Whistleblower Provisions in AMLA
When the Anti-Money Laundering Act of 2020 (AMLA), part of the National Defense Authorization Act, was passed, much was said about how drastically it would change the landscape of AML Compliance in the United States. However, three years later, many of the provisions either have not been fully enacted or do not have the teeth to be enforced. One greatly touted provision is the “Whistleblower Incentives and Protections” (WIP) section of the act. This section goes a long way in promoting the ability of whistleblowers to come forward without fear of retaliation and professional turmoil. However, there are several gaps when it comes to granting this program the power it needs to succeed. We will discuss what WIP does and doesn’t have and how a new bill will change that.
Protection Against Employer Retaliation
WIP provides enhanced protections for whistleblowers from retaliation by their employers. The law prohibits employers from retaliating against employees who report AML violations, including firing, demoting, or harassing them. The law also provides whistleblowers with the right to sue their employers for damages if they are retaliated against, with a right to trial by jury.
Additionally, the act prohibits pre-dispute arbitration agreements in AML whistleblower cases. These agreements require employees to waive their right to sue their employer in court and instead agree to resolve disputes through arbitration. The new law ensures that employees have the right to take their claims to court and have their case heard by a jury. Prohibiting pre-dispute arbitration agreements is crucial because it ensures that employees can seek justice in the courts, rather than being forced into arbitration, which can be a less favorable venue for employees. This provision of the law is intended to protect whistleblowers from retaliation by their employers, as they can now take their claims to court without fear of being forced into arbitration. If successful, a whistleblower can seek compensatory damage, back pay (doubled and with interest), reinstatement of their previous position, attorney fees and other remedies related to the retaliation.
The law strengthens the protections in place for whistleblowers and provides them with additional tools to fight back against retaliation. Whistleblowers play a critical role in uncovering and stopping AML violations, and they should not fear retaliation for doing the right thing.
Extension of Statute of Limitations
WIP extends the statute of limitations for AML whistleblower cases. The statute of limitations is the time limit within which a plaintiff must file a lawsuit after the alleged harm has occurred. Under the new law, whistleblowers have up to ten years from the date of the violation to bring a claim, up from the previous five years. This provision is an excellent enforcement mechanism. Often times, financial wrongdoing can take years to uncover and unwind the web of complex transactions that took place to facilitate the illegal acts. With the statute of limitations doubling, potential whistleblowers have an appropriate amount of time should they discover malfeasance or significant money laundering violations.
Where WIP Falls Short
The financial incentive of WIP is where one of the biggest gaps exist. While payment for whistleblowers can be up to 30% of financial penalties levied as a result of the whistleblower’s actions (minimum $1 million penalty), there is no minimum award percentage or amount. In theory, the award could be as little as 1 cent. Additionally, funds for awards would need to be appropriated by Congress. Up through most of 2022, no such funds have been appropriated to pay any potential whistleblowers nor have there been any means to fill that fund. Essentially, there is promise of financial incentive without the backing of actual finances or guaranteed minimums for that incentive to be attractive to a potential whistleblower.
Enter the Anti-Money Laundering Whistleblower Improvement Act (AWIA)
On November 17, 2022, the United States Congress passed the Anti-Money Laundering Whistleblower Improvement Act of 2022. With little main stream coverage, a potential bombshell change to reporting AML wrongdoing is now in the books. This new law enhances the incentives program for potential whistleblowers who provide original information that leads to successful enforcement actions. Under the new law, whistleblowers have a minimum 10% reward of the monetary sanctions collected by the government in cases involving violations of the Bank Secrecy Act (BSA) and other AML laws. This creates a minimum six-figure reward for successful enforcement actions, as enforcement actions would need to be a minimum of $1 million dollars in value to qualify for a reward. The rewards are paid from the newly created Financial Integrity Fund that will be funded directly by AML/Sanctions enforcement actions, rather than relying on congressional appropriations. Additionally, the act expands the ability to report violations to sanctions covered by Trading With the Enemy Act, International Emergency Economic Powers Act, and the Foreign Narcotics Kingpin Designation Act. With the evolving international sanctions regime, this is a key piece of the provision for financial institutions conducting business across several jurisdictions.
The expansion of the reward range makes it more attractive for whistleblowers to come forward with information about AML violations, especially given the large financial penalties that companies can face for violating AML laws. Whistleblowers can now receive a larger share of the financial penalties that companies face, which can serve as a significant incentive to report violations.
Overall, these new provisions create an environment where AML whistleblower enforcement actions could become as prevalent as the SEC cases we have become accustomed to seeing. By late 2021, the SEC had awarded more than $1 billion dollars to 207 whistleblowers (an average of $4.8 million) since its inception in 2010. As more enforcement actions resulting from whistleblowers begin to be published, it is incumbent on institutions to bolster their AML and sanctions compliance programs, so that any compliance issue is reported internally and properly escalated and handled. This way no whistle is blown against them.
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