’s budget by nearly 30% to $210,330,000. This move will undoubtedly aid and ease FinCEN’s implementation of the provisions required by the AMLA. FinCEN is now equipped with the necessary tools to add oversight of the financial sector, strengthen corporate accountability, provide adequate support to investigate authorities, and modernize the sanctions process. Moreover, the new budget allows FinCEN to increase its staff in order to meet the various AMLA requirements.
This Congressional bolstering of FinCEN will ideally empower the modern whistleblower with unparalleled incentivization to challenge and expose fraud on the public’s behalf. As evidenced by the AMLA, enforcing regulations can be costly. Thus, encouragingly, the federal government’s prioritization of the policies described herein – intentional legislative effort to fund the fight against fraud – is a step forward along the path of continuing to ensure regulatory compliance in the complex corporate realm.