This Will Combat Kleptocratic Money Laundering in Global Financial System, With New Sweeping Financial Incentives

On December 23, 2022, Congress included the Anti-Money Laundering Whistleblower Improvement Act as part of the Omnibus Budget President Biden has now signed into law. The Act includes drastic new measures to expand enforcement against kleptocratic money launderers operating in the United States financial system and abroad, chiefly by expanding the incentives for whistleblowers with knowledge of illicit conduct. The most important update to these whistleblower laws is that corporate auditors and compliance professionals can now qualify as whistleblowers. This is a significant expansion to include more eligible financial professionals typically prohibited from claiming an award under the Securities and Exchange Commission’s Office of the Whistleblower created under the Dodd-Frank Act in 2010.

Though large payouts under the U.S.’ various whistleblower programs routinely make the news and significant awards are increasing in frequency, would-be whistleblowers are often discouraged to learn that little-known statutory exclusions render them ineligible for an award. The logical result of these exclusions is that fewer whistleblowers with information of illicit financial conduct come forward, the government’s enforcement priorities are stymied, and our financial systems suffer continued abuse.

The Anti-Money Laundering Whistleblower Improvement Act eliminated many award eligibility barriers and increased the scope of reportable conduct which can entitle one to an award. The Act created a fund (dubbed the Financial Integrity Fund) out of which whistleblower awards will be paid. The Act also dictated that at least 10% of any collected financial sanctions resulting from whistleblowing will be paid to eligible, voluntary whistleblowers who provided qualifying information to their employer, the Department of the Treasury, or the Department of Justice (assuming those sanctions surpass $1 million) – though the Act authorized payouts of up to 30% of any collected sanction. When determining the size of a whistleblower award, the Department of the Treasury will consider the following factors:

  • the significance of the information provided by the whistleblower to the success of the covered action;
  • the degree of assistance provided by the whistleblower;
    the programmatic interest of the Treasury in deterring the particular violations disclosed by the whistleblower; and
  • additional factors to be decided by the Department of the Treasury, which we expect will mirror factors utilized by the SEC.

The Financial Integrity Fund will be comprised of criminal forfeitures, payments of restitution and fines, and even victim compensation payments. Those familiar with the SEC’s whistleblower program will note that the Act is similar to that program in many ways. Importantly, the Act also provides significant protection for whistleblowers against retaliation stemming from their cooperation with the government. Unlike the SEC program, however, whistleblowers qualify for retaliation protections even if they only reported criminal conduct to their employer and not to the government.

Where the Act differs from the SEC and other current whistleblower programs is where it truly shines. We view the following two differences as critical.

First, other whistleblower programs typically exclude potential whistleblowers who gained knowledge of criminal conduct as part of compliance or audit duties related to their employment. This exclusion was removed from the Act and allows those who are often in the best position to gain knowledge of criminal conduct to qualify for awards. We expect to see a large number of auditors and compliance professionals report misconduct through the program. Importantly, the new program is not limited to just U.S. citizens.

Second, the Act allows whistleblowers to report violations or the evasion of U.S. sanctions, including but not limited to statutes such as the Trading with the Enemy Act and the Foreign Narcotics Kingpin Designation Act. This notable expansion largely relates to Russia’s invasion of Ukraine and the government’s desire to target and seize assets of oligarchs engaged in money laundering and other abuses of our financial systems – though its reach extends far beyond Russia. Given the stakes involved in reporting criminal financial conduct such as money laundering or sanctions evasion, potential whistleblowers should take comfort in knowing they can report such violations anonymously through counsel.

The Act is a positive, overdue measure that will better enable the government to curb the widespread abuse of our financial systems that often goes undetected and undeterred, and will encourage new groups of key individuals to come forward with knowledge of these abuses. As always, we encourage any potential whistleblower to seek the advice of experienced and competent whistleblower counsel prior to contacting the government.

The White Collar, Government Investigations & Special Matters Group has experience representing whistleblowers concerning international securities investigations and enforcement, including kleptocratic money laundering investigations spanning from Moscow to Mauritius. More about our practice group is HERE.

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