Congress has passed the the FY2021 Department of Defense Authorization bill, which includes the Anti-Money Laundering Act of 2020 (AMLA), a comprehensive overhaul of U.S. anti-money laundering laws. The AMLA would establish a whistleblower reward program at the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) modeled on the successful Dodd-Frank SEC whistleblower program and create a private right of action for whistleblowers who suffer retaliation for disclosing potential violations of the Bank Secrecy Act (“BSA”), 21 U.S.C. 5311 et seq. As demonstrated by the success of similar laws rewarding whistleblowing about various types of fraud, offering financial incentives to encourage potential whistleblowers to take the significant risk of coming forward would substantially enhance the government’s ability to detect and combat money laundering.
As revealed in the FinCEN Files, Panama Papers and numerous studies, criminals and terrorists have been able to use shell companies to facilitate human trafficking, evade economic sanctions, funnel taxpayer dollars to intermediaries who pay bribes to foreign government officials, disguise weapons trafficking into conflict zones, evade taxes, and perpetuate financial crimes. A March 2019 report by Global Financial Integrity reveals that, in all 50 U.S. states, more information is currently required to obtain a library card than to register a company.
The Corporate Transparency Act, which is also included in the FY 2021 NDAA, targets businesses that act as “fronts” or shell companies on behalf of those conducting illicit activities. It requires companies, including foreign entities registered to do business in the U.S. to disclose their true, beneficial owners to the U.S. Department of the Treasury (Treasury) at the time the company is formed and when ownership changes. Additional anti-money laundering reforms in the AMLA include:
Beneficial ownership information maintained by Treasury will be kept confidential and treated as sensitive information and made available only to: (1) authorized Government authorities upon request, subject to effective safeguards to facilitate relevant national security, intelligence, and law enforcement activities; and (2) financial institutions, for purposes of complying with their customer due diligence requirements.
Section 6314 of the AMLA would create a whistleblower reward program at the Department of the Treasury, under which a whistleblower could obtain an award of up to 30 percent of collected monetary sanctions that Treasury recovers in a judicial or administrative action brought under the BSA that results in monetary sanctions exceeding $1,000,000. To be eligible for an award, the whistleblower must voluntarily provide original information to their employer, Treasury, or the Department of Justice (Justice).
The AMLA would significantly expand the current BSA whistleblower incentive law, which permits Treasury to pay a reward to an individual who provides original information about a BSA violation which leads to the recovery of a criminal fine, civil penalty, or forfeiture which exceeds $50,000. 31 U.S.C. § 5323(a). Under the current law, awards are capped at $150,000 or 25 percent of the net amount of the fine, penalty, or forfeiture collected, whichever is less. And the decision to pay an award is discretionary. The modest award cap has failed to encourage whistleblowers to jeopardize their careers by reporting BSA violations.
The whistleblower reward program that AMLA would establish is similar to the SEC whistleblower program that Congress enacted in the Dodd-Frank Act, which has proven successful in enhancing the SEC’s ability to detect and halt fraud schemes and protect investors, including hard to detect fraud happening abroad but impacting U.S. investors and the marketplace.
Since the inception of the SEC whistleblower program, whistleblower tips have enabled the SEC to recover more than $2.7 billion in financial remedies, most of which has been, or is scheduled to be, returned to harmed investors. The SEC has issued awards totaling approximately $728 million to 118 individuals. In FY 2020, the SEC issued awards totaling approximately $175 million, the highest amount of any year in the program’s history and received over 6,900 whistleblower tips, a 31% increase from FY 2018. The SEC has received whistleblower tips from individuals in approximately 130 countries outside the United States.
The AMLA whistleblower incentive provision would encourage whistleblowers to provide “original information,” i.e., information that is derived from the independent knowledge or analysis of a whistleblower or is not known to Treasury or Justice departments from any other source, unless the whistleblower is the original source of the information. Providing information that is exclusively derived from an allegation made in a judicial or administrative hearing, in a governmental report, hearing, audit, or investigation, or from the news media would not qualify for a whistleblower award unless the whistleblower is a source of the information.
To address well-founded concerns that disclosing money laundering can result in retaliation, the AMLA permits a whistleblower to report a BSA violation anonymously and qualify for an award where they are represented by counsel. In addition, the AMLA requires Treasury and Justice to take steps to protect the confidentiality of whistleblower submissions. Any officer or employee of either agency must not disclose information provided by a whistleblower “which could reasonably be expected to reveal the identity of a whistleblower,” except where the agency is required to disclose the information to a defendant in a public proceeding instituted by the agency and in accordance with the Privacy Act.
There are three conditions that disqualify a whistleblower from being eligible for an award:
In contrast to the Dodd-Frank Act’s award eligibility rules, the AMLA does not does not impose limitations on award eligibility to whistleblowers who gain information through the performance of an audit of financial statements. And it appears to permit compliance personnel to obtain whistleblower awards in that the term “whistleblower” includes an individual who provides information relating to a violation “including as part of the job duties of the individual.”
The monetary sanctions collected in any judicial or administrative action that can qualify for an AMLA whistleblower award include any monies, including penalties, disgorgement, and interest ordered to be paid, but excludes (i) forfeiture; (ii) restitution; and (iii) any victim compensation payment.
An AMLA whistleblower may also qualify for a “related action” award, which is any judicial or administrative action brought by (i) any appropriate federal authority; (ii) a state attorney general in connection with any criminal investigation; or (iii) any appropriate state regulatory authority, when the action is based on the original information provided by the whistleblower and led to the successful enforcement of the action by Treasury or Justice.
To determine the amount of an AMLA whistleblower award, Treasury will consider:
Section 6314(g) of the AMLA creates a private right of action for whistleblowers who have suffered retaliation for disclosing potential BSA violations. It prohibits any employer from retaliating against a whistleblower for:
Note the following regarding the scope of protected whistleblowing:
Similar to the SOX whistleblower protection law, the AMLA prohibits a wide range of retaliatory acts, including directly or indirectly discharging, demoting, suspending, threatening, blacklisting, harassing, or in any other manner discriminating against a whistleblower in the terms and conditions of employment due to the employee’s protected whistleblowing.
The catch-all category of retaliation (“in any other manner” discriminating against a whistleblower) includes non-tangible employment actions, such as “outing” a whistleblower in a manner that forces the whistleblower to suffer alienation and isolation from work colleagues. See Menendez v. Halliburton, Inc., ARB Nos. 09-002, -003, ALJ No. 2007- SOX- 5 (ARB Sept. 13, 2011). An employment action can constitute actionable retaliation if it “would deter a reasonable employee from engaging in protected activity.” Id. at 20.
The whistleblower protection provision of the AMLA applies the causation standard and burden-shifting framework set forth in the AIR21 Whistleblower Protection Law. Under that framework, the whistleblower prevails by proving that their protected whistleblowing was a contributing factor in the unfavorable personnel action taken by their employer. The DOL ARB has emphasized that the standard is low and “broad and forgiving”; protected activity need only play some role, and even an “[in]significant” or “[in]substantial” role suffices. Palmer v. Canadian Nat’l R.R., ARB No. 16-035, ALJ No. 2014-FRS-154, at 53 (ARB Sept. 30, 2016). Examples of circumstantial evidence that can establish “contributing factor” causation include:
Once the whistleblower proves that their protected conduct was a contributing factor in the adverse action, the employer can avoid liability only if it proves by clear and convincing evidence that it would have taken the same adverse action in the absence of the whistleblower engaging in protected conduct.
A prevailing AMLA whistleblower is entitled to the following remedies:
These remedies are substantially similar to the relief authorized in the anti-retaliation provision of the False Claims Act. Neither statute authorizes an award of punitive damages, but double back pay and uncapped compensatory damages can be potent remedies.
AMLA retaliation claims must be filed initially with the Occupational Safety and Health Administration (OSHA), which will investigate the claim. If OSHA determines that there is reasonable cause to believe that a violation occurred, it can order relief, including reinstatement of the whistleblower. The whistleblower and the employer can appeal OSHA’s determination by requesting a de novo hearing before the DOL Office of Administrative Law Judges, but an employer’s objection to an order of preliminary relief will not stay the order of reinstatement. Once an AMLA retaliation claim has been pending before the DOL for more than 180 days, the whistleblower can remove the claim to federal court.
An AMLA retaliation claim cannot be brought more than six years after the date on which the violation occurs or more than three years after the date on which when facts material to the right of action become known, or reasonably should have been known, by the employee alleging a violation.
The AMLA clarifies that a whistleblower exercising their right to remove their claim from DOL to federal court can try their case before a jury. AMLA retaliation claims are exempt from mandatory arbitration.
The AMLA’s whistleblower protection provision does not diminish the rights, privileges, or remedies of any whistleblower under any federal or state law or under any collective bargaining agreement.
The anti-retaliation provision of the AMLA will afford robust protection to whistleblowers disclosing money laundering, but it will not apply to employees at credit unions and FDIC-insured depository institutions. Those employees can bring retaliation claims under weaker anti-retaliation laws that protect only whistleblowing to the government (not internal whistleblowing), impose a higher burden of causation, and provide anemic remedies. See 12 U.S.C. § 1831j; 12 U.S.C. §§ 1790b, 1790c. For the AMLA whistleblower program to succeed, Congress should eliminate this exception to the scope of AMLA whistleblower protection.
The rights and remedies provided for in the whistleblower rewards and protection provisions of the AMLA may not be waived by any agreement, policy form, or condition of employment, including by a predispute arbitration agreement. In other words, companies are prohibited from including “gag clauses” in confidentiality agreements or confidentiality policies to prevent whistleblowers from reporting BSA violations to federal regulators or law enforcement.
If enacted, the whistleblower rewards and protection provisions of the AMLA will play a critical role in identifying and combating money laundering.
Whistleblower retaliation lawyer Jason Zuckerman will speak at a National Business Institute webinar about Whistleblower…
A Bloomberg BNA article titled SEC Whistle-Blower Awards: No Guarantees quotes SEC whistleblower lawyer Dallas Hammer’s insights about…
Actionable Whistleblower Retaliation Federal whistleblower protection laws prohibit a broad scope of retaliatory personnel actions, including:…
In a post titled Wherever I look, whistleblower issues abound, The Pump Handle, a blog…
